There's a letter that's getting a lot of publicity in the Isle of Man that borders on the absurd.
Written by (visiting) Prof Hugh Davidson its claim is that the whole exercise undertaken by the UK in reclaiming the VAT subsidy that was paid to the Isle of Man for far too many years was a simple act of bullying. And he then goes on to claim that the proposal now being made by the UK for the rest of the subsidy to be cancelled is another act of bullying on its part that it can get away with simply because the Isle of Man caved in to the UK's demands the first time round.
With the very greatest of respect to Mr Davidson maybe a little cognisance of the facts might help. As I've shown time and again on this blog, the UK subsidised the Isle of Man by well in excess of £200 million a year before the October 2009 VAT sharing agreement adjustment that reduced that by £140 million a year.
No one has yet proven my original data wrong: in fact, I stand by it to this day. As a result it is very obvious that the UK is still heavily subsidising the Isle of Man each year and as a result the Isle of Man still undertakes the pernicious activity of undermining the democratic mandate of the UK government to collect tax from those who owe it within the United Kingdom. That is an act of economic warfare on the part of the Isle of Man government and the UK is quite right to take the most basic of action in response to that by removing the subsidy it provides to the aggressor.
Mr Davidson would be wise to recognise this in his rhetoric, because upping the rhetorical stakes here can only be to the detriment of the Isle of Man. After all, the UK could do much more if it wished than simply revise the VAT sharing agreement. There are numerous other subsidies from the UK to the Isle of Man including those on health, defence, the supply of services, etc., all of which could be commercially charged for, and should be in my opinion. As far as I know they're not on the agenda as yet, but if the Isle of Man's position is to be awkward then I see little reason why a UK government looking for cuts shouldn't impose these on a place that due to its tax haven status has a higher GDP per head of population than the UK enjoys by some way.
In summary, talk of aggression won't pay: there's only one in this relationship and it's not the UK.
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Your view is only true if you believe that it is the UK’s money in the first place. What I don’t understand, is whether any revised figure you come up with in your calculations, Richard, makes allowance for money spent in the UK by individuals and businesses resident in IOM. Being an island, all individuals here would shop online, and visit the uk often for goods nit available locally. And businesses here would import almost everything from the UK – computers, stationery, fittings, eqipment etc. I know it would be difficult to estimate this accurately, but is it even taken account of at all?
Tell me what the sum is and I’ll respond
Professor Hugh Davidson is entitled to his opinion. I am however, rather shocked that it was deemed good enough or even relevant for publication. But you come to expect that.
FM, IOM prices are higher than the UK and have been rising every year for quite some time. Perhaps you could think of a reason why.
Also, what impact do price differences have on the IOM’s balance of trade? i.e. how much the Manx spend inside the IOM and how much outside?
FM, I would further like you to consider the Manx Government may not be entirely transparent with either it’s neighbours or its citizens, and that is only the fault of the current occupants of Tynwald, and I assure you, at the detriment of its people.
Whether they can be removed or not is another thing as free and fair elections seem to be a thing of the past.
I don’t know what you mean by “tell me what the sum is”. I just want to know whether this is taken into account. I recall that under the old system the manx public amd businesses were asked every 10 years to estimate off island expenditure. I assume that the current calculation also takes account of it in some way. However the statement that the English now want to base it on what iom would raise if they were independent suggests that this will no longer be taken into account. That to me seems unfair, and I wonder if this is insisted upon, would the iom be better off abrogating?
James I agree that the reason why this is such a difficult area is due to the lack of transparency, and I doubt that either party, Manx or English, is being honest with the public.
