The Lord Mayor of the City of London is visiting the Isle of Man today to learn more about the Island as an international business and finance centre.
Alderman David Wootton will be given briefings on various sectors of the Island’s economy, and will also deliver the Chief Minister’s International Lecture.
I bet they’ve tidied things up to keep the boss happy. That’s what always happens when the Group CEO drops in.
This was posted as a comment on the bnloog this morning but asks too important a question for it nopt to be shared – so thank you Anrigaut whoever you might be:
IOM is proud to announce that it is now “in first place in respect of the largest number of non-UK incorporated AIM top 100 companies”, with a market share of 18.6%, ahead of (the well-known tax havens of) Bermuda and the BVI – in second and third place respectively.
This news is also reported here.
I know little about this subject other than that AIM-listed companies are (or so I understand) subject to less regulation than LSE-listed ones and that there are certain tax advantages (as well as more risk) for investors. But one could well wonder what these companies, with a “current market capital of £1.14bn”, actually DO on such a small island. The mind boggles
As to who they are – who can say? The official AIM website appears to have no search facility by geographic location. An independent site at http://www.aimlisting.co.uk does have such a facility, but a search for Isle of Man companies returns the helpful message “Sorry but no results were found” (same result for Bahamas, Jersey & Guernsey and just one company under BVI – but around 30 in East Anglia). Obviously providing information to this site is optional – but is anyone surprised that not one of the 50 IOM-incorporated AIM companies choses to do so?
The IOM Minister for the Department of Economic Development, John Shimmin MHK, is reported as saying: ‘This research shows the Isle of Man performing very well in the AIM market despite difficult market conditions and serves to illustrate that the island is the preferred gateway to London for international corporate capital raising requirements. This is another example of how the Isle of Man is a significant contributor to the City of London and why the Crown Dependencies are important to the UK economy as a whole.’
No doubt this will be on the agenda when the Lord Mayor of the City of London visits the island next week:
“The Isle of Man has been building relations with the Lord Mayor’s Office in recent years, and one of Alderman Wootton’s predecessors in the role, Alderman David Lewis, described the Island as a ‘core asset’ for the City.”
If I might add an appropriate note – if ever there was evidence that the City runs its own government with its own foreign policy this sort of thing supports the thesis.
This is quite amusing. The Isle of Man has taken umbrage with Ed Miliband for his criticisms of the island’s continuing use as a tax haven (which is indisputable to anyone willing to look at the evidence) and the local paper, Isle of Man Today, has taken up the issue. As they report:
On Monday, we asked the Labour Party central office whether Ed Miliband genuinely believes the Isle of Man is not as well regulated as the UK, and asked the party to provide figures showing the number of people/amount of money that has been put into the Isle of Man illegally and what evidence it had of the island’s non-co-operation with UK authorities.
We also asked the party to confirm whether it was referring to the legal practice of tax avoidance or the illegal one of tax evasion.
iomtoday had not received a response as this story went live.
Well of course they haven’t received a reply. That’s because I know anything about what’s happening (I don’t). I know no one could reply - because the information is not available. The secrecy in the Isle of Man makes it very hard to estimate any such thing – which is why best estimates had to be used by the Labour party. They happened to be mine.
But to argue Labour’s wrong to criticise the abuse of secrecy because data on those using that secrecy does not exist because of the existence of that secrecy is quite absurd. Surely even the Isle of Man can see that?
The following is a blog post by Shadow Labour minister Owen Smith MP on tax havens, published yesterday. I reproduce it as it seems to be the Labour line on the announcements made this weekend:
These are tough times for families and businesses. Bills are going up, jobs are being lost, incomes are being squeezed.
And as Ed Miliband and Ed Balls have made clear, if Labour was in government now we’d be making different choices.
We wouldn’t be cutting spending and raising taxes as far and as fast as David Cameron and George Osborne. Their reckless plan has choked off the recovery and put more people out of work, which means £158billion more borrowing than planned.
And the reality is that this Tory-led government’s failure on the economy means tough times are set to continue.
