The Isle of Man is working exceptionally hard to bolster its image. It’s signing TIEAs (tax information exchange agreements) left, right and centre, it’s got the OECD believing it promotes and supports tax transparency, and now it’s attempting to lure offshore pension and QROPS business to the island to swell its coffers.
As a result of the weight of positive publicity being generated and disseminated about the Isle of Man currently, we thought we’d better take a closer look at the advancements the island has made recently to improve its image – which was significantly tarnished following the collapse of Kaupthing Singer and Friedlander (Isle of Man) in 2008.
We decided to court opinion for an article from our opted in list of active expat investors. However, our relatively small survey returned a surprisingly strident attack on the island as all but 7 of the 75 readers we decided to question stated vociferously that they did not trust the Isle of Man. The most commonly reported feeling of those we spoke to was that the offshore tax haven was not doing enough to instil confidence in its financial environment for expatriate investors. So, whilst a selection of Expatra readers say ‘don’t bank on the Isle of Man,’ let’s look at what the island has been up to in a bid to improve its tarnished image, and why perhaps the authorities’ work has not yet gone far enough to encourage investor confidence in the jurisdiction.
Isle of Man – Positive Publicity
The Isle of Man was recently praised by the Organisation for Economic Cooperation and Development (OECD) for its willingness to abide by their guidelines for the effective exchange of information relating to suspected tax cheats. In fact, the island was one of only eight out of over ninety jurisdictions to meet all the standards set by the OECD…
To effect this position, the Isle of Man has signed tax information exchange agreements with 25 other nations, and it has received 51 exchange of information requests in recent years.
Naturally enough all this is positive headline making stuff for the jurisdiction, and authorities have been quick to highlight the praise the island has received from the OECD.
The island is now pushing very hard to win over highly lucrative QROPS (qualifying recognised overseas pension scheme) business following HMRC’s completion of an investigation into the Isle of Man’s 50C pensions legislation.
According to the Isle of Man Association of Pension Scheme Providers’ (APSP) chairman, Stuart Clifford: “Now the review is finished and 50C schemes are approved, we can resume growth as a QROPS destination…During the next few months, the merits of the Isle of Man as a pension jurisdiction will be very much in the public eye.
“The APSP is putting together an international marketing strategy aimed at international advisers setting out how the Isle of Man can provide international retirement solutions…We are not just a QROPS destination, we are a retirement solutions jurisdiction.”
Looking Beyond the Headlines…
Just reading the positive promotion of the Isle of Man’s position at the moment, one could very easily be forgiven for thinking that this is a progressive, secure, open and transparent jurisdiction, with investors’ best interests at heart. However, you needn’t scrape too far beneath the headlines to see an entirely different side to the story.
Starting with the island’s perceived transparency as a tax haven, one can say that having all these TIEAs in place is a good thing – but one can also say that TIEAs are a complete and utter waste of time!
In order to effect a request for information under the terms of a TIEA, the requesting authority has to give supporting evidence for making their request such as who they want to investigate, and what grounds they have for believing the information they need to support their investigation into this person’s alleged illegal activity exists within the jurisdiction in question.
In other words, there can be almost no doubt in any nation’s authorities’ minds about an individual they seek information about before they are able to request that information from a country with which they have a TIEA. This renders TIEAs very limited in scope and usefulness according to many criticisers of the schemes.
Such criticisers want automatic exchange of information…and until that is universally offered, they argue that TIEAs just give tax havens like the Isle of Man a false air of respectability.
Of course, there is a counter argument to this position as well! And that is that everyone has the right to remain ‘presumed innocent’ of any crime including tax avoidance of evasion until proven guilty, and that every free individual on the planet has a right to privacy, including having the right to retain privacy of investment activity.
Whichever side of the fence you’re on however, the fact is that TIEAs alone aren’t enough to prove a jurisdiction’s credibility as an investment environment…a fact specifically mentioned by well over 50% of our surveyed readers.
So what of the Isle of Man’s bid to become an offshore pension centre of choice for international investors and expat retirees?
Well, the jurisdiction’s credit rating remains AAA – which is something not to be sniffed at in this economic day and age. However, the island has lost out on its share of UK VAT revenues significantly, and as a result it is now in a more precarious position financially speaking.
However, authorities are quick to point out that unemployment remains exceptionally low locally (2.1%), that GDP growth figures for the last year remain impressive (4.7%), and that there is more to the Isle of Man’s economy than just financial services. Or in other words…it is not wholly dependent on growing as a QROPS centre of choice to remain fiscally stable.
This means that investors should supposedly see many positive reasons as to why the Isle of Man is a ‘good’ place for their pension business…
Why Expatra Readers Say: ‘Don’t Bank on the Isle of Man’
We asked 75 readers from our opted in list of confirmed expatriate investors whether they felt that the recent positive promotion of the Isle of Man meant that they were more willing to consider it as a place for potential investment, or whether their opinion of the jurisdiction was unchanged by the above discussed headlines and stories.
We also asked them to expand on their answer with their reasons for or against considering the Isle of Man as a place to do business, bank or save and invest…
As stated, all but 7 of the 75 people we chose to survey informed us that they did not consider the Isle of Man as a place that they would favour for any investment activity – despite the positive headlines. Some of those who chose to furnish us with further details commented thus: –
“The Isle of Man has seemingly taken no responsibility for banking failures in the past, and this remains the dominant story in my mind.”
“I lost money when KSFIOM went down – the Isle of Man authorities did nothing to help investors like me.”
“The IOM’s financial regulators don’t have a grip of financial activity on the island in my opinion, and the so-called investor protection scheme is grossly underfunded and underestimated.”
“Isn’t it true that those involved in financial regulation on the Isle of Man can also be (or are/have been?) directors of local banks or finance houses? I believe that’s the case – therefore how can you ever trust the regulatory environment.”
“I may be considered old but even my memory’s not that bad – I can still remember what happened in 2008! No, I wouldn’t knowingly invest on the Isle of Man.”
“Whilst IOM isn’t as bad as some offshore jurisdictions, I personally chose Guernsey for my QROPS.”
In Conclusion and What do YOU Think About the Isle of Man as an Offshore Tax Haven?
It’s clear that the Isle of Man really is making some effort to improve upon its position as an offshore tax haven. It’s trying to keep the OECD happy for example, and it’s also trying to strengthen its revenues by targeting business growth areas such as QROPS – which is good for the overall economy and everyone affected by it. However, it is equally clear that the authorities have an awfully long way to go to win back public opinion.
Whilst those we surveyed represent only a very small group of expatriate investors globally, these are the sort of people the Isle of Man needs to have on side to advance their business environment and ultimately their economy.
In this case it seems it’s very much a case of actions speaking louder than words – i.e., the Isle of Man needs to take much greater action to secure its investor environment before seeking to promote its perceived benefits through the media for example.
What do you think about the Isle of Man’s investor environment? Do you agree with the majority of our survey group that the island’s recent history has tarnished its reputation too greatly for example? Or do you think that the benefits of this triple A rated jurisdiction mean that it is a competitive and secure haven for your wealth? Feel free to air your opinion below…