Isle of Man Today has reported the reaction of the Island's Treasury Minister Allan Bell on the research Tax Research and the Tax Justice Network issued recently on the subsidy of £270 million the UK provides to the Isle of Man Government a year. What did the honourable minister have to say?:
In his speech Mr Bell said the article [in the Observer] had been initiated by the Tax Justice Network which he described as a 'motley crew doing their very best to stir up resentment against not just the Isle of Man but off-shore jurisdictions in general.'
'They (the Tax Justice Network] will use every opportunity to undermine the Island and try to damage our economy,' he said. 'We do need to keep an eye on these sort of bodies as well.'
To be candid, he did find a flaw in the article:
Mr Bell had pointed out that the article included several inaccuracies, the most glaring being that the Island's population was 26,000.
True! The Observer sub-editor made a typing mistake. The original research did not. Clearly Mr Bell is not keeping a very close eye on us. The reality is he needs to, because a little abuse on his part does not let him off the hook. Looking at his budget for 2007-08 explains why:
1) Amazingly the 'Pink Book' that includes the budget details does not even refer to the 'Common Purse'
2) The budget speech did, once. It said:
This year, as we move into our new sharing arrangement within the Common Purse Agreement, I believe that it is wise to take a more cautious view as to our levels of indirect income in the short to medium term, and to restrain our spending commitments accordingly
Which is scant regard for the importance of the issue.
3) As Isle of Man Today reported the reality is this:
[Mr Bell] said the agreement was negotiated in 1979 and relates to VAT-sharing scheme which sets the VAT rate at the same level as the UK with revenue going into a common pool. At the end of the year the Isle of Man gets a proportion of the revenue back on a pro rata basis.
Mr Bell said the scheme had proved 'very beneficial' to the Island and had helped government achieve the zero rate of corporate tax. 'We have been able to ride out any shortfall from corporate taxation, unlike Jersey and Guernsey where they have no VAT and have had to bring in fresh measures and sales tax.'
The Minister said the system had worked in the Island's favour, but in 2005 the UK government merged the customs and excise and revenue departments leading to a review of all existing agreements, including the common purse agreement. Negotiations between the Island government and the UK began in 2006 and a new deal was reached in the last few weeks. Mr Bell said VAT will still be pooled with the UK but the deal now introduced new criteria with payments in future being related to GNP.
Which simply confirms everything we said. So much for us being a 'motley crew'. Actually, we've exposed a truth the Isle of Man has been trying to hide.
I've done some research on the new scheme. First of all it is not cutting Isle of Man income, so its no less generous than before. We can safely assume that the £270 million subsidy is correct. Second, the new scheme seems to work from an agreed subsidy level and increases it by respective GNP growth. In other words it has no relationship to real activity still. In fact, what's abundantly clear is that the UK has agreed to continue to subsidise the Isle of Man to continue to act as a tax haven - one where we know tax evasion is promoted, as the US Senate reported last year.
Mr Bell is wise to watch us. We have nothing against the Isle of Man, at all. We do have a profound dislike for those who knowingly assist others to avoid their obligations under law. And that practice is widespread in the Isle of Man. How do I know? Well, put it like this. The Isle of Man deliberately chose not to opt into information sharing under the EU Savings Tax Directive. That was done to ensure those who did not wish to declare their tax liabilities in their home states did not need to do so. We consider that facilitation of tax evasion by the Isle of Man government. We're watching you Mr Bell. With good reason.