Paul Hotchkiss discusses the Isle of Man’s intention to remain being considered among the very best centres of international business.
The Isle of Man Government is committed to maintaining the Island’s status as a leading International business centre of the highest reputation and is forging ahead in implementing its commitment to international standards.
The island is listed on the OECD white-list and has been praised on numerous occasions for its approach to meeting the requirements of the international community regarding transparency, exemplified by the recent signing of the disclosure facility with the UK (similar to that signed by the UK with Liechtenstein) and the proposed Inter-Governmental Agreements to be signed with the United States and the UK.
The Government has also indicated its desire to create a diversified economy, evidenced by the emerging and growing sectors such as e-gaming, e-business, clean tech, film and bio med. The Government has demonstrated its commitment to these new and flourishing sectors (as well as existing sectors) by cutting through ‘red tape’ and showing that its motto “The Isle of Man: Where you can” is not just marketing spin.
The Isle of Man has enjoyed over 30 years of continuous expansion and in the 2013/2014 Budget on 19 February 2013, the Treasury Minister confirmed that the island’s National Income grew by three per cent in 2012 and is set to continue in the future at a similar rate.
The island maintains an AAA credit rating from Moody and a AA+ long term sovereign rating from Standard and Poor’s (S&P) Rating Services. S&P acknowledged that the island has a high income level, strong balance sheet and is politically stable, indicating that it could return to its AAA rating if it diversified its economy. Government reserves currently stand at over £1 billion; however, the Government is still in the process of rebalancing its budget as a result of the re-negotiation of the Customs and Excise Agreement with the UK. This rebalancing is likely to result in reserves dipping slightly over the next two years.
The island continues to be at the forefront of developments in international tax compliance, transparency and exchange of information and punches well above its weight in this area. The island maintains its highest rate of income tax at 20 per cent with a maximum limit of £120,000 per individual.
International Developments and Obligations
The Isle of Man Government is committed to preserving the island’s status as a top class financial centre with good regulation and cooperation with other jurisdictions, conducting high quality, substantial business with transparency and full participation in the work of regulatory organisations. To this end, either in force or pending, there are 26 Tax Information Exchange Agreements, eight ‘OECD style’ Double Tax Agreements, one colonial agreement with the United Kingdom, as well as 11 agreements relating to shipping and aircraft and a further 12 limited agreements allocating the taxing rights for individuals.
In addition, the Isle of Man has led the way by committing to entering Inter-Governmental Agreements with the United States in relation to the US Foreign Account Tax Compliance Act and a similar agreement with the United Kingdom. Both agreements are expected to be signed in 2013.
The IMF published its review of the Isle of Man in 2009 and praised its high level of compliance with global standards regarding regulation and implementing recommendations to counter money laundering and terrorist financing.
On 19 February 2013 the island entered into a Memorandum of Understanding with the UK which is similar to that signed historically with Liechtenstein.
The Island abolished its Attribution Regime for Individuals with effect from 6 April 2012, which has meant the island’s zero-ten regime is now seen by the Code of Conduct Group as Code Compliant. The Government announced in its Tax Strategy document 2013-2016 a commitment to retain its current tax regime. This now creates a stable environment for the island’s finance sector to flourish with certainty.
The island is in the process of modernising its company law and recently announced consultation on the Companies Bill 2013. The objective is to clarify and modernise the island’s company law which exists currently in a series of separate Acts that require cross-referencing to each other. The new proposed Act is extremely user friendly which should appeal to those who establish companies on the island. In addition the Companies Registry is being modernised which will enhance efficiency and service to its customers. There are also proposals for a separate Foreign Companies Bill to cover F-Register companies that do business in the Isle of Man but which are incorporated elsewhere.
The Isle of Man is a Tier 1 jurisdiction for e-gaming and has experienced excellent legal, accounting and fiduciary firms who are familiar with all aspects of online gambling. In addition the island hosts a number of software developers.
It is also the first jurisdiction to have launched a qualification in e-gaming. The Industry now employs over 800 people and accounts for eight per cent of the Isle of Man’s GDP. The Island is on the so-called ‘white list’ under the Gambling Act 2005 which enables operators to advertise in the UK. The island will remain on the white list despite reformation of the 2005 Act by the UK Gambling (Licencing and Advertising) Bill.
