Jurisdictions with low or zero tax rates are known to be linked to tax evasion, tax avoidance and even money laundering.

That’s the clear view of the chairman of a delegation of MEPs who visited the island last week as part of a crackdown on alleged VAT abuse.

The visit by the European Parliament special committee came as Brussels urged the UK to take action against over ’abusive practices’ in the VAT treatment of corporate jets imported into the EU via the island.

These concerns were first raised last year in the wake of the Paradise Papers leak.

Committee chairman Petr Ježek MEP explained: ’The Paradise Papers revealed an issue of massive VAT refunds of corporate jets, most probably leased by the owners from themselves.

'On the surface the regulation is in place but with such a revelation it could be that everything is upside down.’

The Manx government insists we followed the UK rules on VAT treatment of aircraft. It is still awaiting the results of a review by HMRC and UK Treasury.

Mr Ježek said: 'If there is a zero corporate tax rate it attracts a lot of capital. It may be for different reasons. It might be the regulation you have is higher or better but most probably it’s because of the tax rate. It’s true that tax avoidance, tax evasion and to some extent money laundering is related to places where there is a very low rate, or zero rate, of tax.’

Mr Ježek accepted the line between tax evasion and tax avoidance is not that straightforward.

But he added: ’If something is legal it doesn’t necessarily mean it’s fair.’

Also under the spotlight of the TAX3 special committee during its visit was the government’s policy on ultimate beneficial ownership and the island’s e-gaming sector.

'Companies doing online gaming don’t come here because of the higher regulation but because of the tax rate,’ explained Mr Ježek.

The TAX3 committee began its visit with a presentation at the Mannin Hotel, Douglas, by human rights lawyer Paul Beckett.

MEPs also met with Chief Minister Howard Quayle, Treasury Ministry Alfred Cannan, as well as police, financial and gambling regulators. The EU and European Parliament have approved plans for a public register of beneficial ownership to be brought in by the end of next year.

Such a register has already been introduced in the UK.

But the Manx government has held back, saying that the system we have, with a register accessible only by tax and law enforcement agencies, works well.

Mr Ježek said the committee wanted to see how that works in practice but pointed out that other jurisdictions can only ask for information if there is a specific allegation of wrong-doing being investigated.

He said any public register needed to be readily accessible and usable.

The MEPs’ visit came as the UK wrestles to break the impasse over the Brexit withdrawal deal.

Mr Ježek said he was in London on the day of the Brexit referendum. 'Promises were made that could never have been fulfilled,’ he said.

'There doesn’t seem to be a majority in the House of Commons to support the withdrawal deal. While the deal is probably the best the UK could achieve, the offer is certainly not better than the situation you have now.

'A hard Brexit would be a catastrophe. There are discussions about a new referendum. But I really don’t know where this is heading.’