The Isle of Man’s decision to reach agreement with the UK to exchange information on tax residents may perplex competitors and observers but it highlights the reality of policies pursued by the Isle of Man for many years. This agreement with the UK, coupled with the USA’s FATCA (Foreign Account Tax Compliance Act), clearly and categorically establishes the Island as the world’s most open and transparent country.
The move distinguishes the Isle of Man from International Finance Centres (IFCs) and raises important questions about the Island’s brand and future economic strategy. It is a development very much welcomed on the Isle of Man where the ReallyManx initiative, sponsored by Manx Business Connection, was established to develop and highlight the importance to the Island’s future of companies with real substance and presence.
So what will be the Isle of Man’s niche in tomorrow’s world? It is vital to understand how to create sustainable jobs and income-generating opportunities in a world hostile to the tax-driven business that is perceived to exist in International Finance Centres. In reality, the substance and diversification of the Isle of Man’s community and economy shows that the Island is actually an International Business Centre (IBC). Policies have been pushing the Island in this direction for some time and it is now makes sense to rebrand the Island as an IBC, emphasise the unique position and attributes of the economy, capitalise on these strengths and put clear water between the Isle of Man and those who still do not recognise the way the world is changing.
A typical IFC is characterised by being heavily dependent on banking and finance and is believed to have a lack of tangible business, transparency, regulation, rule of law, social services and education. In reality, Isle of Man is a million miles away from the perception propagated by pressure groups to perpetuate the populist myths that pander to people’s prejudices. Briefly outlined below are some facts about the Isle of Man; these lead to the inevitable conclusion that the Island should be branded as an International Business Centre and that key strategic aims should include articulating this and ensuring that economic policies all support this concept. Maybe then people will understand what the Island is about and the base upon which its economy is founded.
The Island’s Chief Minister’s message as leader of the Government of National Unity gives a concise and accurate summary of the philosophy; he said the Island’s top priorities should be “delivering further economic growth and diversification to provide new income for Government and jobs for our people, living within our means by achieving a balanced budget, protecting the vulnerable in society.” Details underpinning this statement are readily available and reveal that the Isle of Man’s level of social security benefits is higher than that in the UK, while spending on health and education is significant by any standards. Tynwald, the Isle of Man’s parliament, is one of the oldest democracies in the World and the Island was in advance of the UK in giving votes to women and to 16 year olds.
The Island is proud of its independent legal system which is based on English law, it complies with all the principles of modern law, social justice and human rights, its tax system has been examined and approved by numerous international bodies and its regulations are considered to be first class by any international yardstick. For example, the formation and management of companies and trusts is strictly regulated and licensed on the Isle of Man, whereas people are shocked at the lack of regulation in the UK and USA; countries which are always ready to criticise easy targets but reluctant to defend problems in their own backyards, of which there are many.
IFCs depend on banking and finance for the majority of national income and employment, but in the Isle of Man the share taken by banking is only 11%, insurance is 15% and all legal, accountancy and company administration activity together a further 10%. So even if we assume that residents and indigenous business used none of these activities, the most that could be attributed to traditional “offshore” activities is a total of 36%, according to the latest data, that for 2010/2011.
When account is taken of the 200 plus manufacturing companies, comprising some 5% of national income and including companies that were involved with the landing on Mars, that produce a large proportion of the world’s heating elements, that are leaders in clean tech, aerospace and health industries, a very different picture of the Isle of Man emerges from the stereotypical view. Include the 9% national income generated by e-gaming companies clustered on the Island, the 5% from ICT and income from a wide range of other activities, including agriculture and fishing, the most fundamental of industries, and the Island can only be classed as a diversified International Business Centre.
Why is the Isle of Man different from other jurisdictions and able to be so diversified?
Why is the Isle of Man developing increased substance in its business and how is it doing so? The reasons are obvious: encouraging companies to develop tangible operations on the Island enables them to be compliant with any moral, fiscal or regulatory questions while at the same time increasing the amount of income and employment available locally. The method is simple: ReallyManx was established both to encourage and assist companies to understand why and how to develop substance and where appropriate, use e-business channels to conduct their activities from the Isle of Man.
It is for all these reasons that ReallyManx and the Isle of Man look forward, for example, to the implementation of principles such as country-by-country reporting. ReallyManx believes that the Isle of Man has all the attributes necessary to attract to the Island and expand, economic activity that is high value, real and visible. It is this endeavour that will enable the Island to expand and sustain its vibrant and successful economy for the benefit of all its people.
This brief article has omitted the data and argument that underpins the analysis but both are available and any questions will be welcomed and answered. The conclusion is that the Isle of Man is clearly an International Business Centre; diversified, compliant with the highest standards and a great place to live and work; any other definition can only be made by the misinformed or the mischievous.