But when unfair choices are being imposed on people – like cuts to tax credits, or changes to child benefit – everything needs to be done to ensure those that owe tax pay their fair share.
I have been urging ministers to get a grip of the rumbling controversy about supposed sweetheart deals cut by HMRC with some of the world’s biggest businesses and we will continue to raise questions about that.
And today, Ed Miliband has highlighted another vital issue where rising public anger shows more than ever the need for real action now. Continue reading »
It’s reported in the Isle of Man this morning that:
The chief minister has dismissed demands from Labour leader Ed Miliband for talks with the Isle of Man and the Channel islands ‘over tax evasion’.
In the United Kingdom press at the weekend, it was reported Mr Miliband would call for negotiations to begin with the governments of the Crown dependencies.
It was also claimed he would demand ministers follow up the talks, with threats to shame the islands on the international stage by placing them on a globally recognised blacklist.
Allan Bell says he has only just received assurances from the UK government that it is happy with the way the Isle of Man is regulated.
Perhaps Mr Bell hasn’t noticed that Miliband is, I presume, disagreeing with the government on this issue and saying Labour would do something different? In which case he needs to wake up and smell the coffee.
Ed Miliband is giving an ultimatum to British tax havens. According to the Independent:
Ed Miliband declares war today on the UK’s secretive offshore tax havens which he says could raise £2.4bn for the Exchequer and help to reduce the deficit.
As Ed Balls, the Shadow Chancellor, signals a major shift in economic strategy by admitting that a Labour government would be unable to reverse all of the coalition’s cuts, Mr Miliband will expand on his theme of “fairness in tough times” by making those at the top of society contribute more.
In the Labour leader’s sights are the Channel Islands and the Isle of Man, which shelter UK residents’ cash which would otherwise have to be taxed by HM Revenue and Customs.
European Union loopholes allow UK residents to disguise money offshore held in front companies and trusts. The tax havens are not obliged to let HMRC know which British taxpayer the vehicle relates to.
The EU is attempting to close these loopholes, but Mr Miliband will say that this time-consuming process, which could take years, is allowing billions of pounds to go uncollected.
A Labour source said: “In these tough times, when unfair choices are being imposed on people – like cuts to tax credits, or changes to child benefit – everything needs to be done to ensure those that owe tax pay their fair share.”
Mr Miliband will call on the Government to act as a matter of priority through diplomacy at EU level. The plans are an expansion of his theme, set out in his speech last week, for the deficit to be reduced through fairness – particularly tackling the richest in society, while defending the “squeezed middle” on low to middle incomes.
Tax experts estimate that as much as £2.4bn could be raised by calling time on UK tax havens. Richard Murphy, director of Tax Research UK, said: “Breaking tax haven secrecy is essential to collecting the tax that’s the alternative to cuts.”
The policy, which would be included in Labour’s 2015 manifesto, is designed to show Mr Miliband is acting on reducing the UK’s deficit amid ongoing questions about his leadership and the party’s economic credibility.”
And according to the Observer:
Ed Miliband, the Labour leader, is to demand that the government forcesJersey, Guernsey and the Isle of Man to reveal the identity of British tax evaders with money hidden on the islands.
The tax havens, which are crown dependencies, are costing the government billions every year as the rich protect their money from Revenue and Customs probes through front companies and trusts.
Miliband will this week call for negotiations to begin with the governments on the three islands. He will also demand ministers follow up the talks with threats to shame the islands on the international stage by placing them on a globally recognised blacklist drawn up the Organisation for Economic Co-operation and Development (OECD)..
The move is part of the Labour leader’s attempt to define himself as the foremost campaigner in British politics against the excesses of capitalism. He will claim that every £1m raised by his policy on tax havens is equivalent to a year’s salary for 50 newly qualified teachers.
UK residents with money abroad are required to pay tax in Britain on the income they receive, but many do not declare that they have money stashed away.
Jersey, Guernsey and the Isle of Man have not been co-operating with UK authorities’ requests for the identity of people with money on the islands. Richard Murphy, of Tax Research UK, said the country could recoup £2.4bn.
