Search Result for isle of man vat subsidy — 56 articles

The EU is to investigate the UK’s tax havens. It should start by asking why the UK subsidises the Isle of Man to sell tax abuse

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As the Guardian reported late yesterday:

The European parliament has voted to launch an inquiry into financial crime, tax evasion and tax avoidance, saying the Paradise Papers had revealed the “unfinished work” needed to secure fair taxation.

A special committee of 45 MEPs, provisionally entitled Taxe 3 in its terms of reference, will spend a year investigating issues including those raised in the leak of data from the offshore law firm Appleby.

A key focus for the inquiry will be the use of offshore tax havens to save on VAT. The leak exposed how the Isle of Man had issued £790m in VAT refunds to the owners of 231 private jets.

The Taxe 3 inquiry marks a further threat from the EU to the UK’s network of offshore tax havens following the EU referendum. The terms of reference specifically promise that “particular attention shall be given to the crown dependencies and overseas territories”.

I sincerely hope I get a chance to report to this committee. As I noted last November:

The reality is that it still appears to be true that the UK is subsiding the Isle of Man to be a tax haven. My estimate that the current subsidy may be more than £70 million a year. The scale is not as big as it was, but it's still serious. As ever some data helps explain the conclusion.

All the data referred to in what follows is summarised in this one table:

UK GDP data is from HM Treasury and VAT revenue from budget data. Similarly, Isle of Man data for GDP and revenue comes from Isle of Man government published sources. The first two columns compare these ratios at face value. The Isle of Man now seems to collect less VAT as a ratio to GDP than the UK, which is a complete reversal of the situation observed a decade ago, and so it would appear that all is now OK with the world, and that the shortfall might be explained, logically, by the higher level of supply of financial services in the Isle of Man economy, with these sales being considered exempt for the purposes of VAT.

Experience has, however, taught me not to take numbers at face value. I thought I'd rummage a little deeper because what we now know is that GDP is a notoriously unreliable indicator of national income in a tax haven, as Ireland has proved. As we now know the real economy there is vastly lower than the GDP figures imply. So I looked into the Isle of Man's GDP and found this (page 8, here):

Sixty two per cent of the Isle of Man's GDP is corporate profits. For comparison the UK equivalent data (from table D in the PDF download here) is 21%. To put it another way, 41% of Isle of Man GDP is made up of corporate profits that flow through the place, but which do not stick there (of course), which do not represent sales arising or value added in the island. Knock this out and the result is a much better indication of what really actually happens in the island on real economic activity that might happen there, which is, of course, the basis on which VAT can be recovered because VAT relates to sales, not corporate profit flows. And when this is done then it is readily apparent that the rate of VAT attributed to the Isle of Man is still way over the odds when it comes to the VAT common purse. It is collecting nearly 9% of GDP in VAT whilst the UK, which has an identical VAT system, collects just over 6%.

The result is obvious: we are still paying the Isle of Man to be a tax haven. The subsidy is now likely to exceed £70 million a year.

And in case you are wondering where all the profits come from, page 6 of the Isle of Man data already noted explains this.

Let's be quite clear that the egaming earnings of the Isle of Man are not domestic. It's a pretty bleak place, but the whole island does not egame constantly as a consequence.  Nor are 15% insurance or 8% banking  or 9% other finance sectors mainly domestic either (and all are VAT free, of course). Finance makes up about 10% of UK GDP (give or take). Add these together and they are 51% of GDP. If 10% out of that total is domestic I'd be surprised. The rest is excess profit flows having nothing to do with domestic activity. That's 41% to eliminate then - or exactly the difference in profit rates, noted above, corroborated in a different way.

The evidence is clear: current rules are still letting the Isle of Man get away with VAT claims against the UK which seem excessive. I am aware that the situation has been under review, but the reality is that it's now clear that nothing has yet stopped the VAT subsidy to the Isle of Man to be a tax haven. It's time it was made clear that this has ended, for good.

I suggest that the time has come for the EU to investigate this issue on which I have campaigned for well over a decade. I hope to play a part by supplying evidence.

The Isle of Man denies it’s subsidised by the UK without ever addressing the issues I have raised

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It's a bit over a week since I raised the issue of the Isle of Man's continuing subsidy from the UK to be a tax haven.

Since then the issue has been addressed in the Guardian and in a House of Commons adjournment debate.

