OFFSHORE rivals Jersey and Guernsey are bound to follow the Isle of Man’s lead in striking a tax deal with the UK, it has been claimed.
Pressure is mounting on the Channel Islands to share information with the UK taxman about British citizens who hold bank accounts in their islands.
Meanwhile a leading Isle of Man banker says he believes the Isle of Man Government has ‘read the tea-leaves’ correctly.
And John Webster, chairman of the highly influential Manx Business Connection, has welcomed the move to share information with the UK. He says it is time to rebrand the island as an international business centre.
Mr Webster told the Manx Independent: ‘This agreement marks the beginning of a new era in the Isle of Man’s economic development and clearly distinguishes us from International Finance Centres; the island is undoubtedly a diversified International Business Centre, anyone calling us an IFC in future should be corrected immediately.
‘So what will be the Isle of Man’s niche in tomorrow’s world?
‘Understanding how to create sustainable jobs and income-generating opportunities in a world hostile to tax-driven business that is perceived to exist in International Finance Centres is vital.
‘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.
‘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.’
Even as Chief Minister Allan Bell outlined the reasons for the government’s decision to adopt tax exchange information with the UK in Tynwald, the Channel Islands were still falling short of agreeing to release information on bank accounts held there to Her Majesty’s Revenue and Customs.
But speculation is growing that such an agreement is not far away.
Isle of Man tax expert Paul Hotchkiss said: ‘I cannot see Jersey and Guernsey and others not following suit – what choice will they have?’
He added: ‘I think it will only be a matter of time before other jurisdictions do the same.’
Mr Hotchkiss said despite global pressures this is the right time for the island to take the initiatives set out by Allan Bell when he announced plans to expand automatic exchange of tax information to combat tax evasion and financial crime – and reflect new international standards of co-operation, compliance and transparency.
Mr Hotchkiss said: ‘The government should be applauded for taking such a bold move ahead of our competitors.
‘It is time to think for ourselves and take hold of our economic development, part of which is to take the necessary steps to move towards transparency. I do not believe this initiative will damage the island in the long run – if anything it will dramatically enhance our reputation and put the island in a better place for the future.
‘I do not believe we will lose business except we may lose business which sits here which is linked with UK residents who have not complied with their obligations.
‘The devil is, of course, in the detail and there is a danger of wider investigations which may lead to nothing and this risk needs to be managed.
‘There will be critics of this move but it is just a question of timing: it was going to happen at some point and it was just a question of when.’
Mr Hotchkiss believes a disclosure opportunity to regularise tax affairs is in some respects a necessity. ‘It seems a strange thing to say but any such facility will in itself generate significant economic activity.’
John Coyle, a former president of the Isle of Man Bankers’ Association, told the Manx Independent that ‘2012 might well go down in the history books as one of the most important years in the development of the Isle of Man’s economy in recent decades.
‘Just when most of us thought that our most important remaining signings of 2012 were the completion of our Christmas cards, the Isle of Man Government has indicated that it intends to sign up a new tax transparency agreement with the United Kingdom, and to complete the formalities early in the New Year.’
Mr Coyle, who is chief executive officer of Standard Bank Isle of Man, added: ‘Whilst to some, such a move might come as something of a culture shock, my view is that the island once again has read the tea-leaves correctly and sought to capitalise on both its existing reputation as a co-operative and financially responsible trading partner, as well as to exploit any first mover advantage that may come from the goodwill generated.
He continued: ‘There can be no doubt that the overwhelming popular sentiment is that, in this time of seemingly unending global recession, everyone is expected to take some of the pain – whether you are a huge corporation like Starbucks or a relatively minor celebrity like Jimmy Carr.’
The Chief Minister of Jersey, Senator Ian Gorst and the Chief Minister of Guernsey, Deputy Peter Harwood, issued a joint statement in which they said: ‘We also share a common commitment with the UK to combat tax evasion and to participate in international efforts to combat financial and fiscal crime. We have long made it clear that neither island has any wish to accommodate those engaged in tax evasion.’
Senator Gorst added: ‘The UK government is seeking to promote more widely as a new international standard the principles of the US Foreign Account Tax Compliance Act (FATCA). Jersey considers that it is important that in doing so the UK Government mirrors the approach of the US FATCA in being global in its application, ensuring a non-discriminatory approach for all jurisdictions.
‘In our ongoing discussions with the UK Government we will be pressing them to make clear the steps they are taking to promote the adoption of automatic exchange of information worldwide to ensure that a level playing field is achieved for all finance centres competing in the global market place.’
A body called Jersey Finance also hinted that the island is not far from following in the Isle of Man’s footsteps.
Heather Bestwick, deputy chief executive officer of Jersey Finance, said: ‘We welcome the clear and robust statement issued jointly by the Chief Ministers of Jersey and Guernsey on the subject of ongoing discussions.
‘As the statement clearly explains, this is an important and complex matter that should be developed and agreed by a process of constructive consultation between all parties.
‘It is the view of industry that considerable work is still required to construct a solution that meets the long-term needs of the UK while at the same time avoiding the very real risks of disproportionate costs in terms of implementation and compliance, and unintended consequences that might unduly harm the international competiveness of Jersey and Guernsey.
‘As a representative body for the finance industry in Jersey, we welcome our government’s call for such a consultative approach and believe that this reflects Jersey’s long-standing co-operative relationship with the UK and our commitment to adherence with international standards that are applied on a level playing field basis.’
• Read more from Mr Coyle and Mr Webster in Monday’s Examiner