The Isle of Man’s finance industry is destined to lose some of its traditional selling points but there are other opportunities to be had provided the island fully capitalises on its strengths.
This was one of the messages to come out of a tax seminar entitled ‘International Tax Planning – From Radical to Responsible’, which was addressed by leading players in the field.
‘We have to prepare our strategic position appropriately, move where we need to, resist to the extent that we can [and flex] the soft power that we’ve built by our remarkable level of compliance,’ Malcolm Couch, Treasury’s chief financial officer, told the seminar hosted by Deloitte, in association with the Department of Economic Development.
Mr Couch said that the island needed to shift from focusing on selling itself as a low-tax regime to multinational businesses in various sectors to instead concentrating on marketing itself as being the best in its field in the products and services that it offers. ‘Excellence of delivery and excellence of service will always win,’ said Mr Couch. ‘Turbulence is absolutely inevitable,’ he added, noting that change would extend beyond tax to encompass banking reform. ‘There is going to be a completely new architecture for [banking which will] change everything that we thought about before in terms of how banks will be regulated and supervised.
‘The challenge for the Isle of Man is seeing all of these things, trying to understand them as best we can, positioning ourselves appropriately.
‘If there is a market that has a set of rules [we] need to conform to those rules if we want to be in the market . . . if you think you can ignore them or go around them, sooner or later somebody finds out and your reputation and your ability to do business falls, whether you are a business or a government.
‘But one can be optimistic . . . especially if you look at our business in the wealth management sector [where] all the indices are ticking up very strongly, in certain parts of the globe very, very strongly indeed. If you are a strategically orientated business in a strategically orientated centre there should be the ability to still do lots of good business and earn a healthy profit.’
John Spellman, the Isle of Man’s director of international finance, said the Vision 2020 strategy, which will be launched on January 27 next year, is formulating an approach to such changes.
A joint private-public sector initiative, the strategy on building the economy is looking at a range of elements, including legislation and regulation, tax policy, infrastructure, workforce skills and government’s capabilities.
Mr Spellman, who sat on the ‘Radical to Responsible’ panel, said: ‘We’ve been taking a hard look at what happens next,’ he said, adding that demand for certain types of financial products and services will increase, not decrease, in the future.
‘The Isle of Man is very well placed (to compete) but we’ve got some bitter pills to swallow in the next two to five years.’
Bill Dodwell, the London-based head of Deloitte’s tax policy group, said: ‘I would have thought that there would continue to be a big role for a transparent, regulated [jurisdiction] that takes a different line to [what is being offered in the likes of] the UK or France.
Picking up on Mr Couch’s assertion that the Isle of Man needs to provide something more to business, he spoke of the need for businesses to have real substance in jurisdictions where they pay taxes, which could be to the Isle of Man’s advantage as this encourages businesses to set up operations and employ staff in countries which offer the dual advantages of a strong international reputation and a lower tax rate.
In his presentation, Treasury Minister Eddie Teare, recapped the measures already taken by the government in response to the changes in the international agenda.
He described how, through early adoption of measures such as FATCA and joining the Multilateral Convention on Mutual Assistance in Tax Matters, the Isle of Man has secured itself a reputation as a leader in the development of international tax standards, culminating in official recognition by the Organisation for Economic Co-operation and Development (OECD) as one of a small number of top rated ‘compliant’ jurisdictions
As head of the firm’s tax policy group, Mr Dodwell represented Deloitte at the Public Accounts Committee, the House of Lords Economic Affairs Committee and the G8 Tax, Trade and Transparency event, and sat on the interim Advisory Panel on the General Anti-Abuse Rule (GAAR).