There's excellent coverage in the Telegraph on this issue this morning.
I admit I am quoted extensively saying:
"I know this is a massive problem for the Isle of Man, but it has been a long time coming and I don't apologise for it.
"Why should the UK taxpayer subsidise the Isle of Man so that it can operate a tax haven and offer a standard rate of income tax of 10 per cent, a top rate of 18 per cent and a cap on total tax paid?
"It does not need a zero per cent corporation tax. It could charge capital gains tax. It could charge inheritance tax. All of these are choices: bad choices.
"Today's ruling means they will now have to collect tax, change their tax regime and attract real business and tourism.
"It also raises another question: how long can these crown dependencies last? Jersey, Guernsey and the Isle of Man all have holes in their budget, their tax regimes aren't viable and very soon they will have to apply to the UK or EU for inclusion."
I note Anne Craine, the Minister responsible for this issue in Douglas said:
"There will be those who say that [the Manx] government has not fought hard enough, that we should have refused to accept any revision of the Revenue Sharing Arrangement, or that more robust political lobbying in the UK could have improved our position.
"To those I would say, the Isle of Man government has negotiated robustly in a much harsher economic and financial world than most people on the island have experienced. The world has changed; we have to get real.
I agree.
Now accept that I've been right all along and begin to adopt a post-tax haven plan for the Isle of Man.
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I am new to this blog and only came across via a mate in the Isle of Man. I’m based in Guernsey by the way.
Your comment about Guernsey and Jersey in the Telegraph is simply wrong. I appreciate that its your opinion but I cannot not let it pass, at least as far as Guernsey is concerned. Guernsey has a tiny annual budget deficit which has only arisen in the past 3 or 4 years since adopting zero-10. A combination of economic growth and elimination of public spending wastage by a previously wasteful and out-of-control public sector has all but eliminated that annual budget deficit to (I understand) less than GBP 15m. The island has several hundred million pounds in reserves and has no debt. Its a very long way away indeed from being in any financial trouble.
Unlike Jersey and the Isle of Man, Guernsey has not had the need yet to introduce any form of VAT or GST. A rate of 5% (if we were to copy Jersey) would raise GBP50m a year, resulting in an annual surplus of GBP 35m. That’s totally sustainable and totally realistic, but is most unlikely to even be needed as the remaining deficit takes care of itself by prudent government. Unlike most governments, Guernsey’s seems to have things well under control at the moment.
The finance industry is doing OK in the current difficult global circumstances. The fund sector is doing well, the fiduciary sector’s growth is flat and captive insurance is doing OK. I would expect some retraction of the pure banking industry but nothing dramatic as the island is already now fully signed up to automatic exchange of information under the EUSD and anyone who was afraid of that is likely to have long fled these shores.
Please rest assured that we won’t have any need to approach the EU for help or inclusion for many years to come, if indeed ever. In fact, we couldn’t apply to join even if we wanted to – a fact which you have overlooked – as our population is too small to satisfy the entry criteria (Malta being the smallest member). I doubt very much if the EU in its current state of affairs is at all keen on welcoming any new members, especially any members who you think are bust and need bailing out!
Its quite probable that the Euro and also as a result the entire EU will soon collapse – almost inevitably if Italy’s economy is in as bad a state as has been announced over the last 24 hours, and even not allowing for Spain’s likely collapse. If the UK government gets landed with a huge bailout bill because of Darling’s commitment recklessly made in the last hours of the Labour Government then its easy to see the UK pulling out of the EU anyway. There’s more chance of Rebekah Wade becoming Prime Minister than of the Crown Dependencies becoming part of the EU although the Isle of Man is clearly going to need help from the UK to replace its lost GBP 200m.
It would help if you got your facts right.
2010 deficit is £35m and 2011 will be at least the same http://www.gov.gg/ccm/cms-service/download/asset/?asset_id=13572984
That’s 10% of revenue – and you have no clear way out – or you would not be using reserves
Every plan so far – growth and cutting spending for example – has failed
So respectfully – your claims are as ludicrous as your comments about Alastair Darling
I think you are out of date with your 2011 figures. Latest tax receipts result in a significant reduced deficit from GBP 35m.
Of course we have a clear way out – we can introduce GST as I stated in my post. At 5% that’s 50m to cover a figure of somewhat less than 35m. Easy. Legislation to enable the introduction of GST was enacted in 2008 but I don’t think it will even be needed.
The decision to use reserves was wholly intentional. What’s the point of having reserves if you don’t use them? Its no different from individuals to opt to use their capital to buy a new car instead of funding it out of income – wholly intentional. In case its escaped your intention Guernsey could fund that 35m level of structural deficit for many years ahead if it chose to do so. It chose to fund the deficit that way until 2013 by which time the deficit will have disappeared – everything is well on track to do just that.
Growth plans have not failed – the Guernsey economy is still growing, albeit slowly but unlike most other jurisdictions whether onshore or offshore. And I think you will find that we are cutting our spending very effectively – you appear to be getting Guernsey mixed up with Jersey. Two entirely different jurisdictions and separately-run you know by a different set of politicians. Very surprised at you getting that one wrong.
