I was amused to find there were 25 visits to this blog from the Isle of Man Government yesterday. I can't imagine why this happened :-), but you're all very welcome!
If you'd like to talk, please feel free to call.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
None from Jersey? I’d have thought they’d be well chuffed with the story…
Alex
They’ve been alright, but the story only broke in Jersey last night.
And it also seems that the obvious importance of the issue has yet to be undertsood there.
It seems to me we’ve given Jersey the bets policy chance it has to get out of its black hole. I hope it grabs it with both hands.
Richard
I too have in the past written much about the Isle of Man, CI, EU etc and appeared in radio programmes. You are wrong about the subsidy although EU doubts over the tax policy were always there. There is no subsidy from the UK.The so called Common Purse or Customs and Excise Agreement has worked in the Island’s favour due to a gap or lacuna in the text as it were. The Common Purse was introduced mid – Nineteenth century to help develp a very poor Island and pay for the harbours. In recent years it has mean that the film industry could come to the IOM with a little Manx subsidy and by way of spending generate a huge turnover boost which thus artificially inflated the VAT refunds or share from the UK. Effectively, the UK was giving the IOM a bonus which it did not deserve. The UK asked the IOM to keep quiet and the IOM was feared that CI complaints would make the UK chnage the VAT situation for all three Islands together. The UK and the IOM can end the Customs and Excise Agreement with I think I am right in saying two years notice. The renegotiated Common Purse so called must now reflect genuine economic expansion and activity so in effect the lacuna is closed and the IOM is back in the real world. A subsidy it was no as the UK invented the formula and times changed. We in the IOM have been told that boosting local turnover is the key to sucess as the Island is now. last I heard, 70% dependent on VAT and such turover turnover taxes. However much the CI is jealous and it is, the Common Purse is not a subsidy as this would affect the constitutional position and the IOm remains as ever self-funding. It was the CI’s bad luck not to have joined the VAT club when it was on ofer and it now hasto make do with a local turnover tax. You can post this on your blog if you like. Regards Barrie Stevens 38 Murray’s Road Douglas IM2 3HW
Barrie
Respectfully, your story makes no sense at all.
IF tghe IoM had boosted its activities by film activity that would be relfected in its GDP and VAT should have stayed a broadly constant ratio of GDP and comparable to the UK.
BUT as my research shows, that was not the case. The VAT income of the IoM was over 21% of GDP – pretty good going on a tax charged at 17.5% of turnover.
So you’re right – the deal could, and should be cancelled. But your explanation makes no sense at all. I suggest you’ve been sold a pup by Allan Bell.
Richard
No Richard. You are the one in error. Do you seriously expect people to believe that you are right and everyone else is wrong all of the time? First of all, I do not represent the Isle of Man or its government in any way and Allan Bell is neither a friend nor a dog breeder so he has not sold me a pup.
I have written much in the IOM and CI press about the effect of EU, FATF, Information Exchange etc on the finance sector, often in advance of government comment, and am not allied to any “establishment”. Indeed, I was once invited to a meeting at the IOM Treasury where attempts were made to find out how much I knew and then to silence me. A Manx Radio presenter tells me that he was asked to keep me off his programme.
Your comments relating VAT to GDP make no sense other than as an attempt to blind one with “eco-babble” but they do indicate the hidden nature of the VAT formerly stemming from the film industry via a loophole or lacuna in the Customs and Excise Agreement that has since been closed by the most recent form of that agreement.
Certain people on the Island have asked about the film industry, “Where does the money go” as it does not appear as a separate account so to speak. This is because it is a VAT payment via the UK from the virtual pooling of our joint VAT receipts.
It is a joint effort and not the UK playing Lady Bountiful. The Island has its payments as of right and not as a subsidy and I wouldn’t mind betting that the EU agrees. After all, far from staying outside of VAT the IOM has complied with the spirit and law of such taxation via the UK. It has not sought to be different. It has given up its right to non-participation. Why should it be vilified?
We were openly told here that the last big cheque from the UK would be the very last. There would be no more such windfalls although the film industry is still active but less so.
