Mec Vannin Make Believe

[Frances]

now I'm somewhat confused - just what is the function of this MB - to protect the interests of the Finance Sector ? - why remove a link that did not come under any sub-judice rules nor to any obscene pages - it was to a blog - http://www.taxresearch.org.uk/Blog/category/isle-of-man/

[Skeddan]

oldmanxfella, were you perhaps citing the following (or a similar report) which seems to suggest what you said in your first post in this thread:

 

http://observer.guardian.co.uk/business/st...2036362,00.html

 

If so, fair enough to make you point as you do, if you go by what is said here: "the Isle of Man's 26,000 population is bailed out by UK taxpayers to the tune of £270m a year."

 

The article goes on to say:

 

"This pot is split between the UK and the Isle of Man under an agreed formula which allows the island to claw back more than it pays in." - so it seems according to this that IoM claws back £270m more than it puts in.

 

Now as it happens, it seems the IoM government takes another view, as also quoted in this article:

 

"The Isle of Man government said: 'We refute strongly any suggestion that the Isle of Man is subsidised by the United Kingdom."

 

So which is it? Is this £270m really just a tax loophole, a genuine subsidy to support public expenditure, or the better end of the VAT deal (if so, how?), or something else? The Observer report says one thing, the IoM Govt another, and these are contradictory (to the tune of £270m - no small amount). Is it just a case of going with whatever make-believe one thinks seems right, or is it perhaps possible to get a clear answer to this?

 

I am a little sceptical about the accuracy of the report given the mistake it makes in reporting the IoM's population as 26,000 (perhaps meaning workforce?), but perhaps it has the rest correct. oldmanxfella, I'm not trying to prove you wrong on this point, I'd just really like to get to the bottom of what is really going on.

 

The article also states " the defence costs it pays to the UK at £32 per head ..." which I take to be approx £2.5 million rather than £832,000 (using the wrong population of 26,000). This is in line with the sums historically paid, and is accounted for hard cash that IoM pays to the UK.

[bluemonday]

the Isle of Man's 26,000 population ?

Been another plague then.........

[triskelion]

So which is it? Is this £270m really just a tax loophole, a genuine subsidy to support public expenditure, or the better end of the VAT deal (if so, how?), or something else? The Observer report says one thing, the IoM Govt another, and these are contradictory (to the tune of £270m - no small amount). Is it just a case of going with whatever make-believe one thinks seems right, or is it perhaps possible to get a clear answer to this?

 

VAT is shared between the Island and the UK, rather than the Island administering it itself. It is not at all a subsidy, but a legitimate form of revenue. The Island has done favourably out of it, as Frances said, through reduced customs commitments, among other things. However, it also prevents the Island from lowering it's rates of VAT in order to sell to the UK at lower costs (as happens currently in Jersey with companies like play.com and indigostarfish), so in fact serves to close a potential tax loophole. Mec Vannin's position, such that is, is that the Island should have full control of its revenue streams.

 

The Guardian/Observer has a long-standing dislike for the Island, as is evident from the outraged tone of the article. Quite frankly, I don't see why the Island should pay anything towards the costs of the UK's military, what with invasion or a declaration of martial law being somewhat unlikely. Though it sounds a bit hysterical, it seems to me to be a form of 'protection money.'

[Skeddan]

Freggyragh, FYI I have posted a response to you comments on Howe in the 'King of Mann' thread.

 

BTW, As I said, I don't speak Manx Gaelic, but I have a smattering...

[Lonan3]

I have a smattering

Have you tried Germolene?

[Skeddan]

Quite frankly, I don't see why the Island should pay anything towards the costs of the UK's military, what with invasion or a declaration of martial law being somewhat unlikely. Though it sounds a bit hysterical, it seems to me to be a form of 'protection money.'

 

On the other hand it is legitimate under international law for an occupying power to levy charges from the territory under its adminstration. It's nefgildi.

[bluemonday]

Norse "Nose Tax " - nice comparison.

[Skeddan]

Norse "Nose Tax " - nice comparison.

 

 

It's not a comparison - nefgildi is exactly what it is, it just doesn't dress it up in euphemisms such as "Imperial Contribution" or "Defence Contribution".

[oldmanxfella]

just what is the function of this MB - to protect the interests of the Finance Sector ? - why remove a link that did not come under any sub-judice rules nor to any obscene pages - it was to a blog

 

Like Freggyragh I strongly support the finance sector and what Allan Bell and others have achieved. The author of the blog, whilst I'm sure his stats are right so I was happy to quote, does often seem to have an axe to grind about the IOM and as I said I didn't see the point in permanerntly linking. Particularly as it just arms Skeddan with bias info on a system he himself says he does not understand.