Today there is an excellent review of the Isle of Man and its tax practices in the Guardian today. I recommend it, not least for the revelations about the sheer nastiest of the place.

As interesting is the response in Isle of Man Today. The ritual rebuttal is offered:

In a statement, the Manx Treasury said: ’The Isle of Man is not being subsidised by the UK.

’FERSA is in place to ensure the Isle of Man and the UK get their fair share of the revenues they collect for each other.’

Except they don't. And in the remainder of the statement they utterly failed to address the issues I raised, which is the surest sign there is that they're on target.

This one has a while to run, again.

The case against subsidising the Isle of Man to be a tax haven goes to the House of Commons

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Dame Margaret Hodge called an adjournment debate on tax abuse and the Isle of Man in the House of Commons yesterday. Her closing comments were of particular interest to me, referring as they do to suggestions first made on this blog on Monday:

Back to the Isle of Man, one might ask how this small country can afford to raise enough in taxes to run its public services without any contribution from corporation tax. The answer is simple: we subsidise it. It is our tax money that substitutes for the tax income that it could receive from charging businesses properly. It is our money that enables it to be a tax haven. Our Government do not just tolerate tax havens. They are using our taxes to enable the Isle of Man to operate as a tax haven. As with all these things, the Government refuse to be transparent, so let me try to unravel this.

Because we and the Isle of Man share a border, we also share what is called a common purse for VAT and other import duties. All VAT and import duties collected by the Isle of Man are passed to Her Majesty’s Revenue and Customs, and then the Exchequer gives the Isle of Man a sum on the basis of a formula that is supposed to reflect how much VAT has been generated from the economic activity that takes place there. In 2016, the then Chief Secretary to the Treasury renegotiated the formula and agreed a generous annual uplift of way above the level of inflation.

We give the Isle of Man more than £300 million a year, which is just under one third of its entire budget for public expenditure. That figure is set to rise to £340 million by 2019. This sum appears to have nothing to do with what is happening in the Isle of Man’s real economy, where employment is down and the population is declining. It has everything to do with what seems to be a deliberate policy intention of our Government to subsidise the Isle of Man and thus promote and support it as a tax haven. The Treasury has refused to publish the details of the formula on which our payment is based. I ask the Minister to release those details so that we can see how the sum is determined.

What this shows is that we are not innocent bystanders who simply put up with the utterly unacceptable activities in tax havens that have been exposed in the Paradise papers. We actively support and enable tax havens to function and exist. Without our subsidy, the Isle of Man could not afford to have a zero rate of corporation tax and could not function as a tax haven. The Isle of Man is well and truly a UK tax haven. Far from being at the head of the fight against tax avoidance and evasion, and money laundering, we are at the heart of the evil conspiracy involving advisers, the super-rich, global corporations and Governments. We are aiding and abetting the very few wealthiest and most powerful in our society to keep their wealth secret and avoid paying their fair share of tax.

The Minister will try to claim that his Government have achieved a lot to tackle avoidance and evasion. He might try to say how much better his Government have been than the previous Labour Government. I have never defended the record of the Labour Government in this area, but his Government’s record is also shameful. It is not what is done that really matters, but what is left undone.

I urge the Minister to tear down the shroud of secrecy and force all our tax havens to have public registers of beneficial ownership. This simple ask for better transparency about who owns what and where is utterly central to our desire to expose avoidance and hence stamp on it. I ask him to toughen up our regulatory bodies and to hound the Bonos, the Mrs Brown’s Boys and the Lewis Hamiltons of this world through the courts to make sure that they pay their proper dues. I ask the Minister to introduce legislation that will ensure that the advisers who dream up these tax avoidance wheezes are held to account for what they do, and held responsible and punished when schemes that they invent are found to be unlawful. Those three actions would go a long way to ensuring we have a responsible tax system that is fair to us all. I look forward to his response.

As has often been the case, I am on the side of Margaret Hodge on this one.

And I am grateful to her for giving such an airing to my arguments.

The Isle of Man is still being subsidised by the UK to be a tax haven

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This weekend much attention will be drawn to the use of the Isle of Man for VAT abuse. It is a story I know well, and in which I can fairly say I have played a part. This is because in 2007 I noted something odd about the Isle of Man government's accounts. As I put it at the time:

To put to simply I noticed an odd fact about that income. When I compared the VAT that it claimed to receive in its government accounts with its declared GDP the ratio was 21.7%. That’s odd as their maximum VAT rate is 17.5%. It’s even stranger as the UK, using a slightly more onerous VAT regime which is however broadly similar to the IoM’s collects just 6.1% of GDP as net VAT revenue.

