I received a comment yesterday evening on this blog suggesting |I have got the basis of calculation for the Isle of Man / UK VAT Common Purse Agreement wrong, meaning that my claim that the IoM will be claiming substantial additional VAT from the UK is wrong. The commentator is, of course, hiding behind a pseudonym but I have taken him seriously, and my reply, which is worth reproducing in full here as if I am wrong it should be noted that I am wrong, was as follows:
I am intrigued by your comments, and I repeat the suggestion made previously that I am sure you actually work for the Isle of Man Treasury. There are three reasons for thinking so. First, you speak with an assuredness that would be hard to have without doing so. Second, you are clearly familiar with the underlying principles, but third and most important the way you write on the issue suggests that you are so familiar with the issue that you have lost sight of the absurd claims you are actually making.
Let’s deconstruct what you are saying. You accuse me of comparing apples and oranges when plotting the graph of Isle of Man GDP that I plotted — based openly, honestly and appropriately on data published by the IoM Treasury. And yet it’s not me who is doing that — it is you!
But if what you say is true then what the Isle of Man now proposes to do is ignore its new measure of GNI, so carefully produced and trumpeted. It will instead base all VAT claims on GNI for 2006, as updated by percentage annual movements since then.
To understand this — you claim — I have to go back to the sample calculation. That’s here. http://www.taxresearch.org.uk/Documents/IOMGST.jpg And even though this says “obtain latest published national income data” you say that’s not what it means, at all. No, it means 2006 income data is the benchmark for good. And relative change from then are all that matters.
So, for 2008/09 the right data for VAT calculation purposes will not be GNI of £3,414,806. It will be the figure of £1,944,910 as per the sample calculation updated by real growth from 2006/07 as shown by the old method of calculation of perhaps 12.2% as published here http://www.gov.im/treasury/economic/data/income.xml column 4 and then, having utterly ignored the rebasing of 2007/08 what then happens is that the figure for 2007/08 ( £2,183,723 from column 4 in the previous link, presumably) is then adjusted by the decline of 5.5% recorded in the latest figures to give a figure of GNI for the purposes of Vat apportionment calculations alone — which is wholly made up, and according to your new data utterly wrong — for 2008/09 of about £2,063,618 even though the actual number you publish is £3,414,806 — in this case 65% higher?
Is that what you’re really saying?
That’s not, of course, what the sample calculation implies — it says start with the latest data note — and I have relied on that — but if the Treasury in the Isle of Man says it really will be using make belief data of the type you suggest will be used as calculated above — based on a baseline figure which they now say is incorrectly calculated but which you say they are still willing to use albeit that changes will now be measured in oranges even though the original was measured in apples, then of course I have to concede IF they say that that then the Isle of Man will not be claiming any additional VAT from the UK.
But get them to say that categorically first.
And then I’ll say the following:
1. Using wholly artificial data calculated on inconsistent bases, which have changed since the agreement was first reached, is no basis on which to take forward the Common Purse Agreement. So it should be renegotiated.
2. The IoM Treasury spin that there was real growth in the IoM in 2008/09 was misleading — and the people of the IoM should know that — and I’ve done them a service by drawing this to their attention. The economy actually declined in size significantly in the year.
3. Those same people should know that in hard times their government has spent a lot of money producing data which is firstly misleading and secondly so unreliable it can’t be used as the basis for agreeing international obligations with the UK.
4. However, that new data now shows that the people of the Isle of Man are so well off that the remaining subsidy that I have shown still exists in the Common Purse Agreement must be withdrawn by the UK. So the Isle of Man’s spin on this issue will prove to be wholly counterproductive.
5. My exposure of this issue will have been wholly justified in securing a statement from the Treasury which would confirm they will not seek to use the new data to support quite unjustified VAT claims which might otherwise have not been able to protect the UK from such claims.
And without that statement from your Treasury I’ll say something quite different. Which is, of course, that I am almost certainly right and you are planning to make such inappropriate claims.
It’s up to you. Get the Treasury to issue the statement and you can say I got the claim that the IoM will make an excess claim wrong. But then I show how absurd your behaviour has been, and have the satisfaction of taking credit for ensuring you can’t make that claim in future. Don’t issue it and I’ll say you’re going to make that claim.
Which is it going to be? I don’t mind. You might note I win either way.