I have already provided links to my workings this morning. They are likely to be an underestimate as they ignore tax to be recovered on capital hidden offshore.
I do, of course, welcome this move by Labour. My hope is it’s the start of a whole campaign on the tax gap. That though is for time to tell. For now it makes very clear that the claim by the Crown Dependencies that they are transparent and all is now well with them is but a hollow sham: that is far from the truth. Now it is time for them to offer real reform if they are serious in their claim that they do not want tax evaders to use them, something that is all too easy at present.
Ed Miliband’s announced a new initiative today that is sure to resonate around the offshore world.
As I understand it he, in essence, has said three things. The first is that the UK should push as hard as possible for the European Union Savings Tax Directive (ESTD) upgrade planned for 2013 to be implemented as soon as possible. Second, in the process he suggested George Osborne had put back the whole process by negotiating the Swiss tax deal over which the EU is now threatening to pursue the UK because it does not comply with the requirements of the existing ESTD, let alone the revised one. And third he said that if for any reason the EU can’t deliver the ESTD on time because Austria and Luxembourg continue to try to block it then the UK should go ahead and demand that its Crown Dependencies and Overseas Territories enter into deals equivalent to those required under the ESTD with any reasonable country that wants one.
Now this is radical stuff. The ESTD is about tax evasion, that’s all. It has no other purpose. So this initiative extends the whole debate about corporate responsibility from the issue of company tax into the whole arena of the tax evasion that some companies – and notably banks – facilitate through their offshore operations, whether knowingly or not.
Second, whilst the ESTD has been in operation since 2005 it has been widely acknowledged – even by the EU itself since 2008 - that there are gaping loopholes in it. The Tax Justice Network view of this is here. The key points are simply though. First, the existing directive only applies to cash deposits – and based on my research of offshore portfolios that’s rarely more than 20% of offshore asset holdings – meaning 80% or more of all income escapes the arrangement and so remains untaxed in most cases in the country where it should be declared for tax purposes whilst, second, the ESTD only applies to income held in an individuals name so that cash and other assets held in companies, trusts and other arrangements also avoids or evades tax as well. Put the two facts together and I estimate well over 90% of all income that should be known about in tax havens like the Channel Islands is not advised to HMRC.
Those are loopholes too big to tolerate at a time when tax revenue is the scarcest commodity in the UK economy.
The big question then is, can Miliband do this? My thinking is yes, he could. First, this is about the international relations of the Crown Dependencies and overseas territories, and we are responsible for them, and as such can legislate them if we wish to do so, and opinion that the House of Commons Justice Committee came to in 2010 when reviewing this issue, basing their opinion on the Kilbrandon report. Second, knowing this the Crown Dependencies have actually done all we have ever asked them to do on such issues. That is exactly why they have adopted the European Union Savings Tax Directive and the EU Code of Conduct on Business Taxation despite their reluctance to do so. In practice they knew they had no choice but do so. Third, if they really want to be awkward we could simply remove the exemption from tax being withheld on payments of interest, royalties, dividends and other sums to these places that are in operation at present and they cease to be tax havens overnight and lose their entire financial services industry at a stroke. Given they publicly say they don’t want tax evaders to use them there is no way on earth they’d risk that, but we could impose it, and they know it.
So Miliband, if he were prime minister, would hold all the cards in his hands, and the Crown Dependencies would have the 2,3 and 4 of spades when hearts are trumps. In other words, this threat isn’t hollow; this threat is for real.
And what would we win by doing it? Well, I suggest it could be £2.4 billion a year. That’s best on my 2009 estimates, here and taking just the part relating to the Crown Dependencies into account.
That’s why I applaud this move: it’s a straightforward attempt to tackle tax evasion. That’s exactly what government should be doing now. And it’s a low cost attempt to do so as well. It works by shattering secrecy. After that’s done the pressure on those with these accounts to disclose will be very high indeed – and so the measure is virtually self-policing.
Of course the Crown Dependencies will protest – but if they do so then they’ll be coming out on the side of tax evaders. Is that what they really want to do?
