Manx look to international finance

Press, 23 February 1987, Page 28

Manx look to international finance

By

JOE JOSEPH

of Reuters Lacking the cachet of the Cayman Islands or the glamour of Bermuda, the Isle of Man is known more for the welcome it gives restless millionaires than as the booming offshore financial centre it would ( like to be. Having’ begun late in the race, this self-govern-ing British dependency, perched in the Irish Sea midway between England and Ireland, is still dwarfed by opulent tax havens like Jersey and Guernsey, its nearest rivals in the far sunnier Channel Islands. The Isle of Man has plenty of tax exiles. The racehorse owner, Robert Sangster, and racing driver, Nigel Mansell, are among those who have

been lured by the 20 per cent flat rate income tax. Now it would dearly love to be given an international seal of approval by having a major United States or Middle Eastern bank open up shop in its resort capital, Douglas. So far none has obliged. But if not booming, business is at least brisk. “The economy is going very well,” said Jack Nivison, president of the Legislative Council, the upper chamber of the island’s 1000-year-old parliament, Tynwald. “We are attracting a lot of businesses to the island, particularly in banking, insurance and shipping,” he said. “I’m very optimistic.” The island’s banking watchdogs are wary of welcoming anyone who smacks of the shadier end

of international finance. They are still smarting from the damage done to the island’s good name by the collapse in 1982 of a private bank with £42 million (SNZII9 million) of depositors* money. The Government is convinced that the Isle of Man’s attractions as an offshore financial centre offer the most secure footbridge into the 21st century. In this it is partly reacting to circumstances. Tourism is on the wane, the once thriving fishing industry is all but dead, and manufacturing, though livening up, furnishes a declining portion of the island’s income. Britons, finding in the Isle of Man something like home from home, once flocked to its broad, sandy beaches. The promenade along the Douglas seafront is fringed with the bed-and-breakfast hotels and shabby amusement arcades that are the sure signs of the British holidaymaker. The visitors have flown to Spain and Greece: the fares are as cheap and the weather more reliable. Many Douglas hotels, closed for the winter, will be closed for the summer too.

Once the key moneyearner, tourism today provides a slim 12 per cent of the island’s livelihood. In contrast financial services now speak for around a fifth.

The Manx Treasury says that in the third quarter of 1986 deposits at

Manx banks topped £3 billion (SNZB.S billion), a hefty 19 per cent jump in nine months. That is still only a fraction of the £22 billion (5NZ62.5 billion) that Jersey boasts, but Jim Noakes, the island’s banking supervisor, sees potential for further expansion. “Our deposit base has more than doubled over the last three years,” he said. "One of our targets now is to expand our international business rather than our sterling business. This is likely to happen now that our insurance and shipping sectors are doing so well.” The Isle of Man has made moves to become a respectable flag of convenience port and Shell, the oil firm, recently became the latest company to take advantage of the low operating costs and tax benefits offered by joining the Manx shipping register. Noakes is disappointed, but not too disheartened about the absence of a major non-British banking presence. “We have come relatively late into the game and most of the major U.S. and European banks already have establishments in the Channel Islands, but because we are late in the game, we have one advantage over Jersey and Guernsey — space to grow.”

Unlike Jersey, which is notoriously crowded and has strict rules on the sortof people it will allow to take up residence, the Isle

of Man has a fairly free immigration policy. It is hoping to attract another 10,00.0 residents to live next door to the island’s 65,000-strong population. Immigrants sometimes find it difficult to adapt to the island’s small-town pace.

In a recent survey commissioned by the Government, newcomers cited the cost and inconvenience of transport to and from the island as a major irritant. A poor choice of shops also grated, while a third of the women interviewed complained of isolation.' But there is one key decision the island has yet to make: whether to sever its customs link with Britain. Tynwald sets it own rates of income tax and is independent of Britain in most areas, except defence and foreign affairs. Crucially, London sets the rates at which the island levies indirect taxes like Value Added Tax. Now there are fears Britain may be forced to extend the scope of V.A.T. in line with the European Community’s tax harmonisation policies. For the Isle of Man to enjoy a freer hand in shaping its own destiny it would have to dissolve the customs link. The issue was a matter of lively debate at general elections held in November and most islanders now feel it is only a matter of time before the last fiscal ties with Britain are cut.