COULD the international pressure on the island be easing at last?
Over the past five years, our financial services, tax rates and Customs deal have come under intense scrutiny from beyond our shores.
We’ve had the EU question our corporate tax regime, the painful revision of our VAT deal twice in two years, an inquiry commissioned by the Westminster government has run the rule over our ability to withstand financial shocks and the OECD has reviewed our tax transparency and co-operation.
It seems that barely a week went by without another brickbat being lobbed our way by Brussels, London or Washington.
But now as 2011 comes to a close, there is a tangible feeling that international relations have turned a corner – and the pressure on us, at least for the time being, has abated.
This was underlined last week with confirmation that, after months of uncertainty for the island’s business community, European finance ministers have agreed our zero/10 business tax regime is fully compliant and non-harmful.
All this may well be because our friends abroad have bigger problems to worry about – the European sovereign crisis, a yawning black hole in the UK’s public finances and the prospect of the US, the world’s largest economy, sliding back into recession
But equally, our Treasury officials can take credit in robustly tackling problems as they arise and ensuring we are ahead of the curve on issues such as tax transparency.
A case in point is the introduction earlier this year of automatic tax information exchange, the Isle of Man being one of the first jurisdictions anywhere in the world to do so.
While there had been initial reservations from some in the island’s business community, automatic exchange has proved its worth – at a stroke, it has served as a valuable foil to any criticism about lack of tax transparency.
It is notable that even the Tax Justice Network, consistent critics of so-called ‘secrecy jurisdictions’ has acknowledged the work the island has done in this area.
On VAT, the loss of more than £175 million in revenue – about one third of total government income – has caused major problems in balancing the budget. But even here, the UK has indicated it won’t be back for more.
And on zero/10, now finally resolved with the announcement last week by Brussels, criticisms from Europe were dealt with by decisive action: by scrapping ARI, the anti-avoidance measure, that the EU Code Group considered as harmful. The result was to save the corporate tax strategy and the thousands of jobs that depend on it.
Chief Minister Allan Bell MHK agrees that we may have turned a corner but added that we should not be complacent.
He said: ‘The pressure on the Isle of Man over the last five years has been pretty intense. There is a feeling now with the decision on zero/10 that the pressure overall has eased somewhat.
‘This might be to do with the EU and UK having horrendous problems of their own to deal with.’
He said that Lord McNally, UK Justice Minister, had assured him recently that the UK had no major issues concerning the Isle of Man at the moment.
Mr Bell added: ‘We’ve got to be realistic. There will be ongoing concerns in Europe about tax rates but for the time being I’m quite satisfied with the position the Isle of Man had negotiated. Full marks to the Treasury for that.’
Tax justice campaigners argue that offshore centres help to plunder resources and siphon wealth from Third World Countries.
Mr Bell denies the Isle of Man plays any such role. He confirmed that the island is considering extending Tax Information Exchange Agreements to developing nations, a move advocated by the OECD’s Global Forum – so long, he said, as an appropriate model is in place to do so, given that many such countries did not have a properly developed tax system and there were issues of corruption in some regimes.