Review Of Business Taxation System

[Lost Login]

And to add a further question to Albert's: Luxembourg and Malta are oft quoted as successful and thriving financial centres yet dwell within the EU and have, from the list above, tax rates significantly higher than ours. So would the financial gurus please explain what makes them so attractive.

 

Numerous Double Taxation Treaties

[Lost Login]

I am surprised at the doom and gloom. The position refelects a fact of life. Our windows of opportunity have changed regularly since we really started on the tax haven game in 1961

 

John doom and gloom is the message that needs to be sent out to the buffoons at Tynwald as otherwise they will lie on their backs waiting to have their tummys tickled. The message has to get through to them that 0% tax on what were exempt companies has to be defended as hard and as long as possible and for once not to roll over and acquiesce at the first opportunity.

 

Yes eventually we will have to change, things always do change and my best guess is that a territorial based tax system will be introduced for companies such that IoM sourced profits/income will be taxed, non IoM source will not be taxed. They might have to give an exemption on interest to keep funds in the IoM Banks etc. Such a system would in the main keep the offshore industry intact.

[Utah 01]

Numerous Double Taxation Treaties - thanks, but for the benefit of the non-accountant/tax experts amongst us, would you be kind enough to expand and explain just a teensy weensy bit. Thanks.

[John Wright]

Maltese position

 

An International Trading Company pays Maltese tax at the regular rate, 35%, but a non-resident shareholder, or a Maltese company shareholder owned by non-residents, is subject to Maltese tax only at 27.5% on dividends received from an ITC, and can apply for a refund of the difference. In addition, the non-resident shareholder is entitled to a refund of two-thirds of tax paid on dividends (imputed tax) which equals 23.33%, giving a total return of 30.83%, and an effective rate of tax of 4.17%.

 

LUxembourg position

 

1. it managed to aprtially exempt itself from the EU savings directive as far as banking confidentialiy was concerned

 

2. Using double taxation treaties there is no tax on royalties earned overseas so it is an ideal place to hold IP rights and licence them from

 

3. the Family Private Assets Management Company, or SPF is intended to be exempt from corporate income tax, municipal business tax and net-worth tax, and from withholding tax on distributions. These new vehicles are prohibited from commercial activity, and will be limited to private wealth management activity, for example the holding of financial instruments such as shares, bonds and other debt instruments, in addition to cash and other types of bankable asset

[manshimajin]

I am surprised at the doom and gloom. The position refelects a fact of life. Our windows of opportunity have changed regularly since we really started on the tax haven game in 1961

 

The EU big brother will make other nearby states, especially micro states seen as tax havens, comply strictly with its tax proposal by deeming them harmful

You may be right to say that there is too much doom and gloom but the marketing line from the IOMG Government has been based on our similarity to the UK but with low taxes. When I think about what other commercial (as opposed to personal) attractions there are for locating here if the tax was not attractive (ie very low) I am struggling a bit. The fact that the IOMG has confessed that it needs to understand EU taxation better worries me given where we are located and the comments that have been flying around for some time now about 'tax havens'.

[Slim]

However this is an opportunity, not a threat. All we have to do is look at it logically

 

 

 

Great post John.

[Slim]

John doom and gloom is the message that needs to be sent out to the buffoons at Tynwald as otherwise they will lie on their backs waiting to have their tummys tickled.

 

Oh behave. This consultation in itself is a pro active action based on Europe's reaction to Guernseys Zero/10.

[manshimajin]

John doom and gloom is the message that needs to be sent out to the buffoons at Tynwald as otherwise they will lie on their backs waiting to have their tummys tickled.

 

Oh behave. This consultation in itself is a pro active action based on Europe's reaction to Guernseys Zero/10.

Slim what do you see as the specific commercial attractions for business to remain/relocate here if tax is no longer a motivation?

[Lost Login]

John doom and gloom is the message that needs to be sent out to the buffoons at Tynwald as otherwise they will lie on their backs waiting to have their tummys tickled.

 

Oh behave. This consultation in itself is a pro active action based on Europe's reaction to Guernseys Zero/10.

 

Sorry if you feel that way but I read the comments of members and Tynwald in the paper when this was first raised several months ago. There view appeared to be this would have little or no effect on the IoM!

 

As for consultation I have little time for government consultations as I have seen to many, especially from the FSC to the ofshore industry. Consultation to them appears to me we set out our position, we publish for opinion and comments and then discount any opinion and comments received!

 

With regard to this consultation I am struggling to see the point at present as if the Treasury have to publish a consultation document to understand how a change in tax basis will affect business in the IoM I would firstly be very surprised and secondly very worried. I am sure Couch knows the position exactly and this is purely a PR job on some level which in general is what most "consultation" excercises by the Government in my opinion are. Sorry but I am feeling very sceptical today!

[Slim]

Slim what do you see as the specific commercial attractions for business to remain/relocate here if tax is no longer a motivation?

 

The positively motivated locals?

 

We need to be competitive with Tax, I don't think I've said otherwise.

[pongo]

Great post John. But I worry that you are 20 years ahead of your time.

 

I do not see EU membership being something which politicians here are even vaguely beginning to consider. That debate just is not happening. Although it is something which we should ask them for their understanding of next time they come knocking.

 

And I suspect that many here are more anti EU than the worst of the cor blimey Mail/Express readers.

[manshimajin]

Great post John. But I worry that you are 20 years ahead of your time.

 

I do not see EU membership being something which politicians here are even vaguely beginning to consider. That debate just is not happening. Although it is something which we should ask them for their understanding of next time they come knocking.