As a result I said that the UK was subsidising the Isle of Man to the tune of at least £233 million a year to be a tax haven - which was well over a third of its government's income at the time.

To understand this it has to be appreciated that the Isle of Man and the UK share a VAT system. The Isle of Man might be a tax haven, but unlike Jersey and Guernsey, it operates UK based VAT, as it had prior to 1973 and the arrival of the EU operated UK purchase tax for many decades. There is literally no difference between the two jurisdictions' VAT systems.

And, to make the admin easier what happens is that the UK and Isle of Man operate the systems in common. As I put it in 2007:

The ... UK and the Isle of Man share a ‘common purse’ agreement on VAT. This means the Isle of Man’s VAT is paid into the UK Exchequer, in effect. And then the UK gives it a payment in exchange based on a formula which is unpublished but which clearly has nothing to do with the real level of economic activity in the Isle of Man.

In 2007 the Isle of Man was none too happy about my allegation, which was reported in the Observer. All sorts of unkind things were said of my abilities but the simple unavoidable fact was that no state could recover more in VAT then the headline VAT rate multiplied by GDP. Why I was the first to spot this is a good question. If just so happens that I was.

Suffice to say that I was proved right. The UK was, in effect, wholly inappropriately giving the Isle of Man a significant part of its government income without there being any economic justification for doing so. This money it then used to offer low and zero rate taxes to tax abusers who in return undermined the UK tax system. It would have been hard to make up a story much more bizarre.

To cut a long story short, I repeated my suggestions in 2009 and in October of that year the UK government announced a change in the rules. My popularity in the Isle of Man was not too high at the time, and fell further when the rules were revised again in 2011, by which time pretty much all the change that I had said were required in 2007 had taken place. In addition, welcome transparency had been added into the arrangements, part of which let me appreciate that the Isle of Man was not above restating its GDP to try to gain favour in this relationship.

As  I noted in 2011, by then the withdrawal of the subsidy had cost the Isle of Man a total of £215 million a year, which was very close to the sum I first calculated in 2007 of £233 million. This amounted to about a third of the Isle of Man government's income at the time. My role in denying them this revenue has long been acknowledged in the island.

Now stories relating to the Isle of Man and VAT are back in the news, so I wondered if the abuse reached government levels, again. A little research shows that quite emphatically they do. The reality is that it still appears to be true that the UK is subsiding the Isle of Man to be a tax haven. My estimate that the current subsidy may be more than £70 million a year. The scale is not as big as it was, but it's still serious. As ever some data helps explain the conclusion.

All the data referred to in what follows is summarised in this one table:

UK GDP data is from HM Treasury and VAT revenue from budget data. Similarly, Isle of Man data for GDP and revenue comes from Isle of Man government published sources. The first two columns compare these ratios at face value. The Isle of Man now seems to collect less VAT as a ratio to GDP than the UK, which is a complete reversal of the situation observed a decade ago, and so it would appear that all is now OK with the world, and that the shortfall might be explained, logically, by the higher level of supply of financial services in the Isle of Man economy, with these sales being considered exempt for the purposes of VAT.

Experience has, however, taught me not to take numbers at face value. I thought I'd rummage a little deeper because what we now know is that GDP is a notoriously unreliable indicator of national income in a tax haven, as Ireland has proved. As we now know the real economy there is vastly lower than the GDP figures imply. So I looked into the Isle of Man's GDP and found this (page 8, here):

Sixty two per cent of the Isle of Man's GDP is corporate profits. For comparison the UK equivalent data (from table D in the PDF download here) is 21%. To put it another way, 41% of Isle of Man GDP is made up of corporate profits that flow through the place, but which do not stick there (of course), which do not represent sales arising or value added in the island. Knock this out and the result is a much better indication of what really actually happens in the island on real economic activity that might happen there, which is, of course, the basis on which VAT can be recovered because VAT relates to sales, not corporate profit flows. And when this is done then it is readily apparent that the rate of VAT attributed to the Isle of Man is still way over the odds when it comes to the VAT common purse. It is collecting nearly 9% of GDP in VAT whilst the UK, which has an identical VAT system, collects just over 6%.

