Isle Of Man Prospering Despite International Pressures

by Jason Gorringe, Tax-News.com, London

28 March 2002

John Aspden, chief executive of the Isle of Man's Financial Supervision Commission, says that the onslaught from the OECD and other multilaterals in the last two years seems to have led to a redistribution of funds between offshore centres rather than a migration of funds to onshore locations.

"There has been something of a flight to quality, with some investors moving from less reputable offshore centres to the well-regulated ones," he told the Financial Times. "The Isle of Man, like other top-league financial centres, has benefited from this."

The newspaper published a survey of the jurisdiction yesterday, saying that the island's deposit base rose from UK£24bn to £26.8bn in 2001 while funds under management rose from £3.9bn to £4bn.

Phil O'Shea, acting island director of Barclays Bank, told the newspaper he thought there were longer term factors at work: "The number of people working internationally has been rising rapidly," he says. "For this generally affluent group, international banking in a tax-neutral territory has considerable attractions, since their savings can grow free of interest or capital gains tax."

The survey notes that fror offshore financial institutions, as for those onshore, the burden of regulation is increasing. The tightening up of know-your-customer guidelines means time consuming and costly research into account holders and beneficial owners of companies. The need to carry out retrospective know-your-customer checks - on accounts opened when the rules were less demanding - has been particularly onerous.

Financial institutions on the Isle of Man have come to terms with these extra duties, however. "The burden of regulation is certainly greater than 12 months ago," says Bill McKay, island director of Royal Bank of Scotland. "But it has become a necessary part of doing business and it is important the island is in the top league in terms of regulation."

The survey says that Guernsey has out-manoeuvred the Isle of Man in the insurance sector by introducing protected cell legislation. "Guernsey has had more captive business than we have had recently, largely because of the introduction of captive cell legislation," says David Vick, chief executive of the insurance and pensions authority. The number of captive insurance companies has declined from 158 in 1999 to 147 in December 2001. The Isle of Man is fighting back, however, and protected cell legislation should be in place on the island later this year.

The survey notes that the the availability of labour on the Isle of Man gives it an advantage over competitors Guernsey and Jersey, where housing restrictions and tight work permit regimes make it difficult and expensive to recruit workers.

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