The Isle of Man has long been considered a tax haven by the very nature of the fact it’s an offshore haven where one can conceivably save tax! However, when is a tax haven not a tax haven?
Well, in the case of the Isle of Man they refute the label ‘tax haven’ because of the negative connotation it implies, and the jurisdiction has even gone so far as to lobby the Multistate Tax Commission Executive Committee in the US and attempt to have the OECD reclassify the Isle of Man…
We can totally understand the Isle of Man’s point of view because in our humble opinion it is one of the world’s best locations for onshore/offshore finance, investment, company formation, banking etc. This is because of the level of legislation in place to protect investors, because of the level of regulation imposed upon companies doing business in the jurisdiction and simply because of the amount of effort the policy makers in the Isle of Man constantly put in to ensuring their jurisdiction is whiter than white whilst remaining competitive and whilst ensuring investors’ rights are protected.
So, to classify the Isle of Man as a tax haven alongside the likes of Lichtenstein – famed for its lack of transparency – or alongside other jurisdiction where tax evasion is believed to be ‘allowed’ is to imply the Isle of Man is less than compliant, it is less than open and it is potentially less than legal. But it’s a tricky quandary because the term ‘tax haven’ isn’t a legal term insinuating or even directly stating that a jurisdiction allows tax evasion. And at the same time the Isle of Man is certainly not considered a location where tax evasion is possible, allowable, legal or accepted.
The route the Isle of Man are taking in terms of seeking to have their jurisdiction reclassified by the OECD is to show that it is not even a low tax haven. According to the Isle of Man Chief Financial Officer Mark Shimmin, the jurisdiction is “not a low-tax jurisdiction.” In the island’s defence of its position and request for OECD reclassification, Shimmin and the Isle of Man Chief Secretary Mary Williams have approached the Multistate Tax Commission Executive Committee with evidence that the jurisdiction’s tax revenue is 34% of the country’s GDP which is only 2 percentage points below the EU average, and that the Isle of Man also imposes VAT at 17.5% together with everything from payroll to property taxes and that it is therefore not a tax haven.
So, to answer the question posed – namely, when is a tax haven not a tax haven, the answer is, when the ‘tax haven’ in question is the Isle of Man.