The economist, a former member of the Tax Justice Network (TJN), often takes part in the debate on harmful tax practices and offshore finance via his blog, from which he gave this take on the study in relation to the Isle of Man’s status as a tax haven.
“The academic study in question, with which I am familiar, did indeed suggest that the Isle of Man was not in the top league of tax havens,” Murphy wrote in a blog post titled ‘The Isle of Man is failing at being a tax haven’.
“It’s not alone in doing so,” he added. “The Tax Justice Network Financial Secrecy Index does the same, ranking it at 32 in the world.
“Their summary makes clear that when it comes to secrecy [the Isle of Man] it’s still an offender.”
“Not successful tax anymore”
In the blog, Murphy reiterates that the Isle of Man still has almost all the characteristics of a tax haven, even if they are being less used.
“[The Isle of Man] is still very much a tax haven, but just not a very attractive one.”
Isle of Man accounts for less than 0.1% of the global market for offshore financial services according to TJN data, making it a small player compared with other secrecy jurisdictions.
“The reason why it does not feature highly in the TJN list is because that is also weighted by the scale of financial secrecy flows.
“You could almost say that the Isle of Man did not feature in this new study simply because it’s not a very successful tax haven anymore,” Murphy wrote.
Policy implications
The authors of the report stressed the importance of the distinction between sink-OFCs and conduit-OFCs, saying it has potential implications for efforts to target tax avoidance.
“Starting from the idea that some countries act as facilitators and some as tax havens we were able to characterise the role and importance of each country in the world, which can have a real impact in policy,” they wrote.
“Our results show that offshore finance is not the exclusive business of exotic small islands far away.”
The study suggests that targeting conduit-OFCs rather than sink-OFCs to tackle tax avoidance could allow governments and supranational organisations to tailor more effective policies.
That is because developed countries have specific regulations that make them attractive to multinationals, the researchers stated.
“While new territories with low or no corporate taxes are continuously emerging, the conditions for conduit-OFCs (ie numerous tax treaties, strong legal systems, good reputation) can only be found in a small number of developed countries.”
“This realisation may help regulators including the European Union and OECD officials to better tailor their policies.”
