S&P Renews Isle Of Man’s ‘AAA’ Ratings

by Jason Gorringe, Tax-News.com, London

13 July 2005

International ratings agency Standard & Poor's has renewed its 'AAA' international credit rating on the Isle of Man, reflecting the island's robust economy and strong fiscal position.

According to S&P the affirmation reflects the Island's "prudent fiscal policies," which are expected to return the general government balance to surplus by 2006.

"The government's balance sheet remains very strong, despite the unauthorized borrowings of the Manx Electricity Authority (MEA)," noted S&P credit analyst Trevor Cullinan.

S&P also stated that the ratings are supported by the Isle of Man's "open, export-oriented, and increasingly flexible economy".

"Inward investment, a stable business environment, and net immigration have supported robust economic growth over the past decade," observed the report.

However, S&P warned that the European Savings Tax Directive, which went into effect on July 1 and will require banks in the jurisdiction to apply a withholding tax to the savings income of European Union residents, will have a negative impact on the island's financial services industry, although it is uncertain to what extent this will affect the foreign deposit base.

Nevertheless, the report was welcomed by Treasury Minister Alan Bell.

"Standard & Poor’s have made it clear that the Isle of Man Government’s balance sheet remains very strong, supported by robust economic growth, with a stable outlook for the future," Mr Bell commented.

He continued:

"These are recognised international experts confirming the fundamental financial health of the Isle of Man. Their conclusion specifically takes into account the position of the MEA and should help to put that and other challenges into context."

"The MEA situation is unwelcome and an issue of real concern, but it is important to maintain a sense of perspective. As Standard & Poor’s confirm, the finances and economy of the Isle of Man are strong enough for us to deal with this without any threat to our underlying stability."

"The renewal of the Island’s valuable ‘AAA’ rating - combined with the recent news that our real economic growth rate has exceeded expectations at more than six per cent – is a major boost to confidence in the Isle of Man."

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