Regulated by the Gambling Supervision Commission under the Gambling Supervision Act 2012, the island ensures that gambling is conducted in a fair and open way, protects the vulnerable and is not used to support crime. The island recently introduced regulations to ensure player’s funds are ring-fenced. As a result of enhanced legislation and regulation the island remains one of the safest jurisdictions to gamble for online players.
The Isle of Man has a thriving e-Business sector, which accounts for around 12 per cent of the economy. The foundation for this success have been the island’s world-class and highly resilient telecoms and electricity infrastructure and its network of new data hosting centres which incorporate disaster recovery facilities.
The Isle of Man’s infrastructure is designed to be resilient. If a fault occurs then the island’s ‘self-healing ring technology’ kicks in to enable seamless transition to switch to alternative power or data routing. In recent years the Isle of Man has been used as a test-bed for new technologies and was at the forefront of the launch of both 3G and 3.5G services.
This infrastructure coupled with support from Government, recent amendments to Intellectual Property (IP) Laws and the fact that the Island has signed up to many international agreements and protocols associated with IP means that the island remains the jurisdiction of choice for the establishment of e-business.
Shipping and Yacht Registration
The Isle of Man is a Red Ensign jurisdiction at the forefront of yacht registration and administration. It is an international centre of maritime excellence where yacht professionals cover a diverse range of disciplines and are well known for providing the highest level of service to owners, managers, crew, builders, and others involved in this global industry.
Being in the common customs area, establishing yacht ownership on the island enables VAT efficiencies where yachts are commercially chartered.
The island’s Ship registry is world renowned and in the International Chamber of Shipping’s Flag State Performance Table in 2012 shows the Isle of Man continuing to have positive indicators in all areas. Of the 111 flags listed in the report only 12 achieved 'clean sheets'. This reflects the Isle of Man's ongoing commitment to quality and to operating a Ship Registry which is fully resourced to deliver all international requirements. In addition, in early January 2013, the Isle of Man’s Ship Registry registered one of the largest ships in the world, the Berge Neblina, which was being delivered to its owners from a shipyard in China. The additional tonnage tipped total tonnage over the 15 million Gross Registered Tonnage mark and 28 per cent of the tonnage on the register comes from Asia.
The Isle of Man clean tech cluster continues to grow with several new businesses and funds being established recently on the island, including StromaNX, Komatti, Optimum Energy Solutions and Ecofolio. Economic development in the clean tech sector is currently focussed on opportunities for offshore renewable energy in the 4,000 sq km of seabed representing greater than 87 per cent the island’s territory. Significant progress has been made to develop the Marine Spatial Planning (MSP) process including an amended consenting process being brought to Government for approval in spring 2013. Government is exploring opportunities with the Department of Energy & Climate Change for projects exporting renewable energy to the UK. Leasing our seabed for renewable energy projects could generate many millions of annual revenue for the Government. The island has an excellent opportunity to attract businesses linked with operational and maintenance bases for offshore projects in the Isle of Man territorial seas and neighbouring projects close to the island’s 12 mile limit. This will of course boost the finance sector.
The Isle of Man’s space sector is going from strength to strength and is in its 11th year of development. The Institute of Directors hailed the business model applied on the island to the Space sector as a blue print for success and indicated that the UK could learn a great deal from the Island’s example. The island currently hosts 30 companies specialising in the sector out of a total of 54 internationally. The Government’s continuous commitment to explore and encourage new opportunities and promote them internationally demonstrates how quickly a powerful niche industry can be built. The island is seen as being the fourth most likely nation to launch an expedition to the moon after the US, China and Russia. Key to the success of this sector is the zero rate of corporate tax applicable to companies in the sector.
November 2012 saw the beginnings of a BioMed cluster a new business stream for the island. It connects service and product companies in the healthcare sector, bringing cost effective industry-tailored pre-clinical and clinical drug development, manufacture of medical devices, regulatory, compliance & audit as well as medical insurance. Cluster members are working globally with BioMed entrepreneurs, funders, scientists and legislators.
Paul Hotchkiss, Managing Director, Hotchkiss Associates Limited, Isle of Man