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@ Richard,
thank you for your response and link to this item. I read it. I am now absolutely sure that you know exactly what you are doing and you are misleading the reader who cannot see the difference between the apples and oranges. Chinahand is correct in his assertion “His figures of £68 million and £120 million have no basis in reality and are confusing how two different methodologies capture the size of the economy with growth within it. A very poor error.” Nowhere has he said that the basis for calculation is the old one from 2006 as you attribute to him. It is simply a different way of measuring the same thing and both were stated for 2007/8 with the obvious purpose of eliminating an incorrect claim by giving a basis going forward. My previous post anticipated your now stated intention to take credit whatever happens and shows how far in cheek you have tongue.
@woolley
I am not in the slightest trying to mislead
I have honestly said I may be wrong.
Equally I have said that needs proof.
And still you’re not happy – which is absurd.
But maybe that’s because on the data you don’t seem able to tell me the alternatives which may be because if I am wrong on the deliberate attempt to uplift the VAT claim then all the evidence leads to my alternative conclusions instead
It’s all so easy for you to make your anonymous claims – but I am seeking to offer honest analysis. That’s much harder than your position.
Despite taking on a life of it’s own – it has now spawned five or six separate postings and several dozen replies – this is at heart a very simple issue. In fact, it depends on only two questions:
1. Whether the new calculation methodology adopted by the Isle of Man is the same as that used by the UK to calculate its share of the revenue.
2. Whether the Common Purse Agreement states that the two parties should use the same basis of calculation or whether the Isle of Man is bound to adhere to the method it used when the agreement was signed in 2009.
Based on a comment on a previous posting, it looks as though point 1 has been established. Point 2 is not in any doubt: the agreement states in black and white that the two parties should use the same methodology to ensure fairness.
Thus, if point 1 is indeed confirmed, there is no story here – the Isle of Man has merely brought its calculation in line with the UK and is simply claiming its rightful share. (The issue of whether Mr Murphy’s original graph was fair or unfair has always been a red herring for me, as has the issue that this is a convenient time for the island to increase its calculated GDP.)
In any case, the proof of the pudding will be in the eating. Since the revenue sharing agreement states that the two parties must use the same calculation method, the UK is hardly likely to pay up if the Isle of Man has not adhered to this requirement.
[Note: apologies if there are typos in this comment or only part of my argument posts. I am currently on holiday and am typing this on the move.]
@Iliam Dhone
Your questions are a summary of some issues. But they are an incomplete analysis.
Of course you’r right that my graph was a red herring – except for the fact that it was absolutely accurate – the new method states GNI to be substantially more than the old method.
And ChinaHand says this makes no difference to the VAT claim – in which case all I say noted above follows. This has been a waste of time. And if the Isle of Man Treasury now agrees they can say I was wrong all along and I can take comfort for all the reasons I note – happy that an additional claim won’t be made.
If, on the other hand, as I originally alleged, the restatement is designed to reinstate the original level of VAT claim against the UK, over turned (rightfully in my opinion) in October 2009 then one thing follows on – an obvious need to cancel the Common Purse Agreement on the part of the UK as for all the reasons I have noted it will pay it to do so – and the political furore of the UK subsidising the wealthy non taxpayers of a tax haven could not be sustained by any political party in the Uk at this time of cuts.
So to say this is all a simple matter settled by a little data is I ma afraid very, very wide of the mark.
And your chance of getting the money is I think very, very low.
To put it another way – if you think that’s a summary your more than a filling short of a sandwich.
Once again, we seem to be skirting around the issue. Of course our share of the VAT pool will be higher under the new methodology – it gives us a much higher GDP. The question is whether it’s the right methodology – as in, the same one used by the UK to calculate its GDP for the same purpose. If so, any increase in our share is merely what we’re legitimately owed – how could one have a revenue-sharing agreement between two countries using different methodologies to calculate their share of the pot? If, however – and I don’t think this is the case – we’ve adopted a completely spurious methodology simply because it suits us, then I would fully expect the UK to tell us to get stuffed.
@Iliam Dhone
Skirting round this issue? Not me. I’m hitting it on the head and you’re missing it altogether.
So what is the methodology is ‘right’ or ‘wrong’?
If it leads to massive state subsidy of the Isle of Man by the UK (and it will if paid, for treasons I have noted) then it has to end
That’s the issue
Forget the mechanics – they have nothing to do with it at the end of the day.
This is raw politics at a time when resources are scarce and if the UK can win by cancelling your trickery it will – whether the methodology is ‘right’ or not
@Richard. Your argument of “subsidising the wealthy non taxpayers of a tax haven” assumes that the GDP figures for the Island are a true (or truer) indication of Manx wealth than UK economic figures. The two arguments are at odds.
With respect to VAT – if the Manx Government were to attempt to claim more revenue than was intended, then it would indicate a serious problem of governance. I’m sure the members of Tynwald are aware they won’t be thanked at the polls for risking the Island’s Sovereignty.