 

And I suspect that many here are more anti EU than the worst of the cor blimey Mail/Express readers.

I still wonder how the EU would be able to accommodate such tiny legislatures as the IOM or the Channel Islands other than from within a 'UK' umbrella rather like Gibraltar which is classified as "a European territories for whose external relations a Member State is responsible". That would be a shame as we would probably be stuck with sterling rather than adopting the euro. Maybe there is some way of handling 'micro-states' (but even Malta has 5 times our population).

 

Presumably if we sought EU membership the negotiations would focus hard on the business tax issues - which in the abscence of other fundamental commercial benefits we would need to retain.

 

There do seem to be a lot of 'special cases' in the EU from the Åland Islands and Heligoland down to Ceuta and Melilla and Mount Athos.

[VinnieK]

I am surprised at the doom and gloom. The position refelects a fact of life. Our windows of opportunity have changed regularly since we really started on the tax haven game in 1961

 

We need to negotiate in to the EU as soon as possible

 

At the same time we review and change how we raise our income to pay our expenditure

 

6. We have an expanded marketplace for services throughout the EU instead of just UK we should be able to identify the next thing

 

we will be at the table, in the club, have a voice. We will gain rightst of establishment and residence and work and also EHIC in UK as well as EU. If things go pear shaped we will be given assistance . There will be garnst for outr language and culture. We expand our domestic market in services from 60,000,000 to nearer 500,000.000

 

This is an incredibly optimistic assessment of how EU membership would pan out for the Island. I suspect that it's more likely that the EU will unanimously regard our tax regime as a blatant example of 'harmful tax competition' and we will have to entirely ditch our tax advantages. After all, we will effectively be going to them cap in hand: we want benefits of EU membership, but have little to offer in return. As such they will dictate the conditions of our membership in terms most favourable to themselves. On which note, I doubt that having a voice or 'being at the table' will carry much if any benefit to us or weight in the EU. European politics are so vast and built so solidly around the Franco-German axis that our voice would at best be a whisper on the extreme periphery. For instance, who in the EU cares what Malta or Slovenia thinks when it comes to European affairs?

 

Now, you can say that we'll have an access to a dramatically expanded market, but does this mean anything in practical terms? Without the one advantage we have, that being the ability to offer extremely low tax, the Island isn't a particularly attractive base for European operations. Why stay or set up shop on the Island when you can do so in Poland or one of the Baltic states and benefit from a highly educated, multilingual and comparitively cheaper workforce as well as enjoying excellent links to the main financial centres of Europe? The situation looks even bleaker when you consider that we also suffer from the fact that other (relatively) low tax states already within the EU already have expertise and experience with EU law, European trade and finance, and so on, all of which we lack.

 

I'm not opposed to EU membership on principle by any means, and it may well come to that or something similar. But I can't help but feel that the idea of us benefitting to any substantial degree from this expanded market is a bit of wishful thinking. The main economic beneficiaries will probably be the lawyers and civil service who will naturally expand their staff and operations in order to incorporate the European legal and regulatory structures.

 

Edit: There's also a chance you may be wrong regarding work permits. Malta was allowed to retain its work permit system after joining the EU in order to protect its labour market. A similar argument could be made for the Island, citing Malta as a precedent.

[Moghrey Mie]

Great post John. But I worry that you are 20 years ahead of your time.

 

I do not see EU membership being something which politicians here are even vaguely beginning to consider. That debate just is not happening. Although it is something which we should ask them for their understanding of next time they come knocking.

 

And I suspect that many here are more anti EU than the worst of the cor blimey Mail/Express readers.

I still wonder how the EU would be able to accommodate such tiny legislatures as the IOM or the Channel Islands other than from within a 'UK' umbrella rather like Gibraltar which is classified as "a European territories for whose external relations a Member State is responsible". That would be a shame as we would probably be stuck with sterling rather than adopting the euro. Maybe there is some way of handling 'micro-states' (but even Malta has 5 times our population).

 

Presumably if we sought EU membership the negotiations would focus hard on the business tax issues - which in the abscence of other fundamental commercial benefits we would need to retain.

 

There do seem to be a lot of 'special cases' in the EU from the Åland Islands and Heligoland down to Ceuta and Melilla and Mount Athos.

 

I don't think IOM would seek membership of EU.

They would like to do business with those countries and find a loop-hole so it is advantageous to use the island for VAT and tax purposes.

 

They do need to have somebody on the ground in Brussels to build up relationships and find out what is going on. They also need an MHK or MLC whose job is to liaise with London.

The Reciprocal Health Agreement withdrawal wouldn't have been such a bombshell if an MHK had been in contact with Houses of Parliament and House of Lords and knew how they were thinking.

[pongo]

I don't think IOM would seek membership of EU.

They would like to do business with those countries and find a loop-hole so it is advantageous to use the island for VAT and tax purposes.

 

It should be about building a reliable future for the next generations.

 

The loop holes are going to be closed. All of them, as they are identified. This is the inevitable direction in which the road is leading. So it is not even a good business model for a society which wants stability.

 

Much better to focus on the inevitable destination and build an economy and inter governmental and democratic relationships based on that. Continually chasing ever fewer loop holes would commit the island to on going economic fragility and uncertainty. Personally I would prefer a slower but more dependable economy and better relationships with the neighbours.

 

Those who would advocate the continual exploitation of loop-holes would do that until there are no more loop-holes here to exploit and then probably move somewhere else and carry on their game the same.