Any attempt to explain the VAT side of the film industry met with haunted looks from studio presenters at Manx Radio as everyone knew that it was not an intended by-product of the Customs and Excise Agreement (1979). Talking about it was taboo just in case the Channel Islands wanted something similar and the UK took the opportunity to blow the whole lot away with six months notice as it then had the right to do.
I assure you, film companies came over here and made films as a “tax loss farm” and the VAT cheque via the lacuna in the Customs Agreement made it possible for the IOM to offer a small subsidy or buy into successful films such as “Waking Ned”.
The Island’s turnover or velocity of circulation of money was enhanced by the movie folks’ spending and this created an artificial prosperity which then caused the UK to write VAT cheques to the Island’s benefit based on a formula which, it, the UK, had itself devised. No one foresaw the movie scam!!!
Also, you do not cover another vital and much discussed aspect of the Customs and Excise Agreement, namely, that it enables the IOM to be a much more open jurisdiction than the CI.
The IOM is very new to finance. In 1979 when the Common Purse became the Customs and Excise Agreement there was no substantive finance sector. The UK is responsible for IOM good government and cannot let it starve so the 1979 Agreement benefited both sides at a time of Island economic downturn.
There is still a substantial industrial sector here. Likewise, there are no residence restrictions. The culture is more like that of the North of England and people from many parts of the UK come here to live for the quality of life and services that the Island had to offer. Most of the Island’s population is workaday and if you can afford South East house prices you can afford to move here.
The IOM makes its real money via the finance sector from the jobs and services it creates which in turn generate income tax and turnover taxes. This is not the hallmark of a true tax haven.
Going VAT and duty free via Abrogation has always been turned down on the basis that it would make it harder for the IOM’s industry and trading sectors as well as effectively putting up barriers. At the moment you can move yourself and goods to and from the UK (EU) without seeing the join!
This is the main reason the IOM is not like the CI. Now of course, the product of the 1979 Agreement is the manstay of IOM Government finances. Indeed, we have to generate even more turnover locally to make up for the closing of the lacuna. Historically, the VAT funds have been based on a ten year survey of what we as IOM residents notionally spent in the UK or via the UK ie holidays, travel, mail order, visits etc.
This created a formula for fund distribution but which has become unrealistic, especially when the film industry was mooted, hence the change.
So, subsidy it never was. Buntz money it was for a while. Now it is a share out and the UK gets its portion. Funny sort of subsidy.
It is true, and I have discussed it in Treasury here in the past, that the VAT shareout enables the Island to offer its current tax strategy. However, it is also a fact that the residents of the IOM pay VAT and other indirect taxes and thus contribute immensely to their so called subsidy and then share it with the UK!
Also, the IOM business residents must distribute more of their profits as personal income and thus pay IOM income tax to subsidise the tax strategy. This burden is expected to increase. Additionally, the IOM is raising charges for all government related services even down to photocopying charges of 30p in Tynwald library in order to fund the tax strategy.
If the Island were truly subsidised by the UK then the constitutional situation would change. The UK would have the right to notional representation in Tynwald via an MP as a moot point. Currently, the IOM Treasury comes under the Crown which is why the Island cannot run up a national debt. There is no Westminster representation in Tynwald for the budget or supply vote.
Finally, the Island has never been a tax haven. Ask all those off-Island people currently being investigated or paying up back taxes due to information having been released. I personally know of one IOM banking client who has had to pay HMRC £400,000
Regards
Barrie Stevens
Barrie
I am afraid we are going to differ. There’s a simple reason. Your arguments makes no sense at all.
Let’s start with the last one, that the IoM is not a tax haven. In which case how do you explain the fact that the Island appears on every single list of tax havens ever created, whether by the EU, OECD, FATF, IMF, or all the other agencies and academics who have ever looked at the subject? If you’re saying I’m wrong and you’re right what you’re actually saying is that we’re all wrong and you’re right. Respectfully, that’s not plausible. It’s you who is wrong. And you’re in denial of the facts.
Nor is it plausible for the film industry to have boosted the VAT receipts of the Isle of Man threefold but for this to have apparently had no effect on the GDP of the Island. That is nonsense. Again your argument is wrong, and suggests you are in denial of the facts.
The reality is that the Common Purse agreement is a subsidy. It was always meant to be a subsidy from the time it began (albeit related to other taxes) in (if I recall correctly) 1911 and that’s what it still is. And it is continuing – the Tynwald budget for the current year shows that to be the case, although Allan Bell has refused to answer questions on the issue from Tynwald members.