And if their reply is those tax evaders will just move their funds? Then, I suggest, we have to look at regulating the banks involved a lot more aggressively because in that case they will be willingly assisting tax evasion. That’s the next step. But for now let’s note that a politician has taken a courageous line on this issue.
The Isle of Man Today website noted last week:
MOVES by the UK Treasury to introduce a general anti-avoidance tax rule could impact negatively on the Isle of Man.
KPMG island director Greg Jones said it was by no means a foregone conclusion that we would get a general tax anti-avoidance rule (GAAR) in the near future.
But he added: ‘If we did, however, there’s no doubt that it would impact negatively on places like the Isle of Man.
‘Even if the GAAR were targeted as narrowly as the working party report recommends, in my view it would strike out a number of (what has to be admitted are) fairly contrived tax planning arrangements I am aware are promoted from the island.
‘There may be some work for tax practitioners in advising whether a particular planning idea falls within the GAAR’s scope, but on the whole I think we’d lose a certain amount of the business currently being undertaken by some niche service providers.’
As he also explained:
Last year a working party under Graham Aaronson QC was established to look at the scope for introducing such a rule and what form it should take. The working party was comprised mostly of judges and tax academics.
The report produced by the group last November concluded that a GAAR would be a good idea but it should be targeted at situations in which people undertake what are obviously highly artificial arrangements with no real purpose other than to avoid tax – and not at situations in which a taxpayer simply exercises a choice to do something in a more tax-efficient manner.
Good to see that KPMG admit that the Isle of Man is used for such schemes. And remember the GAAR as drafted only tackles the most egregious – or abusive - of schemes.
And they should be worried. The GAAR includes as one of its trigger events:
(g) that the arrangement includes the location of an asset or a transaction, or of the place of residence of a person, which would not be so located if the arrangement were not designed to achieve an abusive tax result
That might be targeted straight at tax havens.
Disclosure: I represented the TUC in discussions with Graham Aaranson on the GAAR’s drafting including detailed discussions of its scope.
The Isle of Man News has a fascinating article asking whether the pressure has been taken off the Isle of Man now on tax matters.
Much of the analysis is wrong because they think the issues are now resolved, and that is far from true but just for the moment I want to highlight another issue, which is the credit implicitly given to the Tax Justice Network for forcing change. As they say:
Over the past five years, our financial services, tax rates and Customs deal have come under intense scrutiny from beyond our shores.
We’ve had the EU question our corporate tax regime, the painful revision of our VAT deal twice in two years, an inquiry commissioned by the Westminster government has run the rule over our ability to withstand financial shocks and the OECD has reviewed our tax transparency and co-operation.
It seems that barely a week went by without another brickbat being lobbed our way by Brussels, London or Washington.
And quite right too. All of then were justified. As they then out it though, discussing the introduction of incredibly limited automatic information exchange under the European Union Savings Tax Directive:
It is notable that even the Tax Justice Network, consistent critics of so-called ‘secrecy jurisdictions’ has acknowledged the work the island has done in this area.
On VAT, the loss of more than £175 million in revenue – about one third of total government income – has caused major problems in balancing the budget. But even here, the UK has indicated it won’t be back for more.
And on zero/10, now finally resolved with the announcement last week by Brussels, criticisms from Europe were dealt with by decisive action: by scrapping ARI, the anti-avoidance measure, that the EU Code Group considered as harmful. The result was to save the corporate tax strategy and the thousands of jobs that depend on it.
Tax justice campaigners argue that offshore centres help to plunder resources and siphon wealth from Third World Countries.
Mr Bell denies the Isle of Man plays any such role. He confirmed that the island is considering extending Tax Information Exchange Agreements to developing nations, a move advocated by the OECD’s Global Forum – so long, he said, as an appropriate model is in place to do so, given that many such countries did not have a properly developed tax system and there were issues of corruption in some regimes.
We’ve been right on everything else. We’re right on this too. And that’s why none of the pressure on tax havens will be going away in 2012. Because that was the issue that always motivated me and the Tax Justice Network.
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