Can’t see that my claims are “ludicrous” at all.
And as for Darling – 2 days before Labour’s term of office expires he signs the UK up for EU bailouts which he had no obligation or need to do. Every UK taxpayer is now paying for that act. In what way was that in the UK’s interests exactly?
Guernsey 2011 budget seems good enough for me
The rest is just puff on your part
It may have escaped your attention that 2011 is more than halfway through. Budgets tend to be superseded by actual figures.
No “puff” at all on my part – as time will tell.
The question I have is how does a geographically isolated jurisdiction with hugely expensive transport links attract “real business and tourism” without offering tax incentives?
As far as personal income tax is concerned, for the ordinary resident, lower income tax only partly makes up for the highly increased cost of living in a place like the Isle of Man. Utilities are far more expensive than the UK, and goods and petrol cost more because they have to be shipped in.
If tax competition really is unethical, then the only viable future for the crown dependencies is to become part of the UK. I am honestly not trying to defend tax abuse, just pointing out the obstacles and problems that don’t seem to have been addressed in this blog.
Perhaps places like the Isle of Man would do better, as devolved parts of the UK? Then they could receive the same subsidies as places like the Hebrides and Shetlands, and could survive on industries which are less morally dubious than offshore finance. What do you think?
I have no doubt that the only future for the Isle of Man is, for the reasons of remoteness that you clearly explain, to be part of the UK.
The model of corruption on which the current economy is built (and have no doubt, this is corruption on a scale that Murdoch has not yet contemplated) is unsustainable
And you are right, it will be difficult to make a living, so there will be the population, and there will be a change in the overall standard of living for those living in the island. That is inevitable. Let us not avoid the truth. BUT that said, I think there will be people who will want to live in the Isle of Man. After all, it is a beautiful place, it has many qualities, it has tourism to offer, it has got engineering and other skills (as I know) and I think it’s very remoteness will also be attractive to some at this time
Interesting response Richard and given your track record it would be a brave person to argue otherwise. However looking more towards the near term, if you woke up on the 1st October to discover somehow you were the newly elected Chief Minister, what are the 5 most impotant things you would do to secure the Isle of Man and its residents future?
I think one also has to consider that the IOM considers itself a true nation,and that many,if not most,would not wish to become part of the UK,preferring to make their own mistakes rather than having them applied from outside! If my point is not clear,maybe ask the Irish if,in spite of all their problems,they would like to be British again?!
The real problem for the IOM Gov`t will be convincing the population to accept that they will have to pay more,and get less-but I don`t see that joining the UK,or the EU fully would make too much difference to the eventual outcome,and might possibly make matters worse.
I suspect Gov`t tax revenues will be notched up(and their is quite a bit of room for that),budgets trimmed a little more,and who knows-even wasteful spending might be curtailed! We live in interesting times.
But you’re not a nation
We have to bank roll you
So smell the coffee and live with it
To be fair, the Manx are a nation with their own culture and language etc, and they should be rightly proud of this. Because of their very small size , however, they are unable to achieve autonomy without having a parasitic relationship with UK and other jurisdictions.
I would argue that it is morally better to legitimize that dependence through stronger (but devolved) ties with Westminster, rather than allowing it to continue through subversive economic activity. This may be a bitter pill to swallow, but autonomy achieved through secrecy and tax abuse is not a fair option for anyone.
Surely if the Isle of Man joined the UK it would ultimately cost the UK Government much more in the long run, as there would be no incentives for companies to be located in the Isle of Man, therefore revenues would be far less than they are currently.
Pardon?
Don’t you realise the IoM is only a drain on the UK?
No cash flows from it to UK – it would all come to the UK anyway
Ahh bazza, just visit some of the deprived areas of the UK and realise that A) The Isle of Man has got a long way to go before as a new part of the UK it might become a greater priority than such places and B) motivated people will migrate to where the work is so they can be productive if they are of working age, and C) if they are rich tax dodgers they already have past form of abandoning homes and friends to save their money in another tax jurisdiction, and no doubt are already consulting advisers about where to go to next if the Isle of Man does levy enough taxes on them. I doubt they will be hanging around long to keep the pressure on the UK to keep high spending levels on the Isle of Man if the Isle of Man gets absorbed.
We do not wish to become part of the UK. I would support abrogation first!
Even if abrogation means bankruptcy and massive unemployment? Sometimes dreams have to give way to reality!
Any individual, company, institution or authority in the slightest doubt about the reputation (or lack) of the wretched Isle of Man government should visit.-
http://www.manxherald.com/index.php/business/660.html
http://www.manxherald.com/index.php/business/661.html
Then tell the PSG that it is wrong in generating, supporting and publicizing views about this shameful mess which describes itself as a “government”.
I would so welcome UK law on the Isle of Man. We currently have over a couple of hundred Manx Advocates, who charges are about the highest in the British Isles. They are well protected by their former colleagues in the judiciary. The legal industry is a big drain on the Manx economy.
Manx Law is not fit for purpose.
Please UK, come and take us over, warts and all.