@James
Why at odds?
They were wealthier anyway – which is why the subsidy was partly withdrawn last year
But if I’m missing something tell me!
Mr Murphy, please don’t be obtuse: if the methodology is right, then there cannot be any subsidy. What you’re suggesting is little more than a logical fallacy. How can one partner in a revenue-sharing agreement be subsidising the other when both parties have agreed to apportion revenue on the basis of relative GDPs and both partners are calculating their GDPs in the same way? The issue of a subsidy – in either direction – can only occur when one partner is stating its GDP in a different way to the other.
@Iliam Dhone
It is entirely plausible the IoM would be subsidised
VAT is a tax on consumption
And quite candidly people in the IoM do not consume at the rate of £45,000 each pa as I show the data implies here
That is because much of IoM GNI is made up of artificiality relocated corporate profits. These should have no VAT on them but the formula may attribute VAT to them, incorrectly. See http://www.taxresearch.org.uk/Blog/2010/10/08/get-the-facts-right-in-the-isle-of-man/
And as I also argue there much of the IoM’s trade has nio VAT on it – transport and finance and zero rated and exempt respectfully – so to attribute tax to these activities in the IoM is also wrong whilst the supposedly excess billing by the IoM is in fact VAT that should arise in the UK
In other words, the formula may approximate to a fair split at the lower level of GNI used in 2009 but will be hopelessly inaccurate and give rise to a massive subsidy from the UK for IoM tax haven activity if the new number, which does not reflect anything like the VAT charging base in the IoM whereas it will in the UK, were to be used
So again, I assure you, I am right – a subsidy is entirely possible because your data is distorted by your illegal tax system
I understand now – you’re actually arguing that the Isle of Man and the UK should use different methodologies to calculate their GDPs for revenue sharing purposes due to the differing economic activity in each jurisdiction. I can certainly appreciate that argument, although I disagree with it – it would be manifestly unfair and go against both the spirit and the letter of the Common Purse Agreement. As for our tax system being “illegal”, that is respectfully nonsense – Ecofin has not reached any conclusions on our corporate tax system. In any case, I’m in agreement with you on one thing – I believe that the cessation of the Common Purse Agreement could well be the best outcome for both parties.
@Iliam Dhone
It seems we only agree on one thing – and that’s the outcome
The people of the Isle of man will be the losers
They should blame their government, as usual
Well, no – please don’t put words into my mouth. I did not say that I thought the Isle of Man would be worse off (in broader, rather than purely monetary terms) for the cessation of the agreement – quite the reverse. Attempting to run an economy whilst not being able to control your own indirect taxation or levels of social security benefits is a ridiculous situation. The cessation of the agreement would give us far more control over our own destiny, hopefully leading to greater political maturity and independence from the United Kingdom within the next few years. As I may have said before on here, I would like to see the island operating as an independent micronation within the European Union, as its present constitutional position is essentially untenable.
@Iliam Dhone
Ah, but you’d have to comply with EU law then!!
And you’re a long way short
And why should they want to bale you out of the mess you’re in financially?
Keep whistling!
Well, we broadly have to comply with EU law now – that’s one of the reasons I describe our constitutional position as untenable: we have most of the responsibilities and few of the benefits of membership. It is also perfectly possible to operate a successful International Finance Centre from within the EU – look at how rich Luxembourg has become. As for bailing people out of financial messes – isn’t that what the EU does these days? Most of the more recent countries to have acceded have had terrible economies. Further, I believe that if we we an independent micronation within the EU, then we wouldn’t have a financial mess in the first place.
@Iliam Dhone
The Isle of Man government has cake and eats it by only complying with the UK and EU laws that suit it. This government grabs ALL the benefits and assumes NONE of the responsibilities. Period.
That is when it is not busy bilking senior citizens life savings.
@Premier Shareholder Group
With respect, that does not make sense – the island does not get to pick and choose which EU regulations it is subjected to. As for all the benefits and none of the responsibilities, that might once have been the case, but it increasingly feels like the opposite these days. Finally, the Isle of Man has not sequestered anyone’s savings – as I understand it, your members made a loss on their investments after buying a financial product they did not fully understand, sold in most cases through poorly regulated Spanish IFAs.
@Iliam Dhone
Wrong on all counts! Only last week the Isle of Man so-called “financial ombudsman scheme” issued a ruling allowing conduct where the UK FSA would issue a heavy fine and severe reprimand.
Very definitely one rule for the UK another for the Isle of Man!