The result is obvious: we are still paying the Isle of Man to be a tax haven. The subsidy is now likely to exceed £70 million a year.

And in case you are wondering where all the profits come from, page 6 of the Isle of Man data already noted explains this.

Let's be quite clear that the egaming earnings of the Isle of Man are not domestic. It's a pretty bleak place, but the whole island does not egame constantly as a consequence.  Nor are 15% insurance or 8% banking  or 9% other finance sectors mainly domestic either (and all are VAT free, of course). Finance makes up about 10% of UK GDP (give or take). Add these together and they are 51% of GDP. If 10% out of that total is domestic I'd be surprised. The rest is excess profit flows having nothing to do with domestic activity. That's 41% to eliminate then - or exactly the difference in profit rates, noted above, corroborated in a different way.

The evidence is clear: current rules are still letting the Isle of Man get away with VAT claims against the UK which seem excessive. I am aware that the situation has been under review, but the reality is that it's now clear that nothing has yet stopped the VAT subsidy to the Isle of Man to be a tax haven. It's time it was made clear that this has ended, for good.

The personal tax statement George Osborne doesn’t want you to see

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The personal tax statement announced by the government yesterday continued to bug me last night, so I did some more analysis.

First I used data on the break down of benefits payments tweeted by Jonathan Portes and apparently from this web site - although I admit I can't see it there. It looks reliable, although I had to allow for rounding (which is fair).

Then I assumed a number of quite reasonable things, all based on the fact that although there were explicit spends in 2013/14 of £726 billion there are additionally what are called tax spends, which are money not collected as a result of reliefs and allowances within the tax system, and there are also some implicit subsidies the government supplies not even included within those totals.

Of the latter I included just one, which was the mid point of the annual cost of implicit subsidies supplied by the government to the banking sector which the IMF estimates as being in a range from $20bn to $110bn a year and which I took to be $65bn or £41bn.

Then I used HMRC data on the costs of allowances and reliefs excluding pensions, which I took from the HMRC estimate here. I included a range of these allowances and reliefs. So, personal allowances for income tax and NI are in the list as they are provided as of right to anyone who qualifies, just as benefits should be, and so are completely analogous with them.

Then  I looked at all tax reliefs for savings and investments of various sorts from ISAs, to capital gains tax allowances through to enterprise incentive schemes. These are all reliefs for those with investment income. This is an explicit subsidy to some people that seemed directly comparable with many benefits payments in that sense (alone, I stress), so they were included to.

After that I also looked at VAT exemptions on spending that is largely by those well off, which was that relating to private education and health. I could have included UK domestic transport too as much of this is a subsidy to commuters but decided not to: these things are, eventually subjective.

I also included capital gains tax relief on housing as a specific category since this is as much a subsidy for housing as is housing benefit.

The overall workings are here: I won't reproduce them in this blog as they clutter things.

Then I reduced the data by categorising it to ease presentation, which included grouping all non-unemployment related benefits, all savings reliefs, tax and NIC allowances and VAT exemptions as the results would have been unreadable and not useful otherwise.

And then I turned it all into this pie chart (click on it for a bigger version):


Screen Shot 2014-11-04 at 07.41.00

This looks very different from the impression George Osborne wants to give. The third largest category of spending is now allowances and reliefs from which everyone benefits (even the highest paid via national insurance) whilst the seventh largest category of UK spending is pension tax relief and the eighth is implicit subsidies to banks. The data is here.

Add together the cost of subsidies to banks, the subsidy to pensions and the subsidy to savings (call them together the subsidy to the City of London) and they cost £103.4bn a year - more than the cost of education in the UK.

There are other absurdities that also become apparent. For example, unemployment benefits cost only half the amount used to subsidies personal savings and investments.

It's also no wonder house prices are so distorted when the implicit tax subsidy for home ownership is £12.6 billion a year.

This is the statement George Osborne would not want you to see because it makes clear that subsidies, allowances and reliefs extend right across the UK economy. And they do not, by any means, appear to go to those who necessarily need them most. The view he has presented on this issue has been partial, to say the least, and frankly deeply misleading at best.

I do not mind having a debate about tax. I relish such things. But it has to reflect facts. This data much better reflects those facts. And I did not even include tax lost in this data. The cost of cheating makes things look even stranger still:


Screen Shot 2014-11-04 at 07.47.44

The tax gap of £119.4 billion comes in at a cost almost identical to pensions, to put it in perspective.

