Is Zero-10 under threat?

[P.K.]

13 minutes ago, Andy Onchan said:

The Irish government must now put the sums in a blocked bank account while waiting for the result of Apple’s and its own appeal to the European Commission.

Because if the EU can put an end to tax dodging by a giant corporation like Apple it spells the end for all the rest of the seedy, grubby little administrations who rely on tax dodging to attract business.

Which is why the Irish government would rather not get a £13 bn windfall because they need to maintain the status quo to carry on playing the long game.

We live in strange times....

[thesultanofsheight]

1 hour ago, Phillip Dearden said:

This is all quite sensitive.

It is hard to say that IOM taxpayers using companies are engaging in avoidance. Avoidance is frustrating the will of Tynwald - in this case Tynwald has said "have a 0% rate" and shareholders have lapped it up. [But I see where you are coming from].

If you accept that gaming and fiduciaries are "Finance Sector" then this sector is about 70% of the economy (some will argue with definitions but it's still big) and much of the rest is supporting those sectors. This means they are fundamental to our economy.

In the short-run, assessing how this pans out will be very important for the Island. "Substance" is quite a nebulous term and how it is defined will matter. Even the banks, Life Companies, Captives and Fund Managers will be concerned as whilst they do have a substantial presence here, much of what comprises their business (debtors, lenders, risks, policy-holders etc...) are elsewhere. The argument about substance is strongly correlated with the rate of tax discussion - we have a number of businesses here that would not be here if they had to bear an increased tax rate - by their nature the ones with little substance here can move easily (or they may cease to trade).

You’re being slightly deliberately obtuse in your reply Philip. I was not talking about fiduciaries or gaming companies or anyone else avoiding tax just because of zero ten. I agree that zero ten has been a catalyst for a lot of employment in the IOM and I said that it had worked well for 20 odd years in delivering jobs and revenue. However I was talking, as you well know, about the removal of attribution regime in 2012 (which I specifically referred to) which essentially made Manx tax avoidance legal for Manx residents using Manx companies which a lot of the wealthy island residents have used subsequently to not pay taxes in the IOM. This was imposed on us by the EU and was not part of the original zero ten framework laid before Tynwald (or adopted by Jersey and Guernsey too) as you also confirm. The race to the bottom started from 2012 when the EU used our own legislation against us by creating a level playing field in tax avoidance - if the IOM legally allowed tax avoidance by Manx residents using zero rated companies by removing the ARI / DPC then we could continue to allow others to avoid tax using zero rated companies in the IOM. The rest I was referring to was BEPS which I also confirmed we have already committed to bringing in anyway. Solly made a good case the other month that zero ten has run its course but nobody is really coming up with any sound alternative despite the fact that it’s now clear (as we have effectively been grey listed) that we will have to start adopting the principles of BEPS and moving towards a model where more economic substance will have to be demonstrated by companies ‘operating’ from here. This could well create more employment in the longer term. Short term though the transition won’t be easy. 

[Phillip Dearden]

18 minutes ago, thesultanofsheight said:

You’re being slightly deliberately obtuse in your reply Philip. I was not talking about fiduciaries or gaming companies or anyone else avoiding tax just because of zero ten. I agree that zero ten has been a catalyst for a lot of employment in the IOM and I said that it had worked well for 20 odd years in delivering jobs and revenue. However I was talking, as you well know, about the removal of attribution regime in 2012 (which I specifically referred to) which essentially made Manx tax avoidance legal for Manx residents using Manx companies which a lot of the wealthy island residents have used subsequently to not pay taxes in the IOM. This was imposed on us by the EU and was not part of the original zero ten framework laid before Tynwald (or adopted by Jersey and Guernsey too) as you also confirm. The race to the bottom started from 2012 when the EU used our own legislation against us by creating a level playing field in tax avoidance - if the IOM legally allowed tax avoidance by Manx residents using zero rated companies by removing the ARI / DPC then we could continue to allow others to avoid tax using zero rated companies in the IOM. The rest I was referring to was BEPS which I also confirmed we have already committed to bringing in anyway. Solly made a good case the other month that zero ten has run its course but nobody is really coming up with any sound alternative despite the fact that it’s now clear (as we have effectively been grey listed) that we will have to start adopting the principles of BEPS and moving towards a model where more economic substance will have to be demonstrated by companies ‘operating’ from here. This could well create more employment in the longer term. Short term though the transition won’t be easy. 

We agree on facts but not causation.

First, and I am splitting fur, for which I apologise, but it can't be tax avoidance to accept the rate of tax set by Tynwald. It's only the word "Avoidance" that I am disagreeing with, your analysis is correct. Locals who use companies may be reducing their tax bill but this is in a way prescribed for by Tynwald, that cannot be avoidance even if some find it offensive.

