“To be, or not to be, a tax haven”
As a campaigner for social and environmental justice, I’ve been following with interest the recent debates on whether we on the Isle of Man are – in fact – a ‘tax haven’. The debate’s rumbled around for decades, of course, pretty much ever since the gazes of the UK EU, US and OECD, began focusing on their various perspectives of harmful tax practices.
Over the years, it’s been entertaining listening to our government leaders contorting themselves, and the English language, to show the world why we’re not. For example, we can’t be one because unlike the stereotypical palm-fringed candidate, we do have VAT, we do have income taxes, we don’t have explicit secrecy legislation, or we don’t have the high levels of average per capita net wealth often associated with havens. Take your pick: there are these, and plenty more.
And of course the Manx government’s spokespeople are quick to take the stage and explain what good news it is that we’ve received this or that plaudit from an international agency, for leading from the front in terms of ‘compliance with international standards’ or for being an early signatory to various sets of transparency and information exchange standards.
And these factors are all important – they make a difference, and each is usually a hard won battle. However, they’re also very incomplete barometers of our status. As someone who’s worked for 30 years in the Manx finance sector, variously in regulation and policy, and at board level for significant financial institutions, I’ve watched – indeed, taken part in – innumerable discussions as to how the Island’s finance sector can be protected and grown over the years.
At the time, I believed I was party to something laudable – after all, creating jobs, growing the economy…what’s not to like?
And at the level of individual financial organisations, these discussions often focussed on how a given product or structure could be ever more useful for its clients, for example by ‘protecting’ or ‘sheltering’ their capital from taxes that would otherwise be paid on their deaths, or some other event.
Protection; shelter; such benign sounding words, aren’t they? Who could feel ashamed of spending their working day in such a praiseworthy, responsible quest?
But over time, I found my own experience became less exalting. What I found was that in developing new products or ‘planning vehicles’, I was able – indeed encouraged – to propose choices that were artificial in the extreme.
“What if we call it [a payment stream] a dividend instead of salary?”
“What if we get the clients to be guarantors instead of owners?”
“What if they take the money out as a loan instead?”
These and many other questions get regularly kicked around by people in the offshore planning industry, looking to re-characterise their clients, or their clients’ wealth, in ways that will enable them to cut their tax bills.
But surely – surely, if electing the way in which you’re characterised is purely an optional choice, it’s also a fiction – no matter how much expensive ‘structuring’ you then put in place to shore up perceptions of what you’re doing.
It was this realisation, among others, that finally made me accept that the offshore financial services industry was no longer for me. Not because I suddenly became a ‘good person’ (I’m not, particularly, but I do my best) – but because a living earned on a lie is no living at all.
And once this realisation had dawned, and as I began to listen for ‘double-speak’ that organisations and their staff routinely use to avoid ‘mis-characterising’ their activities as avoidance, the more I knew it was time for a change in direction.