 

Bias? Well for instance I don't believe that the money paid across is a "subsidy". Its VAT paid by Manx residents for goods and services bought here that is then paid back out of a common purse (ie. its revenue share) to the IOM Government.

 

The common purse, I am sure, at the time it was introduced was a way of balancing the risk of the IOM being used for duty and import-export scams into the UK, with the benefit to the Manx economy of what is effectively a hefty commission for policing and applying the UK VAT system in the IOM.

 

Therefore it seems to be a good compromise for both revenue collection agencies as they both get financial benefit from the common purse, and if it benefits the economy to that degree it is proof that the UK is not plundering the IOM (back to Skeddans original accusation).

 

We are not members of the UK or the EU so don't have to pay VAT and therefore we could go it alone - however it would seem that the shipping, and aircraft indusries etc in particular benefit from being within the UK and wider EU VAT area. Plus the crossing from the UK to here and the rough seas, our dead tourist industry, and our lack of retail infrastructure, don't really make us conducive to booze cruises and VAT free shopping as its easier to hop over the Channel so in reality VAT is a good thing for the local economy as it generates significant capital from the application of a very simple system which is pretty low cost to run.

 

But VAT is certainly no direct subsidy from the UK, and its certainly not booty plundered off the Manx people.

[Frances]

the common purse arrangement needs to reflect the tourist payments which in the heyday of tourism would probably have added up as equivalent to a significant additional population, which, coming mostly from the UK, would otherwise be included in the UK stats (if I remember the argument in the early 20th C it was that tourists spent more on dutiable items, tea, beer etc during their stay than the residents and thus had a larger weighting). I suspect the report ignored items such as the film industry which was I understood using some advantage in tax laws by being Island based. However much you might support the FS if the comments are incorrect then surely it would be simple to put the story right.

 

The rest of Skeddan's arguments I think can be neglected - all countries that have seen a takeover by another population group can be said to be occupied - the New Zealanders didn't quietly sit down with the resident population and agree terms, likewise the USA, Australians etc - at some point it has to be accepted as status quo and developed from that point which has been the case since the 1860's. I too disagree with UK current military policy (airship one springs to mind) but it is a known fact (and has been commented on since WW1) that per capita the Island does not pay the same as the UK for what is effectively a shared defence force.

 

Added - on consideration I wonder if the report included excise duty as well as VAT as the common purse covers both - as the Island is about 1/800th of the UK I would expect the same ratio of VAT but the UK 2004 figures I think don't quote excise duty (alcohol,fuel) which may well be grouped under the same common purse figures in manx statistics.

2nd addition - figures for excise duties on fuels were about £24B and on alcohol £7.5B for UK thus pro-rata for Island about £240M which looks remarkably like the claimed UK to Island subsidy

[Gladys]

VAT is shared between the Island and the UK, rather than the Island administering it itself. It is not at all a subsidy, but a legitimate form of revenue.

 

Let us not forget, including the Tax Research website, that the agreement with the UK on VAT is just that, an agreement. Given the relative bargaining positions between the IOM and the UK, I don't think anyone could argue that we have had a gun to the UK's head. The UK is big enough, sophisticated enough and self-interested enough, to look after its own interests in this agreement; it could hardly be called an unfair agreement.

[oldmanxfella]

Given the relative bargaining positions between the IOM and the UK, I don't think anyone could argue that we have had a gun to the UK's head. The UK is big enough, sophisticated enough and self-interested enough, to look after its own interests in this agreement; it could hardly be called an unfair agreement.

 

and that Glady's is probably the most valid point of all. Its obviously a good consensus reached between here and the UK.

[Skeddan]

On the topic of the £270 million a year ‘subsidy’ from the UK….

 

The basis for such a claim would seem to be a paper by Tax Research (which as I understand it is a one-man outfit run by Richard Murphy), and which can be found here:

 

http://www.taxresearch.org.uk/Documents/TRIoM3-07.pdf

 

Firstly it should be noted the £270m per annum of ‘subsidy’ he calculates the UK gives to IoM is made up as follows:

 

£37m a year which according to him is the amount IoM ‘ought’ to be paying for defence, being £32 per head of the population rather than £528 per head of the population as in the UK. This proportion of this claimed ‘subsidy’ which is ‘paid’ by the UK is purely notional. It is certainly not real money paid by the UK; it exists only in Richard Murphy’s opinion that IoM’s ‘defence contribution’ ought to be larger.

