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I live in the Isle of Man. For those of you who don’t know this is a small island in the middle of the Irish Sea about midway between England, Scotland and Ireland (and a little further from Wales).
 
Although one of the British Isles we are an independent country – with the oldest continuous parliament in the world – and have never been part of the UK and we are not part of the EU. A haven of freedom indeed.
 
Tax here is low. Companies pay tax at 0% (that’s not a misprint – zero) and individuals have about £8,000 free of tax, then they pay 10% on the next £27,000 and then they go to the highest rate – 18%. There is no tax on capital gains and there are no death duties or tax on your estate when you die.

There is an absolute cap of £100,000 that anyone can pay no matter how much his or her income is. This has attracted many of the “super rich” who have brought businesses and jobs to the island.
 
The Isle of Man is often described as a “Tax Haven” and in one respect we are – we pay low taxes. However we are not a “Tax Haven” in a pejorative way as the Isle of Man has tax treaties with several countries and we don’t have banking secrecy.

So why are our taxes so low? This country is governed by the people, for the people. The members of our parliament are real people who live in the community. When I go to the post office I get served by one of the ministers in the Treasury. The Chief Minister (Prime Minister) still serves in his electrical shop when he gets the time. If I want to bend a politician’s ear about something that is bothering me I know where to go.

But more importantly, by its own constitution the Manx government MUST balance its budget every year and it is not allowed to borrow to do so. This concentrates their minds and as there is no party system in government neither is there any pressure for social engineering.

Our politicians raise enough money to meet the needs of the community and they meet these needs far better than our neighbours in the UK or Ireland do. For example pensions are 50% higher here than in the UK for the same contribution level. Actually, for a slightly lower contribution level.

So. No borrowing; no social engineering; no political parties in government; LOW TAXES! Do you think there might be a connection?

Of course there are drawbacks. The cost of living here is quite high because everything has to come by sea/air but nowhere near so high as to cancel out the tax advantages. It is a small island so don’t expect big city life. We do have theatres and cinemas etc but they are not up to West End standard. It costs a lot to get on or off the island unless you can book well in advance. Oh, and the weather isn’t all that good. Our winters are mild (little snow or ice but clear and cold and often windy) but our summers are cool and can be wet.

Me? I came here for work. This is a major offshore financial centre – all the big players in the financial world are here. I am a tax consultant, advising clients on how to structure their businesses to legally mitigate their tax liabilities. Some people think that is wrong, but remember: tax avoidance is legal and tax evasion is illegal. Much of my work is advising US and Australian investors on tax efficient ways to invest in the EU. They make more money for their investors who then pay more tax in their own country simply because they are receiving a better return on that investment.

What about the EU countries – particularly the “new European” member states? Well profits made there are taxed there and in any event they need private finance in order to be able to leverage EU grants and bank funding. If my clients didn’t provide that funding these countries would not get the help they so badly need to improve their infrastructure and the lives of their residents.

Not all so-called “Tax Havens” are bad.

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  1. OECD Praise Isle of Man for cooperation | Link4Business - April 29, 2013

    […] an earlier post I discussed the question Is the Isle of Man Really a Tax Haven. Frankly, in the pejorative and combative style of Brown, Darling and Obama it clearly isn’t. But […]

  2. The best place to live and avoid tax? - Page 2 - February 23, 2009

    […] The Isle of Man??? It is of course very difficult for US citizens – but it isn’t impossible – to reduce the tax they have to pay even if they live outside the US. The word "best" is the problem here. I live in the Isle of Man. For those of you who don’t know this is a small island in the middle of the Irish Sea about midway between England, Scotland and Ireland (and a little further from Wales). Although one of the British Isles we are an independent country – with the oldest continuous parliament in the world – and have never been part of the UK and we are not part of the EU. A haven of freedom indeed. Tax here is low. Companies pay tax at 0% (that’s not a misprint – zero) and individuals have about

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