So respectfully, there’s a good reason for me suggesting I’m right, even if it’s annoying of me to do so. The simple fact is that the evidence supports my case. So far you have produced no evidence to the contrary. Unless you do so I will continue to assume you’re wrong. As indeed will the people of the Isle of Man – who as you yourself note have asked where the film industry money went, probably because it was so small in practice no one noticed it.
Richard
Richard
I have been raking through your site and am disappointed. I thought that you were like me and willing to put things in the public domain that government would rather keep quiet. However, I see that you have a brow beating, bullying and hectoring tone. It is almost the stance of a religious fundamentalist; the Bin Laden of accountancy/taxation.
I am happy for you to expose that which is wrong and expected to see some investigative journalism written by a financial professional, but your site is so full of errors.
I note that at one point you refer to the Isle of Man as an independent territory. This is wrong although the Manx like to think it is so.
The IOM is a Crown Dependency. Authority to govern is pendent from the Crown which effectively means Westminster via the Island’s Chief Secretary a lady “Sir Humphrey,” currently Mary Williams, who heads both the Civil Service and Crown Division.
The former supreme powers of the Lt Governor are vested in Crown Division which is the real government of the Isle of Man.
Isle of Man Government has no independent existence outside of the British state. People have tried to sue the Isle of Man Government only to find that it does not exist. You can sue the Departments. Isle of Man Government is the British Government in a different hat with internal self-government recognised due to the ancient if aboriginal nature of Tynwald.
No laws are passed and nothing moves here without the Royal Assent ie two civil servants in London with an attitude problem and dyspepsia. Incidentally, the UK reserves the right to legislate for the Island at Westminster and there was no income tax here at all until 1918 when the UK threatened to impose it directly.
Constitutionally, the Island loses its right of internal self-government if it fails to do the UK’s bidding and they impose an Irrevocable and Peremptory Order in Council.
The Island’s Lt Governor is constitutionally supreme above all. Currently Admiral Haddocks, he lives in Government House with a gun on the lawn and the Royal Coat of Arms over the door!
The IOM is not part of the UK but the countries of the UK pool their power ultimately in a union parliament at Westminster – devolution excepted – and the resulting state known as Britain incorporates the IOM via the purchase of sovereignty.
The sovereignty was initial acquired for £70,000 in 1760 for George III but the Murray family, who as Dukes of Athol owned the Island’s sovereignty and right to impose taxation, complained and a final price of £415,000 was paid in the 1820’s via a Westminster statute. (The Murray Purchase)
The Island is not part of the realm but it is part of the Crown’s dominion and the IOM Chief Minister must be sworn in by the Lt Governor. The Lt Governor empowers the departmental ministers via Royal Warrants.
You mention the Island’s defence budget being subsidised by the UK. But that is the point. The Isle of Man has no defence budget! It is obliged to make a minor contribution traditionally known as the Imperial Contribution. It is a small part of Britain making a contribution because constitutionally it can raise the tax so to do. Scotland and Wales by contrast are tax spending authorities.
The counties of Britain do not raise income tax. (Yet!) and they have no obligation to pay for defence other than through individual income tax. The Crown has a hand in the counties too via the Lords Lieutenant who play much the same role as the Island’s Lt Governor.
I suppose you will tell me that I am wrong.
The Imperial Contribution pays for the Red Arrows during TT and a fly past plus honour guard and brass band at the annual open air session of Tynwald where the Island’s laws are promulgated in English and Manx.
The Manx nationalist element tried to get the Lt Governor removed from presiding over this session but the UK said that without him it was not a state occasion but the meeting of an urban district council so no Red Arrows, brass band etc!. The Governor still presides!
The Imperial Contribution pays for a small Royal Military Police close quarter protection squad on the Island based at the Civil Defence HQ in a damp wooden hut full of dead flies. This is the Shore Patrol watching you!
Now about this subsidy. You will only dismiss the information and so I will probably make this the last contribution as the site is so unprofessional as not to be worth the time.
