Isle Of Man Likely To Opt For Exchange Of Information, Says KPMG

by Jason Gorringe, Tax-News.com, London

23 April 2003

The Isle of Man will likely go down the exchange of information route with regard to the European Savings Tax Directive, according to KPMG tax director Greg Jones.

Speaking to IoM Business News in the wake of the recent decision by Guernsey to opt for the withholding tax option, Mr Jones emphasised that the Isle of Man has yet to officially make its decision, and echoed Treasury Minister Alan Bell's assertion that the Island will not be influenced by Guernsey's somewhat premature and bold move.

However, he observed that with the Isle of Man's banks and financial institutions predominately owned by British and Irish based parent companies, it is unlikely that the island will go down the withholding tax route. The UK in particular is strongly opposed to the withholding tax, due to fears that it would have a negative impact on the City.

The high costs of implementing the withholding tax are another factor pushing institutions on the Island towards exchange of information, according to Mr Jones, who explained that new systems would need to be put in place to cope with the introduction of a retention tax, whilst procedures are mostly already in place to facilitate exchange of information.

"The feedback that I've had is that the information exchange route is not a significant extension on what happens at the moment," said Jones, adding: "I think that is another reason a lot of institutions will not have a huge appetite for withholding tax."

However, the KPMG tax director acknowledged that the withholding tax is not without its advantages.

"I could be wrong. There is certainly momentum building up that feels that a) it is nice to give the customer the choice b) it might help to keep more business than would otherwise be lost and c) from a public purse perspective, it gives us a bit of tax which we are otherwise not going to get at the moment," he observed.

Whatever option the Island eventually plumps for, Mr Jones suggested that the overall impact on the finance industry is likely to be relatively minor. He played down a recent report from business information company Datamonitor, which predicted that UK offshore jurisdictions could lose 58% of their funds and deposits invested by EU citizens as a result of the savings directive, arguing that the amount of EU based money invested in the Island was "probably quite modest".

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