 

The remaining £233 is a figure arrived at by Tax Research, is explained as follows:

 

“The subsidy must amount to 15.6% of the Isle of Man’s GDP in that year (the

difference between its VAT receipts at 21.7% of GDP and those it should have

collected -- at most -- of 6.1% of its GDP, using the UK as a benchmark.) That is a

subsidy of £233 million in that year paid by the UK to the government of Isle of Man

without any apparent economic reason.”

 

The questions of the validity of this adopted methodology is not considered in depth in his paper, nor are the calculations detailed. As I understand it, Tax Research have arrived at these figures by using the proportion of VAT to GDP, and taken the UK as a ‘benchmark’. In essence this takes the premise that the proportion of VAT to GDP in IoM should be identical to that of the UK, and (if I have understood the logic of the argument), because this proportion is higher in IoM, the difference can only be accounted for as VAT collected in the UK and given to IoM.

 

I haven’t studied economics to any advanced level, but I think the following critique of this might not wholly off the mark:

 

1. There is no substantiation given in support of the validity and reliability of adopting such a methodology. I would assume that if this was a standard and accepted technique in economic analysis it would be mentioned here.

 

2. This seems to me like comparing apples with pears, and so lacks face validity. IoM and the UK are entirely different economies both in nature and scale, and the validity of assuming like for like is, at the least, very questionable. It is especially suspect when assuming equivalence between what may be described as a ‘micro-nation’ and the UK economy, which is “highly globalised and the 4th largest in the world according to one recent survey” (Wikipedia). In my view a very great deal more would have to be done to show this comparison is valid before one can consider the conclusions drawn from this premise have any substance.

 

3. Though I haven’t analysed this ‘methodology’ in depth (partly because Tax Research do not provide any backing to support its validity), the approach not only lacks face validity, but to me seems to be deeply flawed. This analysis assumes systemic similarity on the basis of having similar VAT and GDP, but ignores systemic differences in the two economies, such as exports, to give but one example. Exports do not attract VAT and contribute to GDP, and thus differences here may lead to the kind of variances noted, notwithstanding the fact two economies have similar VAT regimes and have similar GDPs. I certainly am not proposing to attempt to furnish a more robust methodology than that adopted by Tax Research, but rather pointing to what to me seems to be the lack of robustness and flaws in the approach they have adopted.

 

Perhaps an economics expert might correct me in my assessment that this approach lacks face validity. However for the reasons given, at the moment, I find this analysis and the figures arrived at by Tax Research to be far from persuasive.

 

 

 

What this question does draw attention to is the lack of transparency in the question of IoM’s economic ‘dependence’ on the UK, and that any such assessment is like pinning the tail on the donkey.

 

I’m curious as to why the details of this important issue are not made available to the public (both in the UK and IoM). What justification is there for the lack of transparency in these matters? How might national interests (Manx or British) be put at risk by disclosing the details of these VAT arrangements? Is it that it is feared that foreign powers will somehow be able to take advantage by having the details of this agreement (perhaps gaining competitive advantage by making use of it for themselves)?

 

oldmanxfella, you seem to have revised your position somewhat if I have understood you right. Firstly you seemed to say that IoM benefits from the UK to the tune of £300m a year, and gets the better end of the deal:

 

At the end of the day we pay a few quid for defence and have to put up with the Queen as a constitutional head of State. I'd do that for £300m a year.

 

Now you seem to take the view that IoM is not subsidised by the UK, though IoM does make payments to the UK. (and I also agree that Gladys has a good point). In your later post you say:

 

But VAT is certainly no direct subsidy from the UK, and its certainly not booty plundered off the Manx people.

 

I did not ever claim that this VAT is booty plundered off the Manx people. However you have not countered my argument since you do not answer the issue I raised about EEZ’s or the ‘defence contribution’, and have only shot down a straw-man argument of your own making.

 

The question is far from unimportant, and any impression that IoM gets the better end of the relationship with the UK clearly has bearing on peoples attitudes - even if it is only based on make-believe, as seems to be shown in your comments, and the post by Boredom:

 

As someone else said - if you have to put up with the Queen for a slice of a bigger pie its no bad thing..

 

As I stated before:

 

The information needed to make an informed assessment is, funnily enough, a matter of state secrecy and protected under the UK Official Secrets Act. (Presumably because it is not in the UK’s national interest for there to be informed debate on the topic).

 

If this information was available, perhaps people wouldn't be so complacent or apologistic about the UK's colonialist exploitation of IoM.

[VinnieK]

If this information was available, perhaps people wouldn't be so complacent or apologistic about the UK's colonialist exploitation of IoM.

 

I'd be happy with it, if only they still wore those natty red jackets. Until they start doing so the low tax, comprehensive grants for education and so forth is more than enough to buy my complacency.