IOM Finance Sector Reveals Over-Regulation Fears

by Jason Gorringe, Tax-News.com, London

03 April 2002

The Isle of Man is reported to be prospering despite recent international pressures on offshore jurisdictions. However, there are still tough times ahead for the Crown dependency, according to a report in the Financial Times last week.

Folllowing the release of a survey in which it was revealed that the Isle of Man benefited from a 'flight to quality' by investors post-September 11, tax experts have warned that the jurisdiction is treading a fine line between being well-regulated and over-regulated.

Although the Isle of Man was removed from the OECD blacklist of 'uncooperative tax havens' last year, it faces tough negotiations with the European Union, and with the Code of Conduct Group, led by UK Paymaster General Dawn Primarolo.

There is also the feeling that the Channel Islands have been used as a 'sacrificial lamb' by Chancellor Gordon Brown, who in order to secure a compromise over the exchange of information between European tax authorities, promised the cooperation of the Crown dependencies.

It has been suggested that the jurisdiction could use the issue of information exchange on non-resident savings income as a lever to secure greater access to the EU market. At present, the island is permitted to trade with European countries in manufactured goods, but is not allowed access for financial services products.

However, although the Isle of Man is proud of its reputation as a well-supervised offshore financial centre, there are fears that any additional regulatory burden imposed may stifle the development of the finance sector.

'It is a difficult balancing act,' Tax Partner with KPMG on the island, Gregory Jones, told the FT. 'There is a feeling that we are dangerously close to being over-regulated. We have to be careful that we don't drive business away.'

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