With expectations among the Crown Dependencies that the UK's new Labour Government has offshore tax centres in their sights, we asked Bonzo Slater, Manx political commentator and former policy civil servant in Whitehall, for his hot take.
Are there bad times just around the corner for the Isle of Man?
It’s a new dawn… it’s a new day… and I’m feeling good (thanks, Nina Simone). But.
Now Starmer has shaken paws with Larry, and Victoria is redecorating the Flat Above The Shop, will Labour’s landslide and its 'Change' tsunami sweep over Vannin’s shores? Oh… you thought it was Business As Usual? Think Again. Bigly.
Labour’s Change agenda needs cash. And lots of it. The trouble is though, there isn’t any.
So what to do? Borrowing’s ruled out. Taxes can’t rise (except for CGT). And whilst they haven’t actually ruled out cuts, that would be, in the words of Sir Humphrey, “bold and courageous”.
Yet Magic Money Trees do indeed exist. And one sings and rings its siren song over the Irish Sea.
Yes, you’ve guessed it. Rachel Reeves has her sights squarely set on us and our fellow Crown Dependencies. And she’s determined to take our dinner money by any means necessary.
Hodges' unfinished business with the Isle of Man?
Those of you who were still awake at 4am on Election Night watching BBC will have noticed Dame Margaret (now Kicked Upstairs to the Lords Baroness) Hodge waxing lyrical about the “tax gap” (the difference between tax levied and revenues actually received) and sporting a subdued smile whilst sharpening her knitting needles for the great guillotining of tax planners and their patrons. Manxies will doubtless recall her visits to these shores as part of Westminster’s Public Accounts Committee and her minimally kind words about the Crown Dependencies & Overseas Territories. Or as she terms them, “tax havens”.
Then, as if by magic, Sunday’s Observer runs an exclusive on how HMRC kept the true extent of offshore tax avoidance under wraps during the election campaign and is now under pressure to publish the figures (originally due in 2022 but continually delayed by the Treasury).
HMRC did, however, release a report on 20th June 2024 with estimated figures for the offshore tax gap amounting to a very tasty £39.8bn for the tax year 2022-23. A Magic Money Tree replete with yummy leaves & nuts just needing a bit of a shake by Tax Girl (as I now dub Rachel Reeves) & her Treasury Minions. I wonder how the Observer obtained that information. Nice work on Friday evening, Team Tax Girl?
Where are the targets?
One of the offshore devices so effectively employed in tax avoidance (which lest we forget is a legitimate, albeit morally dubious, and legal activity) is the Trust.
Trusts are mostly used to avoid Inheritance Tax. Let’s remember that all those Baby Boomers who got the last Final Salary pensions and bought houses when ordinary people could actually afford them are now counting down the days until they join The Choir Invisible. And when they do, their children will inherit if not the Earth, certainly enough to contribute a goodly wodge of Inheritance Tax tribute to Tax Girl.
There has been some reporting around raising Inheritance Tax rates but Tax Girl has been VERY careful to say that it wasn’t the rates she was looking at, but ensuring the tax due was wholly recovered.
Are you starting to join the dots yet?
Acting against the Overseas Territories is a) complicated & b) not very visible. The Crown Dependencies are closer, so not only can the electorate see Tax Justice being done but also (especially in the case of the Isle of Man) it is rather easier for UK to act.
When is Home Rule not Home Rule?
Currently we are entering the review of the FERSA agreement with UK thus giving Tax Girl a golden opportunity to stick the boot in and “unilaterally renegotiate” our VAT/Duties share to subsistence levels.
Or indeed, make reforms to Inheritance Tax with a few strokes of her new Mont Blanc which would leave the Offshore Trust industry looking like Bomber Harris’ boys had paid a maximum effort visit. Or most probably, do both.
“But we are God’s Throne Of Home Rule!!” I hear you cry.
I’m sorry to be the fun sponge here but all that stuff about Tynwald Day… it’s a collective lie we tell ourselves to give us the impression of agency and influence with the UK. The stark fact of our constitutional relationship with the UK is that we have only as much Home Rule at any one time as suits our overlords at Westminster. Our annual Duchy Of Grand Fenwick theatricals may impress some but they certainly don’t impress Across. Starmer is already gaining a reputation for ruthlessness. For him, sympathy for the minted Manx will be somewhere in the dictionary between manure and syphilis.
Yet the Manx Government seems oblivious to these clear & present dangers to our economic survival. Please God they wake up to them before we all have to pack up our troubles in our old kit bags and wait until we drop down dead.
[REAYRTYS EDIT: We are aware that IOM Government representatives met with Dame Margaret Hodge in May 2024, although the contents and outcomes of the meeting weren't published.]
The views expressed in this post are the author's and don’t necessarily reflect the view of Reayrtys.
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