No, but you see I don’t need to do so
The fact is that IF you were an independent state (the model being used) then you’d shop tax free in the UK and in that case none would be paid to the UK so there is nothing to take into account so the correct adjustment is zero – which is exactly the sum I’ve used
This whole argument is wrong as a result
Perhaps I should blog that
No tax would be paid in the UK; import duty would be payable in the IOM. And in any event in this calculation it would appear that the UK wants IOM purchases in the UK to be counted in the UK pot, not the IOM’s
So, leaving aside your disdain for the Manx for a moment, if you lived here, would you say that we would be better off abrogating? Is it realistic to assume that UK Treasury would allow that to happen? Aren’t the UK looking for the best of both worlds – keeping IOM from becoming a duty free jurisdiction, but not giving them a fair share for pooling their VAT. I can see how large orders from UK would be imported Vat free and then have duty levied locally, but are most UK retailers likely to waive vat online for small orders ny individuals?
Then there are all the indirect taxes that IOM does not get a share of currently – airport taxes, insurance premium taxes etc.
I am perfectly willing to accept that if the Mamx Treasury have been abusing the agreement then they deserve less – and I would gurssthat they were, hence the lack of resistence to the first raid on the rebate. This time round though, I’m not so sure. Again the problem is the fact that it is not transparent.
Look, face facts. If I go to France I pay French VAT. The UK does not ask for it back.
If you have your own VAT that’s the way it works too. Sure, goods specifically exported to you may be VAT free (and charged on receipt) but very large amounts will be paid in the UK because VAT free conditions will not apply e.g they are consumed in the UK
Tough
That’s the way the system works.
And if only you had a decent tourist industry or actually made things people wanted you’d collect VAT from people from the UK in a potentially similar amount
There is no adjustment to make
Freeborn Man – perhaps you remember the article in the Manx Independent the last time around when they listed the top 10 contributors to VAT? The sums were huge, certainly not relating to expenditure of these firms on the Island.
What do you expect the UK’s reaction to be if the Island abrogated? What would each of these firms do? What would be the administrative cost of implementing and running an independent VAT system for the Island, and for firms?
The problem as I see it is that Nick Clegg’s comments at the British Irish Council were taken by the IOM at face value. Nick Clegg is economically wrong, but you can’t expect him to know all about the UK’s economic policy toward the British Crown Dependencies on the spot, as he doesn’t have the concerns over our VAT agreement that our politicians do.
I take from this that the IOM is not even engaged in negotiation, as HM Treasury opinion is more likely to be as below! Remember the Health fiasco – our ministers are perpetual victims!
The Island needs a subsidy to survive under the conditions of free-trade – although the structure of the agreement had to change in 2009, I’m not sure it does at the moment. However, it is unacceptable for the UK to subsidise the Island while the Isle of Man’s policy is to abuse other nations – in particular, the UK.
NB: it is the Manx Government that is the predominant abuser of the international tax system, not the local firms.
This does however mean that every firm has to to combat the effects that burgeoning public sector and escalating welfare spend has on the general price level. So, how do Manx firms support a higher cost level while selling the same goods as available in the UK?
Q&A:
If your friend wants to play a game, but the last time you played it, he cheated. What do you do?
Did the Island restate its economic performance to increase its revenue from the VAT agreement as some believe (and the UK’s actions on the Constitution would also hint the IOM did)?
If the IOM cheated last time out, do you expect the UK to be fair with the current Manx leadership?
I take your point, the UK might not be completely transparent on this, but they answer to the EU on issues of democratic abuse. Tynwald answers to no-man, which is a problem of governance. Governance is the ultimate responsibility of the UK – although Tynwald should really do something about this, this shower of MHKs has proved they cannot.
It is rumoured the UK is now looking at the Constitution of the British Crown Dependencies, which is actually a response to governance issues. As I said a long time ago, the IOM is risking its right to self-determination.
Want to stop it? Write to the Chief Minister, and if he does nothing then vote for someone who knows what they’re talking about, not your local retailer/accountant/chemist/union leader!!!
Well said
It seems to me, then, that either the parties to this agreement sort it out and make the figures public, or the Isle of Man abrogates. And I won’t be voting for any of the incumbent bozos. The problem is, though, that are no alternatives worth voting for either.