I leave you to decide which one to choose, but whatever it is, George Osborne's version is wrong.

Barclays: the bank that just loves Luxembourg and Jersey, but not the UK

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Barclays has put out its first country-by-country reporting. This is not a statutory report: it has been published in anticipation of the requirement that banks produce this data for results from July 2014 onwards.

As the creator of country-by-country reporting I thought I should take a look. This is my analysis of what Barclays has published:

Screen Shot 2014-06-30 at 16.50.43

Click on the image to see a bigger version. The Excel file is here in case you want it. Barclays CBC 2013

I stress, the underlying data is from Barclays bar one thing. They say this:

Screen Shot 2014-06-30 at 16.57.16

I have therefor allocated all the £8.5 billion of turnover and £6.2 billion of double counted profit to the UK, as that is the only clear clue they give me as to what to do with it. They could have provided a better and clearer analysis, but they don't.

Having done this I then proceeded to ignore all the data that Barclays publish on VAT and NIC paid: this is all nonsense. Those are business costs like any other and are deducted from profit and subject to tax relief in their own right. They have no role to play in considering taxes due on profits.

What I wanted to see is whether or not it was likely that the claimed allocation of profits and losses by Barclays accords in any way with the likely allocation of profits by Barclays to the UK, in particular. To do this I treated Barclays as one single economic entity (which, as a matter of fact, it is or it could not publish a statement like this, so I suggest those arguing on this point are wasting their time). Then I worked out the ratio of sales by country and ratio of staff employed by country. Barclays do not provide data to calculate assets by country. I averaged the two ratios for good reason, which is that they can be very different due to the games companies can play. Luxembourg is an example here where sales are very high and staff almost non-existent. The result is the best approximation I can get to of what is called a unitary formula apportionment allocation of profits.

You will immediately note some surprising differences. Suddenly the UK does not make a loss, which Barclays admit they report in this country. Instead a profit of almost £1.1 billion is reported. And Luxembourg does not make a profit of £1.38 billion as is claimed in the original data, but ends up with just £71 million. Jersey also drops, in that case from £801 million of profit to £53 million.

It could be argued this is misleading in some cases: Spain, Portugal and Italy have all reported losses and it is known that these are difficult markets to work in. But then it has to be remembered that there is no independent and free-standing decision by Barclays to be in these places: it was a corporate decision to be in those countries and so the losses should rightly be shared - because this is a single business, as a matter of fact, where cross subsidy really does take place, as a matter of fact.

The real problem is though that the biggest cross subsidy of all is very clearly from the UK. It is complete nonsense for Barclays to claim they make a loss in the UK of significant amount (as seems likely) when in practice more than equal and opposite sums turn up, virtually untaxed, in Luxembourg and Jersey within their own accounts.

So, what is happening? I have a long list.

First, Barclays is, very politely laughing out loud at the UK and is failing to pay its way as a UK bank. So much for the contribution the City makes: this bank is not making it. And ignore those other taxes again: Barclays is employing people who would otherwise be employed elsewhere. The NIC would happen in another company if not Barclays. The same may be true of the VAT and as for the banking levy, that's a tiny contribution to the cost of having effectively been bailed out by the UK taxpayer in 2008 - which all banks were as it was the system as a whole that failed. So let's ignore claim that Barclays is contributing to the UK in these ways: it is not doing anything more than it should.

Second, Barclays is a massive user and maybe abuser of tax havens, and especially Jersey and Luxembourg.

Third, it is clear that transfer pricing of head office operations is not taking place effectively in the case of this company. HMRC must have the power to say that a company must reallocate costs to the group it manages from the UK or a mockery is made of our tax system. The need for reform in this area is obvious.

Fourth the question has to be asked as to why we are so keen to have companies headquarter in the UK when it is very clear that many other countries benefit more than us by not having Barclays' head office in their domain. Barclays could bank here by all means, but candidly we would be better off without their head office.

Fifth, the evidence is clear: country-by-country reporting delivers invaluable data, as I always suspected it would. We could do with more from Barclays but even at this level what we can say is that the internal allocations of income and profit between Barclays group companies appears to make no sense at all.

Sixth, we can ask in that case how the Barclays's auditors (PWC) signed off these accounts as true and fair when that is the last thing they look to be.