Zero/10, ARI and DPC are all part of the same story. The code group did not like tax-free companies but could only be really offended if they were a "harmful" practice which they were deemed to be because they were not available to locals. Zero-tax was adopted and presented as a tax regime that was available to everyone - but DPC and ARI were only applied to locals. The Code Group did not like these "enhancements" and we had to go for "real-zero" ie zero-tax with no fudges. This works for much of our economy but does allow for some local mitigation, reduced government revenue and some will view it as unfair.

I wasn't trying to be obtuse so if I managed it, it was genuine.

The big issue is that lots of people don't like our tax regime and I suggest that while we defend it for as long as we can, we reduce our dependence on it. If those who object to our current regime could identify an effective alternative, their objections would be better received.

 

 

 

 

[gettafa]

So erm, well, would it help if Treasury increased corporate rate of income tax for income from all source ( rather than just land and property in the Isle of Man ) to 20% 

[Phillip Dearden]

18 minutes ago, gettafa said:

So erm, well, would it help if Treasury increased corporate rate of income tax for income from all source ( rather than just land and property in the Isle of Man ) to 20% 

Depends on what you are trying to achieve?

[thesultanofsheight]

28 minutes ago, gettafa said:

So erm, well, would it help if Treasury increased corporate rate of income tax for income from all source ( rather than just land and property in the Isle of Man ) to 20% 

The long and the short of it is this - and I’m sure it’s where myself and Philip would have ended up. BEPS is about pushing towards companies of substance rather than brass plates and investment or holding structures that are just managing assets in a tax neutral environment. Companies of substance trade - they buy goods, they sell goods, they employ marketing staff, they incur shipping costs, and they have a whole pile of directly attributable operating costs etc that they can set off against their earnings. So if we moved to, say, 10% tax these sort of companies still probably wouldn’t pay much tax as their expenses would mitigate or offset their earnings from sales or other activities. That’s really the core of what BEPS is about in receiving a lowered tax bill only because your net trading position attracts a lower tax bill, not just because you’re in a country that charges you no tax on corporate profits. So you can have low taxes like Ireland that can help your trading position but not no taxes. What it would affect though is a lot of companies managed here that don’t really do anything but hold assets or re-invoice for their services. Unfortunately zero ten has ensured that a lot of those type of companies are managed here for tax purposes. Longer term operations of more substance should create more employment. 

[gettafa]

25 minutes ago, Phillip Dearden said:

Depends on what you are trying to achieve?

Perhaps Eddie 'The Eagle' Teare could answer that one. Obviously it is to rake in as much cash as possible.

With three different rates of Corporation Tax I think it is all becoming too contrived. No wonder there has been so much attention drawn to the subject.

Aye, Eddie was the man.

[Phillip Dearden]

23 minutes ago, gettafa said:

So erm, well, would it help if Treasury increased corporate rate of income tax for income from all source ( rather than just land and property in the Isle of Man ) to 20% 

 

Phillip Dearden said:

Depends on what you are trying to achieve?

gettafa said:

Obviously it is to rake in as much cash as possible.

 

Then no, 20% of a small number is a small number.

[gettafa]

but, but 0% of a massive number is still zero....

[Phillip Dearden]

40 minutes ago, gettafa said:

but, but 0% of a massive number is still zero....

Are you serious? 

 

[Andy Onchan]

4 hours ago, P.K. said:

Because if the EU can put an end to tax dodging by a giant corporation like Apple it spells the end for all the rest of the seedy, grubby little administrations who rely on tax dodging to attract business.

Which is why the Irish government would rather not get a £13 bn windfall because they need to maintain the status quo to carry on playing the long game.

We live in strange times....

Have told the Taoiseach that his country is a seedy grubby little administration yet? 

[woody2]

1 minute ago, Andy Onchan said:

Have told the Taoiseach that his country is a seedy grubby little administration yet? 

everyone knows it is already.......

[gettafa]

21 minutes ago, Phillip Dearden said:

Are you serious? 

 

Well yes and no.

But only as serious as  0...10...20....

[P.K.]

41 minutes ago, Andy Onchan said:

Have told the Taoiseach that his country is a seedy grubby little administration yet? 

Wouldn't bother me....

[dilligaf]

9 hours ago, GD4ELI said:

Grow up. The EU obliged Ireland to recover 13 billion euro from Apple, similar situation with Belgium and some multinationals. Luxembourg is under severe pressure from Brussels. Don't confuse the EU with your own tinpot administration.

Would that be the same administration that gave your parent/parents a good living and you a good education (and inheritance without tax)  ?.

Funny how quick people forget.