The original Common Purse was proposed by Governor Loch in the 1860s. At that time most of the tax revenue went off Island and a portion was remitted back for government etc. Loch proposed sharing but with some of it, such as beer tax, reserved solely for the Island. The idea was developing harbours etc.
The Common Purse eventually became a Customs and Excise Agreement with a mysterious formula apportioning money. As I have said, a lacuna in the text gave the Isle of Man a chance to exploit the loophole and subsidise film companies. The latter then formed Manx companies and spent like mad before closing down and due to some quirk everyone made money.
The IOM saw its theoretical turnover rise and this created an artificial boost to VAT apportionment until the UK closed it very recently by negotiating another Customs and Excise Agreement subject to two years notice of termination by either side. So no more windfalls and in future the apportionment will be based on genuine growth. Damn!
I suppose you will deny this as well.
A survey every ten years sent out to the population attempted to estimate how much we as IOM residents spent outside the Island jurisdiction ie how much VAT we generated in the UK.
This makes sense as the Isle of Man could not be a VAT jurisdiction on its own save as part of the British state.
The Island is not in the EU. It is a part of the British state outside of the EU. It is in for trade and the flow of goods but not for the free movement of people, capital and services. (Protocol 3 now part of Protocol 8 refers)
Therefore it could only apply a Customs and Excise regime and be EU/VAT compliant via the UK as a full member on its behalf. It could impose its own insular version of turnover tax but outside of ultimate EU compliance. Jersey has done just this. Incidentally, the Isle of Man has a duty to uphold the rights of the UK as a full EU member state.
Naturally, as the IOM jurisdiction spills over into the UK jurisdiction and there is no border/customs procedure, (hence the existence of manufacturing and engineering industry on the Isle of Man), any procedure must take account of what we spend in the UK and what people from the UK spend over here. Much less of course now that we have little tourism.
The whole lot goes in the pot and certainly until the latest Customs and Excise Agreement the ten year (Decennial) survey formed the basis of apportionment. This led to the Island getting whatever as part of its share but there was a time I recall when the UK pulled out far more from the pot than the Isle of Man did. The finance sector may have changed this.
Who said the finance sector is VAT free and in what context? They sting me when I go round and pay for something!
The Island is not independent and could not be in a Customs and Excise Agreement subject to EU/Commission rules without being merged as it were with the UK for this purpose, although the IOM has its own Customs department.
You often see UK Revenue cutters in Manx waters and I believe the current Manx boat is seconded from the UK. Also, the UK inspectors operate in the Island because on the Isle of Man what counts is who you threw your rattle/teething ring at.
Overall, there is no subsidy and if there was the constitutional relation ship would change. The Island must remain self-financing or be annexed into the UK.
Furthermore, the UK Treaty of Accession contains a provision whereby any IOM aids to industry etc can be reviewed by Brussels and if you think that the finance sector is an industry then the EU has the means to take a view of this so called subsidy.
They do not because it is not a subsidy.
Doubtless you will dismiss this and say that I am wrong.
The UK has not invested in the Isle of Man since the World Wars in the form of airfields, barracks, prison camps, harbours etc. These were purchased by the Island for a song post-war.
As regards the Island being a tax haven. This, like beauty is in the eye of the beholder. Some view the Island through the green eye.
The emphasis in tax haven is the word “haven”. The Isle of Man is simply not foreign or offshore enough to qualify. Long gone are the days when private jets dropped off boxes of cash at the airport.
You cannot even get your money out of the banks without fighting for it. I know of someone who sold a property and paid in an advocate’s cheque for £225,000. No problem. When it cleared and he wanted £5,000 in cash they said no and then declared that he had to tell them in writing what he wanted it for!
I know of one man whose information was disclosed to HMRC and he had to pay £400,000 back taxes, interest and penalties. I know of one CSP who was awoken one morning by a local Bobby escorting an HMRC official on business investigating tax matters as a fraud rather than as a civil claim! This never happened before.
Over in Liverpool the HMRC has a twenty strong force investigating delinquent tax matters on the Isle of Man. The Island’s own tax office has imported ex-UK revenue men to straighten out compliance with the UK tax treaty, FATF and withholding tax information exchange regimes etc.
The famed UK amnesty, which I think is not really an amnesty at all, has been possible because of IOM co-operation. Unlike the CI, we are so close to the UK in all that we do. Three bags full Sir!
