Health Minister David Anderson says the Isle of Man must remain prepared to fight the United Kingdom over revisions to the VAT revenue sharing agreement.
When the UK last changed the agreement, it left the Manx government looking at a £140 million shortfall in finances over a number of years.
Mr Anderson says any further renegotiation by the UK could leave the Island with even more financial problems.
There's one problem for Mr Anderson and the Isle of Man: as I have shown, there remained a substantial subsidy for the Island in the last revision in 2009. I generously estimated that subsidy at more than £40 million at the time without taking some health, education and defence subsidies into account. I also suggested in 2009 that unless the Isle of Man radically changed its behaviour this subsidy was not worth giving.
The Isle of Man has not changed its behaviour, bar agreeing the incredibly limited information exchange required under the EU Savings Tax Directive since that time. As a result its tax haven activities still cost the UK hundreds of millions a year.
It's not surprising that the UK is demanding further reform the VAT agreement with the Isle of Man as a result. And the Isle of Man has not a leg of negotiating credibility to stand on.
In which case I'd suggest it's time the Isle of Man got used to the idea that it might have to pay for it own public services in future - out of tax they collect themselves. That will be a novelty for them.
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The UK provides the Isle of Man with defence (which hasn’t actually been a big problem since Somerled and his Hebridean galleys which added a rudder to the traditional Viking longship), but it does actually pay for the rest of its public services. It has a population of less than 100,000 and is able to manage to pay for all its public services out of the 20% income tax rate that it collects itself because public administration is so much more efficient – only 6% of the work force.
That’s simple evidence of free riding as a tax haven – nothing else
There’s remarkably low cost to living off someone else’s income
The PSG endorses your exposure of the inadequacies of the Isle of Man economy.
This island’s government lives in a time warp, insulated from reality in a mistaken belief that its nefarious relationship with the financial services industry will provide a passport to independence and unfaltering wealth for years to come.
Regrettably for the government (and disastrously for the Manx people) the finance industry (and those that dance to its tune) is as fickle as the weather and as soon as it turns cold it will be goodbye Isle of Man as the foreign friends of the tax evaders/avoiders hastily relocate to another refuge.
Leaving the island, err … high and dry?
@John77 interesting suggestion saying that “Public Administration” is only 6% of the workforce. Perhaps you should question the IOM Government statistics? Where do the Teachers sit in economic statistics? According to a certain Mr Anthony Brown, I believe the Manx Government employs around 8000 FTE. How does this compare against the Island’s labour force? Why is the Island’s labour rate so low compared to anywhere else?
Interestingly, herein lies the rub – how do you fund a larger Government per capita than anyone else? Subsidy. If the subsidy is cut, so is the public sector.
Perhaps you could compare public spending per capita for the IOM against the UK over a time period. I believe you can pull together comparable stats back to 1969/70 from the Tynwald library? The Manx economy is actually fuelled by net Government expenditure – or as Richard might put it – a combination of IOM Government-sponsored economic haverny combined with subsidy. This is on a par with 1980s Conservative economic policy (thing is, everywhere else has seen the devastating consequences of this and moved along).
If the IOM carries on a-la-Jersey it will end up in full blown economic crash within the next 10 years – George Osborne’s Policy One will see to that (although I suspect he’s a little too ambitious in moving from deficit to surplus by 2015).
Jersey is staring at 50-70% off its property prices within the same time period…I wouldn’t suggest the IOM will self-destruct to the same extent, however, I do expect an under-performance of house prices up about 30% relative to the UK (please bear in mind, I talking long-run here).
But don’t worry, the UK will bail us out – otherwise, it would be distinctly un-European. However, I suspect the terms of the bailout would mean learning how to behave, and indeed will result in some loss of self-determination – no question.
If I were on the other side of the fence – in the UK – rather than VAT, I’d look at the Social Services agreements while taking into account the lack of any freedom of information (recently voted down again I see). Without FOI, the Manx politicians in-the-know can spin any story they like without getting found out by the Manx electorate.
For example, in the press, we get highly emotive “Dad’s Army” style images of Union Jack’s invading the IOM instead of “the Manx politician’s have messed up with 0/10” (yes, seriously!)
So, @John77 – perhaps you should consider how you vote? Vote for an old hand and get the same old story – if you work for Government, you will probably be put out of a job, you certainly won’t even get inflationary pay rises (even if they’re promised to you as with no FOI, it means the politician can say what he likes, and deliver something different). You’ll then watch prices go up until your house devalues…rapidly (if you stay around), or vote for someone who might consider building a more holistic relationship with the UK.
A word of warning for anyone on the Isle of Man who thinks that the UK Government will swoop in and save them if the IOM Government reveals it cannot fulfil its obligations.. just look at the relative deprivation in parts of the UK, and realise, when the Isle of Man economy is no longer able to benefit from what I consider an attempt at a “trickle down” economic policy of government spending, historically funded significantly from the VAT sharing agreement, when or if the UK Government takes over, the shock may be jarring to say the least! Incidentally, Richard, did you spot the story in the iomtoday site recently where it was reported that the Isle of Man Film Industry has lost millions? http://www.iomtoday.co.im/news/isle-of-man-news/7_6_million_is_written_off_over_zac_efron_movie_1_3481599
Even the angry visitors to the news site are discussing what ulterior motives the IOM Government may have had for creating financial incentives and providing financial support for the film industry. Yes, the VAT claim is one of the theories.
@ James
I don’t have access to Tynwald library and you can look up answers in Wikipedia just as easily as I can.
I presume that teachers come under “education” – the Isle of Man has 40 schools, which is one for every 2000 people or for about 300 school-age children
If – and that is a big “if” because I have no evidence for it – the Manx government employed 8000 people that would be 19% of the labour force, compared to 28% (according to Wiki) for the UK.
I cannot answer “Why is the Island’s labour rate so low compared to anywhere else?” because it doesn’t make sense. What is “labour rate”?
The Isle of Man government spending amounts to 22% of GDP, while government revenue is 23% so to say that the IoM economy is fuelled by net government spending is ridiculous. And since I do not have a vote on the IoM, please spare me the rant.