Isle of Man Today has reported:
Chief Minister Tony Brown MHK revealed in an exclusive interview with this week's Isle of Man Examiner that the UK had a clear intention to revise the agreement again to ensure that the island received no more VAT revenue than we would collect if we were independent.
He said if the change was made, it would result in a ‘substantial' cut in revenue.
Now that's odd.
Before the October 2009 revision to this agreement the Isle of Man said there was no subsidy in it. I argued there was - to the tune of £230 million a year.
When the agreement was revised I was (probably rightly) accused of having precipitated the removal of between £90 million and £140 million or so of that subsidy. My response was to make clear that the change had not removed all the subsidy. Of course, I was criticised again.
Then I suggested, I think rightly, that the Isle of Man was trying to manipulate the data to reclaim the subsidy. And of course I was criticised again, heavily.
And now the Chief Minister has admitted I was right all along, yet again, and what is more, the UK has the right to act on that logic and remove the remaining subsidy from the Isle of Man.
In fact I'd argue, of course, that the UK not only has that right, but has a duty to act to end this subsidy once and for all. The idea that the UK subsidises the Isle of Man to be a tax haven is absurd.
But will Tony Brown apologise? I won't hold my breath.
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Mr Murphy, this is not a subsidy. The previous arrangement certainly amounted to such, although that may not have been its original intention — the actual arrangement was swathed in secrecy anyway, so that I’ve only just realised how it worked.
In contrast, the UK is now attempting (in my view, at least) to be a little mischievous. Essentially what is happening boils down to how one defines “to ensure that the island received no more VAT revenue than we would collect if we were independent”.
The UK is taking this to mean “as if the Isle of Man were another EU nation within the EU VAT area” as opposed to “as if the Isle of Man had a standalone VAT-like system”. Put another way, they no longer wish to recognise the flow of spending between the two countries, and the fact that we import the vast majority of our goods from the UK. This can be argued both ways, but to me such considerations should be implicit in a fair revenue-sharing agreement.
In any case, the conclusion is clear: the Common Purse Agreement must end. The Isle of Man should leave the EU VAT area and implement its own VAT-like tax, charged on all goods as they enter the island, on all goods manufactured here and on all services provided here. In simple terms, this would mean that when items are purchased in the UK, VAT would be deducted on leaving the country and Isle of Man VAT charged on arrival here. I suspect that this would produce the same level of revenue as the current arrangement, as opposed to the UK getting to keep all the VAT on the large sums of money our residents spend there.
http://www.iomtoday.co.im/news/isle-of-man-news/questions_over_vat_deal_withdrawn_1_3395381
iomtoday’s website also relates how questions about VAT were withdrawn from the House of Keys.. I presume because the Member was told told that the answers might be enormously embarrassing and undermine the official story that is spun.
No: I know why this happened. There is a delegation here from the UK to discuss this issue, and Mr Karran (the Member who asked and then withdrew the question) thought it appropriate to hold it over until the June session when more meaningful answers are likely to be forthcoming.
Iliam
You seem very well informed, as nothing has been said about any delegation in public that I know of. Does this mean that a further revision to the revenue sharing arrangements is about to be signed?
Juan
There is no such delegation on the island, nor is there planned to be.
Odd that Juan Watterson does not know what is going on:
Comment submitted by Isle of Man resident Juan (John David) Watterson (31) University of Lincolnshire and Humberside. BA(Hons) Management with first class honours (2001). Qualified Chartered Accountant (2005). Career 2001-06 KPMG, Audit Senior Parliamentary Career Isle of Man MHK 2006-date (Independent) Government Posts: Member Department of Department of Health and Social Security (special responsibility for Social Security & Chairman, Audit Committee) 2006-09, Department of Local Government and the Environment (special responsibility for Housing and Estates) 2006-09, Chairman Planning Committee 2009-10, Department of Economic Development 2010-date (special responsibility for Financial Services, Companies Registry, and Information Systems Division), member Overseas Aid Committee 2007-10, Whitley Council 2007-2009.
Tony Brown thinks the deal is being reworked and has said so publicly
In fairness, I should add that I (indirectly) heard this from Peter Karran. Peter being Peter, it’s entirely possible that the actual facts got slightly garbled in the retelling.
Richard
As in any country, a member of the legislature doesn’t know necessarily what the executive is getting up to! Especially here.
Juan
And then we will see cpamies set up here to indulge in the same sort of vat abuse we see happening from the channel islands. Personally I would hate to see this happen, but would smile at the irony that Mr Murphy helped to create this situation.
..except would a local replacement sales tax be cheaper than VAT if its used to replace the island’s VAT share-out so that the IOM government books remain balanced? Not sure that it would… And if its less (for these VAT competition purposes) what will the levels of direct taxation be raised to in order to make up the shortfall?
The scenario will be dead by then
Don’t worry
I’m not stupid
However much you like to think it
If the Isle of Man were to be forced into abrogation, at least the retail and tourism industries would benefit as would professional service providers who currently have to levy Vat, thus creating more employment. And of course we can always raise income tax ( probably one of the only things I agree with Mr Murphy on). Either way, the Manx people will survive, so Mr Murphy maybwish us dead all he likes – it won’t happen.
I can’t think that the UK would want to create another duty free zone in their doorstep, but if they did, then many Manx residents would benefit from the boost it would give to retail, services and tourism. And if the belt gets too tight, then we have plenty of headroom to raise income tax. Either way, I’m sure that the Manx won’t starve, however much you would like to see it.
@ Juan Waterson
Isle of Man government obfuscation is legendary and what is said in public, private and/or in the House of Keys is often contradictory and illusive.
What is certain is that the government’s PR spin machine will churn away to keep decent Manx people semi-comatose in premeditated confusion. They may not starve, but prosperity will remain an illusion until this government is sent packing. The sooner the better.
And you will only happy when our government does what – pays compensation to people who forgot ‘caveat emptor’? Your comments on this blog are depressingly repetitive.
Juan
Oh dear! We are back to the old “caveat emptor” chestnut again!
In the UK, (but not in the opportunely backward Isle of Man) consumer law has moved on from the “caveat emptor” model (which was often used as an excuse to totally misrepresent products) and new consumer rights laws now provide the public with proper legal protection. Today “caveat emptor” is no longer applied in consumer law — although in exceptional circumstances it may apply to transactions between businesses UNLESS it can be shown that the SELLER had clear information advantage over the buyer.
The PSG will be “happy” once the Isle of Man government recognizes the legal rights of hundreds of pensioners and takes appropriate action. That you find PSG comments “depressingly repetitive” is not nearly as depressing as losing half your lifetime savings; but then the Isle of Man government probably considers it “depressingly repetitive” that thousands of people should have the nerve to complain about the activities of Bernard Lawrence Madoff.
Be aware that the PSG intends to remain “depressingly repetitive” until the Isle of Man government shows due regard for consumer protection. It is in the public interest that your government should not be allowed to continue with policies which are considerably more “depressing”.