The Isle of Man government also encouraged an island based plc to obtain bank transfers by: – trading under a false name, publishing misleading statements, disguising a massive exit penalty and degrading the integrity of a profession. And then attempting to transfer blame for this conduct onto unqualified and unregulated entities which the company supported by paying undisclosed sums via secretive Caribbean shell companies.
If you do not regard this as a government conniving in the “sequestration “of pensioners savings then you have spent too long living in the Alice in Wonderland world that is the Isle of Man.
All above allegations supported by an extensive dossier of prima facie evidence.
Never bank or deposit a single cent on the Isle of Man
@Premier Shareholder Group
This is interesting. Could you please post the URL for your “extensive dossier of prima facie evidence”? I am aware that your campaign has a website, but for some reason Google is not leading me to it this afternoon.
I am also aware of the large exit penalty (also known as a “market risk adjustment”) incurred by your members, and that this conflicted with some of the top-line marketing of the product. However, this does not invalidate my argument above: the product literature spelled this out in terms that any competent IFA would have understood, yet many of your members purchased through unsuitably qualified Spanish introducers (and even signed a disclaimer stating that they had fully understood all the terms and conditions!).
I am sorry that your members lost money via this investment, but to equate a poorly-performing endowment fund with sequestration of your money by a country’s government is frankly absurd. The only sequestration relating to the Isle of Man is when the UK government froze £550 million of KSF depositors’ assets, thus collapsing a healthy and solvent offshore bank.
@Iliam Dhone
WRONG ON EVERY COUNT!
You say “many of your members purchased through unsuitably qualified Spanish introducers (and even signed a disclaimer stating that they had fully understood all the terms and conditions!).”
PSG: It was the Fund directors who sought and employed unqualified “introducers” to assist in distributing misleading claims published by the Fund. Pensioners signed a contract with the Fund in the belief that the false claims published by the Fund (plus the Fund’s trading title) were true — including the Fund’s (false) declaration that the “introducers” were competent “professional” investment advisors!
Any contract (i.e. terms and conditions) entered into by deception is instantly void and the pensioners require the immediate return of their savings – plus interest and punitive damages.
You say “the product literature spelled this (exit penalty) out in terms that any competent IFA would have understood”,
PSG: The UK FSA publishes a very explicit rule relating to disclosure of “exit penalties” in that they must be transparent and intelligible to the “man-in-the-street” The Isle of Man government allowed an island based Fund to ignore this ruling and instead disguise its disclosure in garbled terms that could only be understood by a highly qualified professional investors/advisors.
Neither the “introducers” (on their own admission) nor the pensioners were capable of understanding the Fund’s technical gobbledegook.
You say “I am sorry that your members lost money via this investment,”
PSG: This is not the point. The PSG campaign is not about the loss of savings but about government sponsored trickery and misrepresentation relating to using deception to obtain bank transfers from pensioners.
You say: “to equate a poorly-performing endowment fund with sequestration of your money by a country’s government is frankly absurd.”
PSG: What is “frankly absurd” is the Fund directors comparing (in an advertising brochure produced by the Fund) “investing” in the Fund with “depositing” money in a building society — and the Isle of Man government’s continuing sponsorship of this kind of garbage.
You say; “Could you please post the URL for your “extensive dossier of prima facie evidence”?
PSG: As previously stated on this blog a fifty page dossiers-of-evidence in support of the above allegations are in the possession of the chief minister of the Isle of Man government, the chief officer of the island’s FSC and the chief officer of the islands financial ombudsman scheme.
Their names, addresses and telephone numbers are on the web/in the book.
Contact them for copies.
@Iliam Dhone
Extract from the contract between pensioners and the Premier Low Risk Fund plc. The ONLY warning disclosed (and this hidden in the depths of the contract’s small print) to warn pensioners that savings “invested” in the Fund would/could be subject to an exit penalty unlimited in both size and duration.
“Notwithstanding any other provision relating to the valuation of the assets of the Sub-Fund contained in the Fund’s Articles of Association, the valuation of assets of a Sub-Fund may, at the discretion of the directors, be calculated (either generally or for the purposes of calculating the redemption price payable in respect of any specific redemption) on the basis of the actual sale price of such assets and not on any other basis contained herein, if the directors consider this to be appropriate in the circumstances, whether by virtue of the size of any redemption, market conditions at the time, or otherwise. In addition, the directors may, in their discretion, apply such adjustment in respect of the breakage costs of any hedging contract which the Fund is required to break in order to effect any redemption as they may consider appropriate in the circumstances.” (143 words)
Page 11 Part 4: Valuation and dealing Para 22 Net Asset Value
For the last SEVEN YEARS the Isle of Man government has approved this impenetrable gobbledegook to allow the Fund directors to charge up to 30% penalty before pensioners can rescue their savings from a deteriorating Fund — a Fund that the directors promoted by comparing it to depositing money in a building society!
