I note the Isle of Man's response to my research published yesterday. They told the Observer:

'We refute strongly any suggestion that the Isle of Man is subsidised by the United Kingdom. The revenue-sharing arrangements are part of the long-established Customs and Excise Agreement between the two governments. This dates from 1979 and is based on the principle of consumption in each jurisdiction.

'The arrangements are regularly reviewed by the United Kingdom and Isle of Man to ensure that the sharing method remains fair and equitable for both jurisdictions. Indeed, a revised sharing arrangement has been agreed between the two countries and will apply from the beginning of April 2007.'

Two obvious questions:

1. How does the Isle of Man consume more than its GDP, domestically?
2. If the new arrangement does reflect local consumption patterns then why is government income predicted to rise next year? It should fall since my research quite clearly shows that the existing arrangement pays the Isle of Man more VAT than can be justified by the VAT rate in proportion to its whole GDP.

Respectfully, I think the answer is complete nonsense. Being open and transparent about the calculations is th only way forward.

In the meantime, I wonder if Jersey and Guernsey could complain to the EU that the UK is supplying illegal state aid to the Isle of Man's tax haven activities?