The Isle of Man is waking up to the reality of the situation it is facing.
A former head of the Isle of Man tax authority, Mark Solly, has apparently written to all members of the Tynwald (parliament) in the island suggesting that the island is in need of a radical new tax structure. That is needed because of the consequences of the reforms imposed on the island by the European Union necessitated because, as I pointed out over the last few years, its tax laws did not meet international expectations. As Mr Solly has realised the changes out in place to ensure the island complies with international requirements now leave it in a position where just about anyone in the Isle of Man with any serious wealth can avoid much or all of their tax bill unlike less well off people in the island who will be paying in full, and that as he notes is unfair and unsustainable.
That's the problem of o% tax system on corporate profits. As I've long pointed out first of all it's unfair, second it's abusive internationally and third it's the route to national bankruptcy. The penny is beginning to drop in the Isle of Man, it now seems.
That realisation has been coupled to the new awareness that the island has permanently lost its VAT subsidy from the UK, also suggested by some to be a result of my work. This loss now means the island is in a dire economic position. It has also revealed the fact that it could only ever afford its low tax status because of the subsidy it got, ironically, from the UK tax payer.
As Isle of Man today notes Mr Solly has said:
'How much longer can the Isle of Man Government afford to go on reducing its tax base? The quicker the island's tax base is reduced, the quicker the government will run out of money.'
‘How does the Isle of Man Government propose to recover the situation?'
Mr Solly says it's imperative that a new coherent national tax strategy is developed ‘as a matter of urgency' — hopefully, with the consent of the electorate.
‘There is after all, a general election in September. The strategy of “cut it and see” is surely no longer good enough.'
Quite so, and I'm pleased to see someone brave enough to say so in the Isle of Man.
But will they also be brave enough to move to be a post-tax haven society? That's the big question.
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“Mr Solly says it’s imperative that a new coherent national tax strategy is developed ‘as a matter of urgency’ — hopefully, with the consent of the electorate.”
Another urgent imperative is that (what passes for) the Isle of Man government enforces Company Law, Trading Standards Directives and Consumer Protection – and that the present state of anarchy in the island’s financial services industry is brought under control and the victims of fraud fully compensated.
Unless the Isle of Man electorate ensures that the present corrupt government is sent packing in September the island is doomed.
Another imperative for the Isle of Man would be to tackle the issue of conflicts of interest, a longstanding problem on this small island. Where else would it be possible for a bank director to be also a member of the body charged with regulating banks — his own and those of his competitors?
At the time of the collapse of Kaupthing Singer & Friedlander (IoM), John Cashen, one of the directors, was also vice chairman of the Financial Supervision Commission (FSC). The bank failed because it had made deposits with its sister bank in London and that despite a clear recommendation by the FSC that all exposure to the Kaupthing Group should be eliminated — a compromise between perceived commercial interests and prudence that apparently went unrecorded and brought disaster to thousands of innocent tax-paying depositors, many of them British expats forced to bank offshore due to the refusal of mainland banks to open accounts for non-residents.
Not only have the Isle of Man authorities refused to accept any responsibility for this debacle (attaching all blame to the UK), but — rubbing salt into the wound – Tynwald has just rejected an eminently sensible recommendation by its own Select Committee on the collapse of KSFIOM that would have prevented bank directors from being members of the FSC, preferring, as ever, to put off until tomorrow …