The directors then claimed the above disclosure is an MVA — but never used this term in any of the Funds documentation. And in a completely separate part of the contract the directors disclosed – in a clear and concise tabulation — the Fund’s minor “redemption charge” tapering from 9% to 0% over five years.
This charge is displayed with such clarity that it can be understood by a five year old child!
Question: Why didn’t the directors simply write? : –
Warning! Your savings could be subject to an exit penalty unlimited in size and duration. (15 words)_
Answer: Pensioners (and any other sane person) would not have transferred their savings to this Isle of Man based Fund.
The investment strategy of Fund has a sufficiency of “risk” that it may not have stayed afloat without income raised via huge redemption penalties and/or the use of these penalties to “persuade” investors not to desert the Fund.
@ Richard. Just an observation if I may – it seems to me your critics have after a number of challenges failed to debunk your case that the IOM is after its vat back resulting in them falling silent or adding comments on something else that they have a view on (eg. constitution)
That surely leaves you as the winner, where does it go from here?
@Ibelin
Thank you
In agree – but I’m biased!
What next – well I will certainly be seeing if this matter can be pursued in the UK. That’s my next step
In the IoM a statement from your Treasury would be appreciated
@Iliam Dhone
Examine closely your statement: – “many of your members purchased through unsuitably qualified Spanish introducers”.
It was the Fund that was responsible for recruiting and paying these “unsuitably qualified introducers” (uqis) to assist in the promotion of a complex “experienced investor fund” designed for professional investors only.
And then describing them as “professional” investment advisors.
Any negligence in this matter lies with the Fund.
The Fund paid these “uqis” via two Caribbean shell companies expressly created by the Fund to make these payments. Both the Fund and the “uqis” refuse to disclose any details of these payments, but pensioners would appear to have been pushed towards the Fund’s investment strategy not because it was in their best interests, but because the “uqis” received high commissions.
UK and EU law require all commission payments to be made known — but not on the Isle of Man.
Neither will it be known if these payments were assessed for taxation as all of the “uqis” have now disappeared.
How can it be possible to pass blame for the Fund publishing (alleged) misleading statements onto the “uqis” by claiming that they were contracted to the pensioners and not to the Fund?
There was no contract agreed between the pensioners and the “uqis”, no agreement to pay the “uqis” fees and no disclosure to the pensioners of any “commission” payments received by the “uqis”.
There were however contracts entered into between the Fund and the “iqis” agreeing to pay fees in return for assisting in the promotion of the Fund. And contracts were signed between the Fund and the pensioners — contracts obtained by the Fund publishing (alleged) misleading claims.
The PSG has a full dossier of evidence to support all of the above allegations.
Well, if they were thinking of The Derbyshire (IOM) they were not wrong! Those who put their money in that particular Building Society found themselves willy nilly in an Icelandic-owned bank (consistently described in its information to depositors as a northern European bank), unable to break their fixed term bonds without penalty (or at the time of sale even with penalty). Two years on from the collapse of KSFIOM, they have recovered just 51% of their savings and are the only casualties of the collapse of the Kaupthing Group not to have been repaid in full.
@ Ibelin
“@ Richard. Just an observation if I may – it seems to me your critics have after a number of challenges failed to debunk your case that the IOM is after its vat back resulting in them falling silent or adding comments on something else that they have a view on (eg. constitution)That surely leaves you as the winner, where does it go from here?”
Not at all. But there is no point in keeping on making the same point that Richard is not comparing like with like which he then totally ducks in his each and every response answer. I think we have to wait and see what happens and as I said before, if the Island claims an extra 60odd million he is right and it’s a scandal. If not, as the published treasury figures prescribe then the whole thing was nonsense.
@ Richard
Statements have been made by Government again saying you are totally twisting the figures as anyone with an ounce of intelligence can see. What more can they say?
@woolley
I’ve endlessly answered your points
It’s not my fault you do not a) want to notice b) understand what I have said
And what have the IoM government said? Point me in the direction you want me to look please – with URLs
@Angela KSFIOMDAG
The Premier Fund was launched on the 1st November 2001 and at the same time the Fund put into public circulation glossy brochures promoting the Fund as:- “A suitable alternative for investors seeking returns of a bank and building society deposits …” and “… an excellent alternative to the returns available from Bank & Building Society Deposits … “
The Derbyshire Building Society had an outstanding reputation until it became involved with Isle of Man registered KSFIOM … but did this involvement come before or after 2001?
If before this date then the Fund directors would be aware of the wretched situation between depositors in KSFIOM and the Isle of Man government and could be vindicated for making their claims.
