The Isle of Man: a tax haven or not a tax haven?

I’m in trouble. When I was in the Isle of Man (IOM) last week I was cornered by a nice man from the Isle of Man Examiner who asked me various questions I can’t now remember about my views on the IOM.

It seems that I referred to it as a tax haven.  I meant this kindly. I thought that being a tax haven was good thing. Apparently not. The article goes on to stress that even David Cameron has said that the island can no longer be considered a tax haven.

One of my new friends from the IOM has been in touch to say that the IOM is better considered a “low-taxed financial centre” in that it is accepted by the IMF and the OECD, and has hordes of tax agreements on disclosure regarding non-residents of the IOM.

The OECD (in November 2011) even released a Tax Transparency Report assessing over 50 jurisdictions, and found the Isle of Man to be one of eight countries to be fully compliant in all main areas with no significant improvements required.

I think this might a problem of vocabulary. For me, the phrase ‘tax haven’ doesn’t automatically suggest any kind of dishonesty or evasion (although I accept it often includes it), just avoidance. And if you are resident in the IOM instead of, say, the UK, you can avoid one hell of a lot of tax.

There is no capital gains tax, there is no inheritance tax, there is no corporation tax, there is no stamp duty, and income tax comes in very low indeed: the top rate is 20%. It is also capped at £120,000. No one pays more.

The island also looks pretty good in economic terms. It has 29 years of GDP growth behind it, and no debt. So it’s a great haven from all sorts of things where you can also pay a great deal less tax than elsewhere. A tax haven or not a tax haven?

PS Buying a nice house in a not-a-tax-haven such as the IOM is not as expensive as you might think. Here’s a nice cottage for £335,000, and a pretty Victorian villa for £425,000. Top end houses aren’t cheap, but they aren’t that much more expensive than houses in the south east of England (where you have to pay increasingly ridiculous rates of stamp duty). If I were looking, I might look at this.

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9 Responses

  1. 09/04/2014, Boris MacDonut wrote

    How interesting that the Isle of Man would wish to portray itself as not a tax haven, of course it is. The vast majority of CG scams and Inheritance tax avoidance are channelled through it. Next time you’re there ask them if they are a conduit haven, and ask about Montpelier.

  2. 10/04/2014, BeastofBakewell wrote

    I can see, given the criteria you choose mention, why you want to see the IOM as a tax haven Boris. However don’t forget that these scams as you call them, seem to be allowed by HMRC! Perhaps they are the ones at fault rather than the jurisdiction that sees a market utilising rules not of their making?

    A tax haven is usually regarded as a place with no income tax and without exchange of investor’s information to the tax authorities in their home country. The IOM fails that tax haven test on both counts.

    AFAIK there are, based on income tax, only 15 tax havens (and the IOM isn’t one of them) and I believe at least 4 of those have ‘information exchange’.

    I accept that things might have been different in the past but that applies to many things in life and the current position is the one that matters in any discussion.

    • 10/04/2014, Boris MacDonut wrote

      Read Nick Shaxsons book Treasure Islands and you,ll see there are a lot more than 15 tax havens.Most sponsored by the CoLC.

  3. 10/04/2014, Alec wrote

    The real tax haven is the British Virgin Islands

  4. 10/04/2014, BeastofBakewell wrote

    Doesn’t the BVI exchange information with EU states?

  5. 11/04/2014, Bumble wrote

    The IoM is not debt-free. Some of the local authorities have debt, and the government-owned electricity authority had to issue a bond when they experienced a massive cost overrun on building a new power station. Still, the amount of debt per capita is much lower than the UK.

    • 11/04/2014, Manxie wrote

      Agree that IoM is not debt free but there are NO government bonds that I am aware of. The huge debt arising from the electricity board’s mis-management is held as a loan from Barclays Bank but sadly no viable plan has been published on how the >£300m ‘loan’ can/will ever be repaid, given the relatively low annual turn-over figure of the MEA. HELP !

  6. 11/04/2014, Manxie wrote

    Many of us living here (and also many of those born here and returned in retirement) view the Isle of Man as a low-tax heavenly place of abode. No inheritance tax leads to a simpler life as one ages, no worries on playing games to limit how much the governmen t gets as it is a big fat zero. Certainly encourages oldies to retain their assets on-island!

  7. 11/04/2014, Bow Street wrote

    What a good idea with the Isle of Man.How expensive is property or renting there.It annoys me so much that I’ve paid tax all my life then after my day my children will have to pay that.I am in my 50s and have made some changes already to avoid it. I will do anything to make sure it goes to my children not to incompetent politicians to waste.

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