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Whilst Gordon Brown, Alastair Darling and Barack Obama attack the Isle of Man as a “Tax Havens” the OECD (Organisation for Economic Cooperation & Development) praise the Isle of Man.

If proof were ever needed that the bully boys of the UK and USA are attacking small offshore countries just to divert attention from their own dreadful record in regulating their financial institutions, and their waste of taxpayers’ money, the fact that the OECD recently went out of their way to praise the Isle of Man and call it an example for other tax havens is worth recording.

The praise was given following the signing of a tax information exchange agreement between the Isle of Man and Germany. This is the 13th such agreement – based on the OECD model – which the Island has entered into.

Now if you cast your mind back a couple of months it was the German Chancellor Angela Merkel’s call for action against “uncooperative tax havens” which seems to have prompted Mr Darling to have a bash at the Isle of Man. This despite the fact that the Isle of Man has had a double taxation treaty with the UK for over 50 years and only a few days earlier Mr Darling had signed an updated tax information exchange agreement with the Island, one which actually goes further than the OECD require.

In 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 that doesn’t stop them having a bash so it really has to be political. Sad.

The real purpose behind these attacks is to try and stop tax payers, individuals or corporate, from using offshore jurisdictions as part of their tax planning. But the fact is that it is well established in law that planning your affairs to minimise your tax bill is perfectly legal. A UK resident putting their money into an ISAor SIPPis doing just that. It is called “tax avoidance” and done openly is perfectly legal. What is not legal is “tax evasion” which at a simple level could be stuffing some money into an offshore account and not telling the tax authorities about it. So someone getting a bribe or “backhander” and shoving the money into an account is not only breaking international law on bribery and corruptionbut is also evading tax.

There is an old saying in law enforcement circles “follow the money” and of course that is what this is all about. Remember that the only crime that Al Capone was ever convicted of was tax evasion. Capone had lots of cash from his criminal activities which he couldn’t account for in the books of his business enterprises. He couldn’t prove where it came from. If he couldn’t account for the money he couldn’t pay tax on it.

I don’t want to get into the history and methods of money laundering which have progressed from people transporting suitcases of cash to banks in “tax havens” to the more electronic age of instant transfers. The only sure way to “follow the money” is for there to be openness in the banking system.

The fact is that some countries do not operate an open and transparent banking system and those are the countries which Angela Merkel was targeting. So what countries was she referring to?

Well there is no global “black list” or tax havens as such, but there is a list of countries which do not cooperate in international banking by having open and transparent banking laws. You might be surprised at who is on that list:

 Non Cooperative Countries  Countries with limited cooperation
Andorra
Austria
Belize
Cook Islands
Guatemala
Hong Kong
Liechtenstein
Luxembourg
Macau
Nauru
Niue
Panama
Philippines
Samoa
San Marino
Singapore
St Kitts & Nevis
Switzerland
Turks & Caicos Islands
Uruguay
Vanuatu
Anguilla
Belgium
Chile
Cyprus
Gibraltar
Malaysia
Malta
Monaco
Montserrat
St Lucia
St Vincent & the Grenadines

You will note that out of 32 countries five are full EU member states (including Belgium, whose capital, Brussels. is also the administrative centre of the EU) and eight are EEA states. Nowhere do you see mention of the Isle of Man, Jersey, Guernsey or the many other British Territories which are coming under political attack.

There is also the point that the Isle of Man, unlike the above EU member states, does comply fully with the EU Savings Directive even though it is not a member of the EU. So, if you want to stuff your money somewhere no-one will find out about it, forget the Isle of Man. But try Austria or Luxembourg or some other of the above secretive or non cooperative tax havens.

Well are the above 32 countries those uncooperative tax havens that Mrs Merkel referred to? Probably, but it will be interesting to see what list the G20 comes up with. Will they leave the EU member states off that list? Will they add places like the Isle of Man onto the list?

 While they are thinking about this it may be worth pointing out that it was only when Bernard Madoff’ blew the whistle on his Ponzi scheme that anyone became aware of the connection to Luxembourg which has total banking secrecy laws. Could Madoff have ripped off investors so easily if he used the Isle of Man rather than Luxembourg? No.

So, my message to Brown, Darling, Obama and the G20? Put your own house in order before you tell the rest of us what to do.

Related Articles:

Political Double Dealing on Tax Havens

Category: International Taxation

One Response to “Isle of Man Praised by OECD Despite Attacks by UK Government”

  1. David Irwin says:

    This is a really good post. I wish I’d spotted it before. Thanks.

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