The PSG is very concerned about your distressing situation and would be grateful for any further light you can shed on this matter.
Angela KSFIOMDAG
Two years on from the collapse of KSFIOM, they have recovered just 51% of their savings …
Regrettably pensioners who transferred their savings to the Premier Fund have done rather worse than this.
Many of those who recovered their money from the Fund had to pay a (previously undisclosed) 28% exit charge – this on top of another (at least) 35% loss in the Fund. So 60% and more.
The Premier Fund did not specify which building societies or banks the Fund would be an “excellent alternative to” (or indeed where these amazing institutions were based) but it would appear their returns were anticipated to be even more disastrous than yours!
The Derbyshire (IOM) was sold to Kaupthing and integrated into KSFIOM in December 2007 – less than a year before KSFIOM collapsed in October 2008. For more information on our situation I suggest you visit our website at ksfiomdag.com. You may be interested to read our latest submissions to the Tynwald Select Committee: our response to their First (Interim) Report on the collapse of the bank and our submission for the second part of the Inquiry which is about to begin – see http://www.ksfiomdag.com/index.php?option=com_kb&task=category&category=83&Itemid=106
If you wish to discuss further, I suggest you contact us via the contact button on our website.
@Premier Shareholder Group
Thanks for the updates, and particularly the wording of the “market adjustment” clause. This falls broadly within my area of expertise, as I am by profession an advertising copywriter and frequently work with financial clients (mostly regulators and global banking bodies, but occasionally financial institutions operating here).
Your responses raised so many points that I think I will have to take them in order (and apologies to Mr Murphy for our having derailed his thread in this way).
• I am unable to comment on whether the unqualified introducers were appointed by the Fund itself until I conduct further research.
• If you believe that the contract you entered was deliberately deceptive — and I would say that this is a grey area, based on what I have seen — then your dispute is with the Fund itself, and not with the jurisdiction in which it was based. (If you entered into a poorly performing or badly drafted investment in the UK, I doubt you would expect the government there to make good your losses.)
• Unfortunately, any claim for “immediate return of their savings — plus interest and punitive damages” is likely to be stymied by the disclaimer signed by your members. If it is the disclaimer I think it is, this states that they are “experienced investors” (which has a very specific meaning in financial contracts) and significantly reduces their right to sue the fund should their investment underperform. Usually these terms are attached to share trades where an investor has chosen not to take the advice of a broker. Whilst I agree that this disclaimer does not sit comfortably with anything marketed as a Low Risk Fund, it should have rung significant warning bells with your members. In fact, if they were not experienced investors (and clearly they were not), then they should never have signed this disclaimer, nor bought such a product — this was irresponsible in the extreme. However, if they were put under pressure by the introducer to sign the disclaimer, they may well have a legal claim against them. But overall, I would say strongly — never, EVER sign a disclaimer untruthfully, or if you do not understand what it means. The cost can be horrendous.
• Agreed that the “exit penalties” were written in terms that would only be understood by qualified IFAs or those with a broad knowledge of financial products. However, the actual contents are not particularly disturbing: they state (i) that assets held under the fund will be liquidated at their current market value, and (ii) that if the fund incurs charges in exiting its own contracts, these will be passed on to the investors. Nonetheless I agree that a warning should have been included in the “consumer” parts of the literature, although for more experienced investors such risks would be immediately apparent for any endowment product.
• I do not agree with the phrase “government sponsored trickery”. At worst this was a regulatory failure, and it is not fully clear that that was the case.
• I agree with you that commission payments made to introducers should be disclosed in the Isle of Man in the same way as in the UK and the EU.
• Could you please retype the brochure quote “A suitable alternative for investors seeking returns of a bank and building society deposits”, this time more accurately. This is not pedantry on my part: I would like to see exactly what it said, preferably in context. However, overall I do not like the tenor of the two quotes you mentioned, given that this was an endowment-based investment aimed at experienced investors.
• “The Derbyshire Building Society had an outstanding reputation until it became involved with Isle of Man registered KSFIOM” — no. Derbyshire International was an Isle of Man-registered financial institution to begin with. You are confusing it with a branch of the onshore building society. (The same distinction applied, with devastating consequences, to the UK government’s sequestration of KSFIOM’s assets — the winding-up order stated that funds would not be returned to “related entities that are not branches”).
8th October 2010
Isle of Man Treasury Minister, Mrs A.Craine, attends the Conservative Business Forum where she meets UK Treasury Ministers Mark Hoban MP, David Gauke MP and Justine Greening MP.
