Isle of Man included in tax avoidance “grey list” by EU

The Isle of Man has been put on notice by the EU to reform its tax structure, as part of moves to clamp down on aggressive tax avoidance.

The IoM, along with Bermuda, the Cayman Islands, Guernsey and Jersey, has been put on a “grey list” of 47 countries that have promised to meet EU tax requirements by the end of next year, or 2019 for developing countries. If they do not, they face being included in a new tax haven blacklist released yesterday.

The island, which is a UK crown dependency, has been in the news during the past few weeks following the Paradise Papers leak of information from legal firm Appleby, which revealed how wealthy people and corporations around the world are using tax loopholes and avoidance schemes to avoid paying taxes. The Isle of Man came under particular scrutiny for how it charges value added tax (or sales tax) on business jets registered there – its government agreed to review its approach after the EU criticised it for not applying the rules properly.

Seventeen countries have been put on the new blacklist – the first drawn up by the EU, which is trying to stop hundreds of billions of pounds being lost to tax avoidance every year, and created following 10 months of investigation by officials. They are American Samoa, Bahrain, Barbados, Grenada, Guam, South Korea, Macau, Marshall Islands, Mongolia, Namibia, Palau, Panama, St Lucia, Samoa, Trinidad and Tobago, Tunisia and the United Arab Emirates.

The EU says they are not doing enough to crack down on offshore avoidance schemes. Inclusion in the blacklist means they may no longer be used by its institutions for international financial operations, and transactions involving them could be subject to greater scrutiny.

The lists will be reviewed and updated annually.

Pierre Moscovici, the European commissioner for economic and financial affairs, taxation and customs, welcomed the blacklist – created by the European Council’s Code of Conduct group of EU member states’ finance ministers – as a “key victory for transparency and fairness”, according to The Independent newspaper.

But he warned that “the process does not stop here” and added: “We must intensify the pressure on listed countries to change their ways.

“Blacklisted jurisdictions must face consequences in the form of dissuasive sanctions, while those that have made commitments must follow up on them quickly and credibly. There must be no naivety: promises must be turned into actions. No one must get a free pass.”

Some critics of the list have complained that it does not include countries such as Ireland and Luxembourg or seem to be based on an objective set of criteria, HM Treasury described it as “an important step in our ongoing efforts to tackle tax avoidance and evasion internationally”.

A spokesman added: “For those that are on today’s list, we hope that this increased scrutiny and the potential for counter-measures will lead them to reconsider their approach.”

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