This is why the £100,000 tax cap is not working too well, save for a few retired greengrocers from Luton moving over. The Island is not much of a resident ‘haven’ unless you are able to divorce yourself from the HMRC and other tax authorities worldwide and if you want that then go to a real tax haven like Switzerland or the USA which seems strangely reticent when viewing the activities of certain states.
The idea of the Isle of Man seeking to destroy the world via tax corruption made the (Manx|) cat laugh so much it grew a tail! Have you seen our politicians? No. I’ll spare you that ordeal.
They literally could not run a whelk stall and have lost or wasted umpteen millions of whatever has come the Island’s way. The Manx Electricity Authority is a bottomless pit of mismanagement!
Our politicians pass laws they cannot even read and unlike the UK there is not a lawyer amongst them.
Actually, for all his faults Allan Bell is one of the more straight talking ones and when all these restrictions came in for the finance sector he did say on the radio that the bubble was about to burst on the Island but that no one was listening to him.
Allan Bell the Treasury Minister represented the Island at Washington and signed a tax treaty with Uncle Sam. Usually the UK does this for us. However, Allan Bell holds the warrant from the Lt Governor so it is a bit like the UK doing it through him.
Now that the Island is in the VAT net etc the next stage for the future is a federal EU tax based on citizenship. The Isle of Man has long since signed the Maastricht Treaty and thus most British/Manx residents have a European citizenship as well as their British citizenship.
There is no Manx passport as you can see on the Isle of Man Government website because the Isle of Man is not an independent territory. Manxmen having themselves and all four grandparents born in the Island do not have the right of establishment in the EU other than the UK and cannot automatically be employed and own a business or be working directors.
What else was there? Oh Yes. The people of the Isle of Man. I assure you they know nor care little about these matters. This is a very working class Island. It is more Coronation Street than Bergerac! Politics here is made up of dog mess, parking, school dinners and bin emptying.
The reason why people asked about the money generated by the film industry was because they got fed up with “The acting pooftas and film fellas poncing around like they own the whole Island yeesir!” ie what do we get out of it? They were certainly not seeking after financial truth!
Most Manxies neither know nor care about Customs and Excise or the finance sector, although some nationalists would wish the whole lot away so that they can get back to being poor and unemployed again.
The Manx never had much but then they didn’t want for much and now they have been taken over and outnumbered. Well, we all have, by 8,000 Polish and two thousand Filipinos!
Well within living memory the Isle of Man Govt shipped surplus labour to East Anglia to hoe and single the sugar beet crop because it could not afford the dole money. And even in the mid-1980’s, as Allan Bell will tell you, the Island had one million in the bank and 3,000 unemployed.
Some tax haven this! Some subsidy from the UK! We pay most of it from here through our spending and then share it!
And the Isle of Man is going to take over the world by tax corruption and VAT through some apocryphal process now cancelled?
I don’t know where you got this GDP and 3 x VAT business from. You would have to have the accounts and know just what “Harry Potter Job” the Customs boys did.
The situation is far from clear and the last person who thought that he knew went mad!
Well, you will dismiss all this and so I shall leave it there. But Richard. You have let us all down. Where’s the beef? Go and sit on the naughty step!
Regards
Barrie Stevens
Barrie
I have posted your diatribe, but that is what it is.
If you can’t be bothered with the facts I have used, and referenced to support my arguments here http://www.taxresearch.org.uk/Blog/2007/03/18/the-uk-paying-the-isle-of-man-to-be-a-tax-haven/ then there is no point in reasoning with you .
But let me explain the absurdity of your argument that the Isle of Man has simply beenfitted from the film buisness in a simple way. It has about £220 million of excess VAT income, as I have shown. That implies a turnover on which that should have been charged of about £1.25 billion pounds (1,250 million a year).
Now feature filsm are expensive, but I gather few cost much more than £50 million and the stars take most of this. Nut let’s be incredibly generous and assume that the IoM earned £10 million a film. That requires 125 films a year to be made in the IoM – all blockbusters at that.
Your argument is absurd. If it’s bullying or hectoring of me to simply dismiss unreasoned diatribe, so be it.
I stick to the reality. You should try doing so too.
This correspondence is now closed.
Richard