She said: “The forum gave me an opportunity to promote the Isle of Man economy and our commitment to transparency and financial supervision.”
“Transparency and financial supervision”… is this some sort of joke?
The world must be told.
NEVER BANK OR INVEST A SINGLE CENT ION THIS ISLAND
@Ibelin
Without wishing to appear rude, are you sure you have read all the comments on this page and fully understood what is being said? Mr Murphy himself has agreed that, so far as he is aware, the Isle of Man is calculating its GDP for VAT-sharing purposes in the same way as the UK, thus adhering to the requirements of the Common Purse agreement. His argument is in fact more subtle: it is that the Isle of Man should adopt a different methodology because of its different economic make-up, and because he believes that profits have been artificially relocated here. I suggest you re-read Mr Murphy’s original postings on the matter, which make more wide-ranging claims implying that an unfounded and opportunistic methodology was employed, and ask yourself whether this does indeed “leave [him] as the winner”.
@Iliam Dhone
Without wishing to appear rude, please do not seek to misrepresent me – which you are doing
Your comments are very far wide of the mark indeed – or just wrong is a plainer way to put it
@ Richard.
I understand exactly what you are saying but it is simply wrong as I (and Chinahand among others)have pointed out repeatedly. The rebuttal from Government I heard was on Manx Radio and talked of a confusion of the new and old methods of calculation just as we have.
Possibly I am being obtuse here, Mr Murphy: I thought we had ascertained that we both believed that both parties in the Common Purse Agreement were adhering to the same basis of calculation of GDP. Could you clarify this for me in simple terms: do you believe that the Isle of Man’s most recent GDP figures were calculated on the same basis as the UK’s, or not?
@woolley
And as I have repeatedly said – you could also be wrong – and Chinahand has confirmed, he does not know
And the rebuttal is not a statement of the form I asked for – just a mangled message on the radio from a minister whose main aim was no doubt to misinform and say I was wrong – as has often been said by IoM ministers in the past until I have been proven right – which is embarrassingly often for them
In other words – you are making completely unsubstantiated claims – again
@Iliam Dhone
The IoM says it is using the same basis – but no one has confirmed it
So do not know
And nor do you
@Iliam Dhone
Numbering your “buttons” 1 to 8
1. The unqualified “introducers” were appointed by a Mr C. Walton (tel number available) whilst he was working for or on behalf of the Premier Fund. How else could the “introducers” obtain supplies of the Fund’s marketing documents and enter into an agreement to receive payments in return for successfully circulating these documents unless they had entered an agreement with the Fund?
2. How could anyone possibly know that the Fund’s sales brochures were misleading at the time of signing the agreement to transfer money to the Fund? The Fund promised “Capital security and capital guarantees which can not be taken away”, a huge exit penalty was deliberately disguised and the unqualified persons given access the Fund were misrepresented as “professionals”.
It is entirely the Isle of Man government’s fault for the simple reason that the Fund knew it could publish what it liked without fear of intervention by this government
3. Experience as an investor is a relative ability and when Premier informed the public that investing in the Fund could be compared with depositing money in a building society or bank pensioners believed that their “ability as investors” was requisite to the level of “experience” required to invest in a “low risk” environment such as the Premier Fund – or a bank/building society.
The pensioners then signed the disclaimer in good faith, not knowing that they were being misled.
Why on earth should there be “warning bells” ringing?
In these circumstances it is astonishing for you to say: – “never sign a disclaimer untruthfully” when the real issue is : – “never promote an investment fund untruthfully and cause people to be misled”
The pensioners were deceived into signing a document believing it to be true — they cannot be blamed.
4. The Fund’s exit penalty was not disclosed as required in UK law. Fact.
The Fund was launched in December 2001 and the exit penalty has been in place since February 2003. Over seven years! The Fund would not have survived without this penalty and you make another astonishing claim that this is “not particularly disturbing”. Words fail ….
5. The Isle of Man government launched “experienced investor funds” as a device to attract more investment to the island. They were totally unregulated (so “regulatory failure” can not be to blame) and an unmitigated disaster. The government has now closed all these funds and radically tightened-up the qualifying criteria for “experienced investors”. But has done nothing to help the hundreds of pensioners who are now trapped in a closed Fund.
6. It is only human nature to do things that your government allows. The Isle of Man government allowed this trickery and the government is 100% responsible for the mess that it created.
Maybe commission payments are required to be disclosed on the Isle of Man and that is why the Fund transferred these payments to Caribbean shell companies where there is no such requirement.
More Isle of Man trickery.
7. The comparison between the Fund and banks and building societies is made in several of the Fund’s brochures. One example quoted verbatim is :- “A suitable alternative for investors seeking returns in excess of bank and building society deposits without the volatility normally associated with equity related investments.”
