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Campaigners back end of zero-10 tax
CAMPAIGNERS are calling for a fairer company tax system.
They believe ditching the zero-10 company tax in favour of an increased rate may cause short-term unemployment among corporate service providers (CSP).
But in the long-term they said it would improve the Island's global reputation.
A group of 12 people headed by Phil Craine of the Island's branch of Christian Aid, was reacting to the results of a survey of CSPs that found business people feared an exodus of companies and work from the Island if it imposed company tax again.
The current zero-10 tax rates, which mean most firms pay no company tax and those in a few sectors including banking pay 10 per cent, is in jeopardy because of EU pressure.
In a letter to the Examiner, the group said: 'Yes, in the short-term, the introduction across the board of a moderate rate of company tax (preferably but not necessarily in concert with the Channel Islands) may cause painful CSP redundancies.
'But in the long run, the cost to the Island's reputation of not doing so may well be higher, as cash-strapped nations find offshore tax leakages increasingly unacceptable.'
Christian Aid is campaigning against what it sees as injustice in the global tax structure, by allowing people and companies to move money around the world to minimise their tax liability. It believes that developing countries lose out.
The 'tax justice' group's letter criticised the fact that most non-resident companies not have to pay company tax and that there is no requirement for them to publish accounts or details of beneficial ownership.
'Too often in recent years the Isle of Man has been seen as the secrecy jurisdiction of choice, not only for unjust "tax planning" that takes revenue from developing countries which desperately need it, but also for money laundering and secret bank accounts,' they said.
'The supposedly-independent FSC (Financial Supervision Commission) seems incapable of addressing these issues.
'Globally, there is a growing outcry against offshore secrecy jurisdictions.
'Surely it would be prudent and forward-thinking for the Isle of Man to become known as the fair and transparent jurisdiction of choice.'
In addition, they said the government should diversify the economy instead of being 'shackled' to the finance sector.
They added: 'We should not be afraid to look at our tax regime with honesty, transparency and a desire for justice as well as profits.'
The Manx Government had pledged to make a decision on the zero-10 tax issue by the end of the year. But Economic Development Minister Allan Bell MHK told iomtoday that the Island must not be the first jurisdiction to come up with a plan.
The Island cut corporate tax to zero in 2006 for most industries to lure business. The Channel Islands followed suit.
The survey of CSPs, commissioned in response to consultation on potential changes to zero-10 by assessor of income tax Malcolm Couch, was carried out in April by Scorpio Partnership.
It found that if a tax of just 2 per cent was levied almost 600 CSP jobs would go.
Were that tax to be 20 per cent, the figure would be more than 1,100.
The business sector believe job losses would be much higher because there would be less work for many other sectors, including banking, law, accountancy and even government.
WHAT DO YOU THINK?
Send your comments to newsviews@newsiom.co.im
YOUR COMMENTS
12 people want to end zero-10 but with no plan to replace it with anything thus meaning those made jobless have no job to go into. What about the further decrease in govt earnings this will cause? We are a small island any industry shutting up shop here will have a big impact across the whole island. What we need now are ideas not a group preaching the bloody obvious. As for Allan Bell he really needs to remove his head from the sand.
AC.
Charity begins at home ! I would suggest that this proposal goes the same way as the next Christian Aid envelope that finds its way through my letterbox - in the direction of the dustbin !
SJR
Financial Suicide......up goes unemployment, these people then seek employment further afield, the amount of houses up for sale escalates to even higher levels, house prices slump, no one wants to buy for fear of further slumps and then we have a property crash as well as a financial crash......and that will hit everyone !! Its time to sit back and just watch on this one, not a time to jump the gun.
R
Zero per cent income and corporation taxes are fine for Wyoming in the USA; and they try to run a small government. You only need high taxes if you try to run a big government. See recent BBC article link. Low rates of tax across the board and excellence in financial services has brought significant fee income into the Island. This has benefitted the entire community, both in direct and indirect economic activity. The so called "secrecy" has gone from the system with advances in tax information sharing and AML legislation. So only the foolhardy pandering for the illusory pat on the back from Uncle Sam would create local mass unemployment when there is no "first mover advantage" in dumping zero-ten. The future of the island simply depends upon maintaining its GDP.
http://www.bbc.co.uk/news/world-us-canada-10994412
HC
Hope these 12 people will pay my mortgage and bills if I ever become unemployed because of this stupid idea. Somehow I don't think so.
CJ
So the Christian Aid 12 want the IoM to begin the fight for Global Financial fairness regardless of the consequences to local jobs, industry and government. Nice one!!. I wonder if the wonderful 12 will publish all of their names and be the first to drop on their swords..??? I doubt it. That's the problem with societies like these, all talk and no do.
