Free-riding from the Isle of Man

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It seems I ruffled a few feathers yesterday with my comments on the Isle of Man’s new GDP calculations. I was accused of being disingenuous because I used he one and only consistent data set the Isle of Man has issued — it’s first published data for each year. I was accused of overstating my case when I chose the smallest possible uplift in GDP I could when assessing the uplift in the VAT claim the Isle of Man will make from the UK. And all of that for the one usual reason that underpins all opposition that comes my way from the Crown Dependencies — a hatred of all who oppose them in a world where the finance industry and its friends have crushed all effective political opposition within these places. Remember it was only recently that an Isle of Man newspaper described me as the political opposition in the island.

But let’s move on from the petty desire to undermine objective comment of those whose vested interest in abusing all forms of information is apparent to instead deal with some facts.

First, the official population of the Isle of Man is about 80,500.

The GDP is now claimed to be about £3.1 billion.

So that is GDP per head of £38,500.

GDP per head in the UK is about £23,000 (my estimate, prepared on a train where I’ve lost internet access, based on 61 million people and GDP of about £1.4 trillion for the period we’re talking about).

The disparity is apparent, I think. And let me be candid: the people of the Isle of Man are not so clever that this disparity can be justified by their productivity. The Isle of Man is simply proving that, like other tax havens, it can induce companies to artificially relocate transactions to its jurisdiction to be recorded there although the substance arises elsewhere.

So four things follow. The first is that the Isle of Man is more than able to be self sufficient in tax terms. It does not need, and has not needed, a subsidy from the UK.

Second, the case for demanding reform in its tax system through the EU Code of Conduct is overwhelming: it is very obvious it is still running ring fences to ensure that there is a wholly artificial tax advantage to appearing to locate business there that must be stopped.

Third, if the UK cannot successfully renegotiate the Common Purse Agreement to prevent the Isle of Man exploiting the UK taxpayer to claim a reallocation of tax resources from the poor of the UK to the rich of the Isle of Man then the UK has one option left — and that is to cancel the agreement altogether. And then it must ensure, of course, that it cannot exploit VAT as do Guernsey and Jersey. That this will pay the UK is obvious, of course. VAT is meant to be a tax on consumers: there is a not a shadow of a doubt that consumption of the scale that the Isle of Man’s claimed GDP suggests is not taking place there. That means a tax reallocation in its favour must arise if the existing arrangement continues.

And finally, the UK has to maintain its anti-tax haven stance. As is apparent from this data, these places are free-rides on the back of ordinary people. When the UK needs every penny of revenue it can get subsidising the free riders of the Isle of Man (and that is all who live there unless they actively oppose its tax haven / secrecy jurisdiction status) cannot continue.