If the Fund is not (legally) comparable to a bank/building society why does the Fund draw these comparisons?
8. Rephrase this to: – “Derbyshire International was another Isle of Man registered company which in the light of emerging revelations of fraud on the island investors should not have touched with a barge pole.”
You are a professional advertising copywriter, based on the Isle of Man, working with financial clients, mostly regulators and global banking bodies, but occasionally financial institutions.
In such a profession it is a pity that you have failed to study consumer protection law very closely.
@Premier Shareholders Group
I think this exchange is now closed
Some lame excuses attempting to justify the contradiction-in-terms that the Isle of Man as a transparent and honest secrecy jurisdiction.
If it says “Isle of Man” government on the packet be assured that there will be impropriety somewhere in the stage set.
Falsus in uno, falsus in omnibus
Trust.
@Premier Shareholder Group
Mr Murphy is right: we have debated this enough here. However, I do have other comments to make, and if you would like to continue this discussion and get my professional opinion on the remainder of the marketing copy, you are welcome to email me at rf3769@hotmail.com
(Please note that this is not my main email address — I will let you have that once you have contacted me, since if I post it here bots will seize it and I will be spammed to death.)
I had no intention to post further here as this discussion is clearly off-topic. But if Richard will allow me, I feel I should try to put the record straight. I do not think anyone – and certainly not me – is confusing anything. Derbyshire Offshore (or The Derbyshire (IOM)) was indeed an IOM registered bank. That is not at issue. But it was a subsidiary (not a branch) of a UK Building Society and covered by its Parental Guarantee. When it was sold to Kaupthing in December 2007, with the agreement of the FSC, it became a (cash cow) subsidiary of an Icelandic casino. The hapless depositors (many of whom tax-paying expats who, with no UK address, were – and remain – unable to open UK accounts) had no say in this and were unable to withdraw their fixed term deposits without penalty (or even, around the time of sale, with penalty). Some of us actually believed the assurances of the Directors that nothing would change. Never again!
@Richard Murphy
On the one hand, arguing that the Island is wealthy – or at least inferring it is wealthier than the UK – and on the other stating (fact) that the figures of GNI on the Island are misleading when looking at the quality of life. Perhaps these are only at odds if one understands the common market relationships the Island has.
Measuring a time series of the Gini coefficient (inequality) on the Island would tell an interesting and probably contrasting story – if, of course, the data exists in the public domain.
It is relatively straightforward to point out that the 2007 VAT agreement was damaging to the UK, but it was also damaging to the Isle of Man. Hence, the 2009 VAT agreement. Frankly, if that doesn’t work than I’d expect at least the UK side to get back around the table 😉
The IOM Treasury will, however, do the responsible thing.
@Illiam Dhone
The IOM will not survive without a better relationship with the EU. For this, it simply needs to commit to the Copenhagen criteria, and write to the Council.
The CC means higher quality institutions, transparency, firm level competition and a commitment to economic cohesion. All of which are good for the Manx in the long-run, but problematic in the short-run.
Does it take the Manx economy to go the way of Iceland for it to consider the EU?
@James
The idea that the IoM Treasury will do the responsible thing is, I am afraid, laughable
It has promoted illegal tax regimes, deliberately.
It is responsible for a major tax haven.
It deliberately distorts world markets, allows the operation of abusive structures, promotes total opacity, creates regulation that encourages a race to the bottom throughout the world, and seeks actively to undermine the tax regime and democracy of other states.
Is there any hint at all of any responsibility in that?
And you have no chance of joining the EU
Having Luxembourg blocking moves is bad enough. No one will want another state captured by the finance industry in the EU – and that is what you are
Apologies, I have been away from the office giving a lecture on zero point energy and therefore unabe to respond before now.
Iliam Dhone,
Please do not concern your yourself at being rude to me, you appear to support secrecy jurisdictions, I oppose them – be as rude to me as you like I couldn’t care less.
Woolley,
Whilst I note your response was not directed at me, I would like to give the following advice. Dont forget to include your ounce of integrity with you ounce of intelligence, history shows us one is worthless without the other.
Richard,
Its their Treasury not mine – I am a UK tax payer concerned as you are with social justice. I sincerely hope you and your colleagues keep up the good work.
So the question orginally asked in this blog;
The Isle Of Man:You decide.
To re-iterate – Ricahrd as you have clearly uncovered something amiss here and your critics have failed to produce evidence against your convictions – you are the winner!!!! end of.
Good luck with taking this issue further I am sure you have the support of the majority silent UK tax payer in doing so.