JAP
The loss of 600 to 1,100 jobs at CSPs would be bad, but the cascade that would follow would be far worse. The reason people use Manx companies is for the tax advantages. Take that away and they will incorporate elsewhere. Many of the lawyers, accountants and bankers here are employed to service those Manx companies. They are assisted by an army of secretaries, administrators and support staff. Far more people are employed in those industries than by the CSPs. Fewer Manx companies means fewer lawyers, accountants and bankers. Fewer lawyers, accountants and bankers means reduced employment opportunities for cleaners, gardeners, builders, secretaries etc. It means less money spent in local shops and restaurants. It means less income tax for government. Lawyers, bankers and accountants are highly trained individuals with very portable careers. Some will stay, but many will leave. What will this do to the housing market if 500 to 1,000 houses come onto the market at the same time? Sure, a collapse will help first time buyers, but what about all those who have mortgages? Many years of negative equity and unemployment are a high price to pay to protect the island's reputation!
MH
What is wrong with someone expressing a contrary view to the populist view. A debate generally requires views to be expressed on all sides so that it is balanced and fair. The macro economic policy of the government always ends up being dictated by the micro economic consequences and this may be because we are such a small jurisdiction that the impact on individuals is much more apparent and important. If these twelve people have a different opinion, let them express it however they want because it will only stimulate a debate. My own personal view is that there is some inequality around the world that it should be a source of great embarrassment to the richest nations, but this is not going to be resolved by the Isle of Man Government. Regards,
JONATHAN
I trust all of the group of 12 people headed by Phil Craine of the Island's branch of Christian Aid are Manx born? If not,and certainly if they were UK born,they too are most likely causing a so called "tax leakage" by moving to another jurisdiction with lower personal and property taxes-plus a few others. We could all adopt a holier than tho position-lets wait and see what tranpires re other jurisdictions in the EEC.
BG
It is disappointing that those who should be aware of the facts about their own island use the same derogatory, and erroneous comments such as "secret bank accounts" or "tax havens" that detractors of the island have tried to label us with over the past few years (with little success if you read recent IMF and even OECD/FATF reports). As for the assertion that "unjust tax planning takes revenue away from developing countries", I would suggest this is more likely than not from corruption by foreign government officials rather than prudent tax planning by corporations and individuals. The fact that the Isle of Man has made great advances in the implementation of numerous TEIA's (Tax Information Exchange Agreements) with over 13 countries and have a highly regulated financial services sector and a responsible and diligent Financial Crime Unit and Courts, just shows how little these accusers really know about a subject that they obviously have little understanding over. The whole point of the zero-10 was to diversify the Isle of Man economy and it is for this reason that we should be standing up to the EU. Self-determination is a fundamental right of any nation and I see no reason why the Isle of Man shouldn't be allowed to continue to provide a tangible benefit to companies who wish to set up over here. Lord knows, with the cost of housing, transportation and utilities on the island there is little reason why any manufacturing or other services sector employer would wish to incur the costs of moving here and finding suitable skilled workers, particularly as there is no substantial EU grant available to do so. Zero-10 is not about shady deals and letting foreign despots hide their ill-gotten gains, but allowing the Isle of Man to stop putting all its eggs in the financial services sector basket and allowing the Manx economy the "freedom to flourish". It's a pity those who live here feel the need to use the ill-informed rhetoric that the blinkered detractors from across the pond (who are far less transparent and accountable as far as Delaware companies are concerned) bandy about when they try to find a suitable scapegoat. Shame on you.
MNR
Absolute madness. The money just goes elsewhere - Hong Kong, Singapore, Virgin or Cayman Islands with disastrous results for the Island's economy as many have mentioned here. The Island will then not be able to support itself and will rely on seeking grants and subsidies from the UK and will eventually be absorbed into the UK as a result. More tax is avoided in the city of London than it is here.
MR, Douglas.
Lets just calm down and think logically about this. This is Christian Aid for gods sake, not a government statement. Charities like this are always making statements like this to try and encourage business into the developing world. The IOM government wont do anything about this for a long time and certainly not unilaterally. If all of the more reputable offshore financial centres decide to drop zero-10, then no harm done, as one would not have made the decision before the other.
MAE
This small group of campaigners can't really have the IoM interest at heart. The IoM must maintain it's GDP to survive. Actions that cause unemployment are just stupid. Regarding so called 'Secrecy' or 'Money Laundering' have these people tried to open an IoM bank account or just move money from one bank to another recently, there is so much paper work and questions being asked these days !! Don't people realize that the IoM is no longer a great tax saving area when you consider the much higher cost of Food, Electricity and Transport to go abroad.
AR.
I half agree with The Twelve. Get rid of "0-10" tax (thats the bit I
agree with) and put ALL businesses on 0% tax rates. Make up the tax
shortfall through personal and indirect taxation. If we want jobs then
we need to encourage businesses and enterprises to set up and stay
here. If they are so sensitive to tax rates then give them what they
want. The businesses will employ people, and owners will receive
dividends. Thats where the IOM Treasury can get its tax money from.
The era of low personal taxation has got to come to an end for the
sake of high employment. Also having a government that didn't spend
the taxes like it didn't hurt us to pay it in the first place would
also be good.
LAXEY DWARF
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