Mr.Steve Rodan, Speaker of the IoM parliament, is not quite right when he recently said: : “every pound spent here is raised here”. The IoM financial services industry earns very little from the IoM. The banks are primarily places for taking deposits that are then upstreamed to an onshore parent bank to be put to work to make money, & the IoM simply taxes banks to raise revenue for its budget.
Mr.Rodan went on to say: ‘By statute our Finance Minister is obliged to balance for a budget surplus – this is done consistently; with no external borrowing, and rates of taxation which actually encourage private enterprise and wealth creation, yet this little nation can still point to first-class publicly financed services in health, education and social security'.
He speaks as though the IoM has a self sufficient economy. Clearly it hasn’t.
It has an economy highly dependent on its financial services industry but it has no bank of last resort. It is out of step with the UK & the rest of Europe. As a Crown dependency it should be required to conform to international agreements in respect of the management of financial affairs that affect us all. Hopefully two inquiries in the UK (Foot & the judicial commission) will expose the weaknesses in the IoM, including those that make depositing in the IoM a risky business.
The Kaupthing fiasco illustrates well that the IoM is not capable of dealing with a banking crisis. Expats & others are now finding out that it is not as secure a place to deposit their life savings as it is trumpt up to be in the glossy brochures & fishing expeditions undertaken by banks & other finance houses.
This and the increasing impetus by the OECD & others to expose those economies that rely significantly on tax evasion and avoidance to bolster them is going to force the IoM to rethink its whole approach to the way it operates as an offshore financial centre. However it is unlikely that principles of morality & ethics will be central features of the exercise. It looks as though taxing times lay ahead for the Isle of Man