Isle of Man Today noted yesterday that:
The Isle of Man might be branded a tax haven by its critics.
But that's not the conclusion of research by academics at the University of Amsterdam.
Their study ranks 24 'sink' and five 'conduit' offshore finance centres - and the Isle of Man is noticeable by its absence.
The academic study in question, with which I am familiar, did indeed suggest that the Isle of Man was not in the top league of tax havens. It's not alone in doing so. The Tax Justice Network Financial Secrecy Index does the same, ranking it at 32 in the world. Their summary makes clear that when it comes to secrecy it's still an offender, only doing really well on three counts, all of them reflecting recent change:
That's still enough to give it a secrecy score of 64, which is enough to make it a tax haven in my book.
The reason why it does not feature highly in the TJN list is because that is also weighted by the scale of financial secrecy flows. And their assessment there is this:
You could almost say that the Isle of Man did not feature in this new study simply because it's not a very successful tax haven anymore.
If the Isle of Man wishes for accolades for that I am happy to give them. I'll be clear; it's still very much a tax haven, but just not a very attractive one. And apparently my opinion matters. According to the Isle of Man today report:
Our biggest tax haven critic, however, has been Richard Murphy of the Tax Justice Network.
Three comments seem appropriate. First, I accept the honour. And if I've helped diminish the haven I am delighted.
Second, I am no longer of the Tax Justice Network, just for the record. We get on just fine, but I've been independent for a long time.
Third, the Isle of Man still has almost all the characteristics of a tax haven, even if they are being less and less used. The real question might be, why not give them up now? When you've lost, after all, it's time to change your game.
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Not very readable on the new format
Next question: what does “Winning” look like for a tax haven?
A tiny minority of the locals get richer, and effectively become foreigners, paying no taxes and contributing little to the host society in any of the countries where they own a property; and a small number of middle-class professionals feel affluent right up to the day they realise that their children will never own a house – not with wealthy foreigners bidding up the prices – and their future lies in emigration.
And it does, eventually, come to an end.
And that’s it. Everone else loses, except the service users; and they are, at best, pernicious rent-seekers, damaging to the host society.
At worst, they are the kind of people you should be very, very careful to praise for their rectitude, integrity, charitable donations and exemplary efforts in rehabilitating and employing men whose lives are blighted by unjust convictions for crimes of violence.
Not sure I understand what you’re trying to say here Nile. Can you explain your points a bit more in the context of the Isle of Man for us
The Isle of Man is at risk of turning into Jersey, or Monaco: an economy run for the benefit of a tiny elite, with finance displacing all other economic activity and that elite bidding up the prices of housing – and, eventually, all services – until life for ordinary people becomes a long grind of two jobs just to keep your head above water while your living standards fall ever further; and, over time, even the banking jobs don’t pay the rent and people in their 20’s start to leave.
Douglas isn’t there yet – the Island is quite large, and it still has agriculture and tourism – so the processes are slower: there’s still manufacturing, and there is still a functioning government providing services.
That can change – the elite, and their clientele, have an aversion to paying even minimal taxes – and an excessive dependency on tax competition and ‘hot money’ always ends up with the tax haven’s administration in a fiscal black hole, with all services (education, especially) effectively unavailable to those who cannot pay, or of such poor quality that using them is a mark of desperate poverty.
At some point, the tax haven notices that everyone seems to be over fifty and the schools are empty. And, as the electorate has to reason to vote for any expenditure that is of use to people under 30, life for young parents gets harder and they will emigrate at an increasing rate. Even, or especially, the ones with a goid education and a job in the banking sector.
That’s what ‘winning’ at being a tax haven looks like.
So where is the Isle of Man on that timeline? Quite a long way along, in the early stages – banking and offshore finance are a bigger proportion of their economy than London’s – and a decade or two away from the state of the States of Jersey.
Bluntly, failing to be competitive – not being a very ‘good’ tax haven – is the Isle of Man’s best hope of retaining a functional economy and remaining a pleasant place to live. But they are trying very hard to ‘win’ and they are gradually succeeding.