I could go on, but you get the message: this analysis suggests that Barclays is massively under-declaring profit in the UK at cost to all of us. I estimate that the loss to the UK could easily exceed £150 million based on the above data. And in that case it is time for serious tax reform in this country.

Richard Murphy: a thorn in the side of the Manx government

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There are occasional moments of pleasure in a campaigners life, not least when your achievements are acknowledged. That is especially sweet when it is your opponents who acknowledge it, as has happened to me in the case of the Isle of Man today:

A representative of an organisation that successfully campaigned for the Isle of Man to get less income from the VAT sharing agreement with the UK is to speak in the island next week.

The Tax Justice Network lobbied for the agreement to be changed and its founder Richard Murphy was a thorn in the side of the Manx government.

There's quite a lot of detail wrong in those two paragraphs. I actually ran the campaign on this issue from this blog as Tax Research UK and I was not the founder of the TJN - but just one those who were founders. John Christensen, who is visiting the Isle of Man next week, has always played a much more important role there and I am no longer formally involved.

But what the heck with the detail? The substance is what matters, and yes, I did from 2007 onwards run a campaign to remove the UK's VAT subsidy to the Isle of Man that I estimated to be as much as £233 million a year. And the fact is that the campaign worked: the subsidy was removed in stages from 2009 onwards. I am quite sure that would not have happened without my work, and the Isle of Man press is acknowledging that fact.

That did not make me popular in the Isle of Man but I have no regrets about this campaign. It was absurd that the UK subsidised a place to be a tax haven that then meant it stole the UK's tax revenue. In this case that subsidy no longer exists, and rightly so. If I had to be a thorn in the side to achieve that, so be it. I'll take it as a compliment.

PS. For all those who like to criticise my work on the tax gap and my calculation methods based on VAT please note the same criticisms were levied in this case involving the Isle of Man, until it was accepted that I was right.

The Isle of Man likes to say it’s debt free – but it owes £171 million

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As Isle of Man Today reported yesterday:

THE Manx public owes nearly £171 million to the Isle of Man Bank in local authority loans.

The figure – branded ‘alarmingly high’ by one MHK – was revealed on the eve of the Budget and in the wake of the news that interest on all of those loans has increased by 0.25 per cent as a result of a clause in a deal between Treasury and the bank. The clause states that if the island’s credit rating is downgraded – as happened in November when Standard and Poor’s downgraded the Isle of Man from AAA to AA+ – then the bank can increase the interest rate on the loans.

The actual figure owed in local authority housing loans is £170,737,446.20.

The island's politicians always like to claim it has no debt: that's clearly not true. It actually owes £2,074 per head of population. OK, that's not quite the £16,500 per head of the UK. But then, nor can the Isle of Man print its own money either and it's also now running serious budget deficits of more than 11% of income - again smaller than the UK, but so it should be given that as yet it is still being heavily subsidised by us as not all the VAT subsidy has gone as yet and we're still massively subsidising the island in some ways - such as defence.

It strikes me that times are just going to get tougher in the middle of the Irish Sea.

The Isle of Man can’t balance its books – maybe it should raise some tax

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It was budget day in the Isle of Man yesterday, and as Energy FM reported:

The Island needs to dip into its reserves to balance the budget.

This year the Isle of Man is suffering a loss of £48m from changes to the VAT sharing agreement.

he government plans to transfer £55m from reserves, despite what it calls 'considerable progress to reduce departmental budgets.'

There are also plans to make withdrawals from the reserves in the next two budgets, before rebalancing in 2015.

The Isle of Man has had more than two years to plan for this VAT reduction now, since the UK announced it was going to withdraw is massive VAT subsidy to the island following my exposés on the subject on this blog. What is very evident is that it does not know how to make its books balance without this subsidy - as I always suggested would be the case. The reality always was that the Isle of Man could only afford to be a tax haven because the UK paid for it to be so.

And don't get fooled by the 'balanced in three years' ruse - all finance ministers say that. What it means is they can only ever forecast two years hence so all their wishes are fulfilled in three years time. George Osborne suffers from the same malaise. The reality is that what this really means is they have no idea how to make their books balance, now or at any time in the future.

So let me offer a simple suggestion to them: try raising some tax. It helps pay for the services your electorate want. It's not rocket science and it's what you'll have to do. The only slight trouble is, it would shatter the tax haven image. And right now the Isle of Man would rather raid the reserves than do that. But as I've always asked, how long can they risk doing that?