David Parsons, KPMG Isle of Man comments on the results of the 2015 UK elections.
Like most of us, I watched the UK election results unfold with a growing sense of disbelief: all of the polls had suggested the UK was heading to some form of cobbled together alliance, whether led to the left by Labour and the SNP, or perhaps to the right by a weaker continuation of the last Tory/ LibDem coalition. Leaving aside the SNP “takeover” of the Scottish electorate, what does the reality of a Conservative majority, albeit a tiny one, mean for the Isle of Man?
Probably the most important factor of all is confidence: at the time of writing the UK Stock Market is up nearly 2% and Sterling has strengthened across the board against all major currencies. So it seems clear that the UK business sector sees the result as good news overall for the UK economy. History shows that a buoyant and confident UK economy is generally good for the Island, regardless of political colour, and I firmly believe that that will hold true again.
The Labour Party had promised to abolish “non-DOM” tax status: that was probably a double edged sword for the Island – on the one hand there’s no doubt that that would have been bad news for corporate service providers and others who depend heavily on the non-DOM market. On the other hand, would the attack on non-DOMs, combined with the promised re-introduction of the 50% top rate of personal income tax, have led to an influx of wealthy new residents and their businesses?
Nor should we kid ourselves into thinking the Tory Party will give the Island an easy ride. Looking back over the last 5 years, probably no UK Government has ever made more progress in tackling tax avoidance: they have achieved automatic exchange of information agreements with all of the Crown Dependencies and Overseas Territories, they’ve introduced the Accelerated Payment Notice Regime (meaning you can be forced to pay tax in disputed cases before HMRC have proved that tax is actually due!) and most recently they have introduced the Diverted Profits Tax (or the Google Tax, as it has become known), which may severely increase the cost of doing business in the UK for some larger Manx companies. So, we should expect the new Government to continue to push in these areas, particularly as many of the initiatives now have international momentum from the OECD and the EU.
Specific challenges will continue to face the Island’s banking industry (the fall-out from UK Banking Reform), and there’s no doubt that life will become tougher in other sectors of our economy as the full effect of ever-increasing transparency becomes apparent. Also, the Conservatives’ policy on the EU – i.e. to have an in-out referendum – does not seem helpful to business confidence – but let’s hope that any uncertainty created as a result is short-lived.
Overall, I sense that the last UK Government demonstrated an understanding of the offshore world, and in particular of the Isle of Man’s place in that world, that was lacking in certain other political parties. Indeed, there is no doubt that the cooperation that the Island has demonstrated (e.g. on automatic exchange of information) was key to the building of respect and relationships at both a political and senior civil service level. Let’s hope that those good relationships continue, and that both of our economies see strong growth.