Allan Bell, the island’s Chief Minister, has said that last week’s FACTA deal shows that the Isle of Man is a responsible centre for international business.
The UK’s Chancellor of the Exchequer, George Osborne, last week hailed a ‘momentous step forward in tax transparency’ when the Isle of Man became the first British dependency to sign an agreement with the UK on automatic sharing of tax information.
Mr Bell said the signing of the deal was ‘world leading’ and would ‘once and for all’ rid us of the ‘outdated name of tax haven’.
‘This undoubtedly will become the global standard, the shape of things to come,’ he added.
A similar deal with the United States is expected to be signed shortly.
The island already shares information automatically on personal savings income with the UK and other EU countries but the new agreement will extend disclosure to include companies and trusts as from 2016.
Mr Bell, who signed the agreement in London with HM Treasury Exchequer Secretary David Gauke, said the island had led the way on tax transparency and as a result relations with UK Treasury were better than they had even been.
He said the deal would come as no surprise to the island’s business community with whom the government had consulted widely.
It’s all a far cry from the late 1990s when the Isle of Man was placed on a harmful tax competition blacklist by the Organisation for Economic Co-operation and Development (OECD).
Speaking following a meeting of the IMF and G20 finance ministers in Washington on Friday. Mr Osborne said he hoped other jurisdictions would follow our lead as soon as possible.
He said: ‘The agreement we have now signed with the Isle of Man is a momentous step forward in tax transparency, showing that when we work together we can push the international agenda forward.
‘The Isle of Man should be recognised as the first jurisdiction to sign an agreement of this kind with the UK.’
And he added: ‘For anyone attempting to hide their money offshore our message is clear: our resolve is stronger than ever, the net is closing in and the world is becoming a smaller place to evade paying the taxes which are owed.’
The agreement with the Isle of Man is the first ever automatic tax information exchange agreement based on FATCA (the US Foreign Account Tax Compliance Act) to be signed between two parties of which neither is the US.
It is being hailed by the Westminster government as a significant move towards a new global standard that will provide a step change in the international community’s ability to clamp down on those hiding assets offshore to evade tax.
A wide range of financial information on UK taxpayers with accounts in the Isle of Man will now be reported to HMRC automatically each year - enhancing HM Revenue and Custom’s ability to close in on those who do not declare their offshore affairs.
The Chief Minister said the island had recognised the ‘direction of travel’ early on and was one of the first countries to sign up to the OECD model of Tax Information Exchange Agreements.
Since then the island has taken the lead and signed more TIEAs than most other jurisdictions, a move that first took us off the OECD blacklist in 2001 and then, in 2009, secured us a place on the OECD’s white list.
The Isle of Man now has some 30 such agreements, in force or awaiting ratification, with countries including Argentina, China, India and Switzerland, together with about a dozen double taxation agreements.
Two more TIEAS were signed last month, with Italy and sub-Saharan Lesotho, the latter being the second agreement signed with an African country (the first being Botswana) - significant as critics claim tax havens are used to siphon money off developing countries.
The same year that the Isle of Man secured its place on the white list, Mr Bell, then Treasury Minister, announced at the OECD Forum in Paris that we were to go much further and introduce a major new policy of automatic exchange of tax information with the EU as from July 1, 2011 – one of the first small jurisdictions to do so.
Last year the Manx government announced it was negotiating with the US to implement its Foreign Account Tax Compliance Act and was committed to become the first nation to sign a FATCA-style deal with the UK.
Mr Bell said the only reason the US FATCA deal had yet to be signed was because of the federal government shutdown following the fiscal impasses in Congress.
‘We are committed to sign a similar agreement with the US.
‘We would have signed if by now except for the fact that the US is closed at the moment,’ said Mr Bell at a press conference on Friday.
He told reporters that the island was signing these deals because ‘we believe it is the right thing to do rather than what we have to do’.
Mr Bell said there is a ‘difference between leading the pack and working as a partner with the UK to establish this new global standard and being dragged along by the coat tails of other countries’.
He said the island was already feeling the benefits of UK Treasury’s ‘more benign approach’ to the Isle of Man.
The Chief Minister said there had been scepticism at first from the island’s business community but the industry ‘agreed with the direction we are going.’
He added: ‘In signing this historic agreement with the UK we are underlining the message to our neighbours and the wider world that our island is a responsible centre for top quality international business.
‘The Isle of Man was the first to strike this agreement with the UK and we are now the first to sign, demonstrating the clear commitment of both countries to the development of a new global standard in automatic exchange. The signing is a significant step towards that global standard and further proof the tax haven moniker in relation to the Isle of Man is well and truly dead, as David Cameron recognised recently in the Commons.’