Following significant media coverage around tax avoidance and tax evasion schemes of late, it was perhaps unsurprising that tax, trade and transparency – dubbed the “three Ts” – were placed at the top of the UK’s agenda for its presidency of the G8.
There have been questions around the role of the British government with regard to jurisdictions like the Isle of Man, for which it has some responsibility as a Crown Dependency, and it is worth clarifying the new agreements made with the Isle of Man to address aggressive tax avoidance schemes.
The Manx Disclosure Agreement took effect from April this year and requires all Manx based financial intermediaries to identify and contact those clients with property that might be affected. Intermediaries need to provide details of the HMRC disclosure facility to encourage UK taxpayers to tell HMRC about previously undisclosed overseas assets. The Isle of Man was the first UK dependent territory to act, hence Chancellor Osborne’s supportive comments at G8.
Comparisons between the tax register plan that emerged from G8 and the EU Savings Tax Directive from 2005 can be drawn.
The EU Directive was not the mortal blow to the Isle of Man and other finance sectors some commentators predicted it to be at the time, as it presupposed that funds were undeclared and nefarious, when in reality it is rarely the case these days. No legitimate business in a well regulated jurisdiction had anything to fear from the EU Savings Tax Directive, nor do they this new disclosure agreement. We believe the tax register will help strengthen the message that tax evasion has no role in the proposition of a modern international finance centre.
The pro-active stance adopted by the Isle of Man and embraced by the G8 reflects the modern day reality of low tax jurisdictions, rather than the more dated views that tend to attract the headlines. Offshore product providers have been conforming to high levels of UK tax transparency for over 30 years via the Chargeable Event reporting regime and providing personal tax information to HMRC.
We welcome these latest developments, which represent a clarification and broadening of existing policy, as the government and providers alike seek greater transparency around tax reporting.
Simon Willoughby is head of proposition for Axa Wealth International
