Isle Of Man May Go 'Part Way' Towards EU On Tax Issues

by Jason Gorringe, Tax-News.com, London

23 January 2002

Richard Corkill, the Isle of Man's Chief Minister since last December, has officially acknowledged that it may have to meet the European Union 'part way' in negotiations on the 'Code of Conduct' Committee's list of 'harmful tax practices', which includes several aspects of the Island's offshore regime, and on the EU's attempts to persuade key offshore jurisdictions to agree to an information sharing regime on savings interest paid to EU residents.

Presenting his annual address, he said: "In the final analysis it may prove necessary for us to make changes, in our own interests, to meet the European Union part way on the issue of taxation, but that remains to be seen, and I would not want to be pre-empt the outcome of our discussions. In the meantime I can assure Tynwald that it will have the final say on our stance on the European tax initiatives.'

Until now, the IOM Government has publicly refused to acknowledge the full extent of the pressures to concede to EU demands on the Tax Code of Conduct and the Savings Directive. Although constitutionally, the UK has no right to dictate Island tax policy, the UK has committed the Crown dependencies to the EU demand and is negotiating on their behalf; in practice the UK could bring considerable pressure to bear on the Island.

Mr Corkill said: 'The outcome of the EU tax initiatives remains uncertain. We continue to keep a close watch on developments and we are in discussions with the UK government. We have no wish to create difficulties for Europe, nor do we want to become the target of European countervailing measures by standing wholly outside international developments. But equally we have no intention of surrendering our autonomy or undermining our economy.'

Luckily for the Isle of Man, in stark contrast to Gibraltar, there is no colonial power other than the UK wanting to assert sovereignty, so that the threat of complete independence is a realistic weapon in obliging the UK to reach an acceptable compromise with the EU.

'Part way' probably doesn't mean giving in on information exchange, because the Isle of Man can confidently assume that Switzerland and the US will not give in on that issue, so it will never be put to the test; but on 'transparency' which means offering the same regime to onshore and offshore companies, it has already indicated that it is resigned to having the same tax rate for both types of company - probably 10%. Other possible changes are less easy to predict.

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