During the 1950s the Isle of Man had little to distinguish itself from surrounding countries so had a depressed economy; much of the workforce had seasonal employment only and there was migration of the young, ablest, resulting in a decline of population from 54,024 in 1951 to 47,166 in 1961. Drastic action was required to differentiate the Isle of Man and to establish an entrepreneurial spirit.
This meant negotiating more independence from the UK and risking a large portion of revenue by reducing the rate of income tax. The importance of using jurisdictional independence and working with the business community to exploit opportunities are recurring themes in this analysis.
The reduced competitive position resulting from the UK’s switch to low direct taxes coupled with bank failures and a turndown in tourism ended the era of rapid but unregulated growth. Government established a Policy Planning Committee which proposed policies to remove disreputable business from the Island and to attract new business. Development was based on enacting business-friendly laws, introducing effective but not unnecessarily onerous regulation, employing experienced staff and providing low business and personal taxes i.e. using the jurisdictional independence to provide an attractive environment for living and undertaking business.
Various laws were introduced to attract specific activities and appropriate staff were appointed to supervise and promote those activities. For example, a Manx shipping register was established and ship inspectors were hired to ensure that vessels registered were safe and that companies were compliant with all international regulations. The Ship Registry soon grew significantly and a visiting House of Commons Committee was satisfied with the standards of the Registry and with the fact that if the Manx registry did not exist then ships and the revenue flows required to service them, would be lost to Britain. Shell, Dorchester Marine, DOHLE, BP and other top names established themselves on the Island. Captive and Life companies were among other sectors to be targeted and many of the world’s top names were among those that established entities on the IOM.
1990s UK, EU and various international bodies focussed on reducing opportunities for terrorist financing and for money laundering and imposed a number of requirements which resulted in the significant growth of regulators and the compliance industry with associated compliance costs. This move was welcomed by the IOM Government which recognised the importance of safeguarding itself from illegal activities, having been so badly affected in the early 1980s and being determined to develop a reputation for doing quality business with good regulation. Less welcomed were the attempts of the EU to impose uniformity and eradicate tax competition; offshore centres were perceived to be taking tax that would otherwise have gone to EU coffers. The Exempt Company regime was deemed to be unacceptable as it discriminated against IOM resident companies, which were required to pay tax at a lower rate of 10% and higher of 18% while those companies not owned locally were exempt entirely from company tax.
The value of international, experienced and innovative new residents is exemplified by the growth of egaming; Government was prompted and advised how best to attract the sector and responded appropriately.
Future economic growth will differ from that of the past but will be based on similar principles. The IOM now has sufficient well-connected, entrepreneurial individuals who are capable of spotting and exploiting opportunities presented by the changing business environment and realignments caused by Brexit. Among those industries being developed are those that are using artificial intelligence, robotics and other technological developments to enhance their offerings; they are not dependent on geographic proximity to their marketplaces so can locate anywhere with good communications.
These principles will rely on jurisdictional independence to generate economic developments by:
Author: John Webster, Chairman, Manx Technology Group