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- ISLE
OF MAN ECONOMY AND CURRENCY
- ISLE OF MAN IMPORT OF FOREIGN
CAPITAL
- ISLE OF MAN INVESTMENTS
BY FOREIGNERS
- ISLE OF MAN RONALDSWAY
FREEPORT
- ISLE OF MAN THE EDWARDS
REPORT AND THE OECD
Isle
of Man Economy and Currency
The Manx economy is stable. Unemployment is
low (below 1.5%, 2006) and inflation is below
that of the EU average. Agriculture, fishing
and tourism were traditional mainstays of the
island's economy, but they have declined in
importance. The Island's Government has encouraged
economic growth by creating a beneficial tax
regime and by offering financial incentives
to manufacturing and tourism.
The
Isle of Man’s gross domestic product increased
in the fiscal year 2004/05 by 5.2% in real terms,
representing the 22nd consecutive year of economic
growth, taking the island’s per capita national
income of $35,000 to 10% above the average of
the old EU15 member states. In the last ten
years, annual growth has averaged 7.4%, compared
to an EU average of 2.5%.
Commenting
on the figures, Treasury Minister Allan Bell
noted that the figures were consistent with
the growth expectations expressed in the Government
Plan.
"The
growth of the economy has continued at a sustainable
and manageable rate and we estimate that growth
since 2004/05 has been of a similar order. Clearly
it is the reason why we have experienced unemployment
rates at below 1.5% for so long and why we have
been able to continue to finance improvements
in the Island’s physical infrastructure and
public services," he observed.
"We’re
all aware of the challenges that lie ahead of
us and for its part Government will continue
to strive to lay the foundations for economic
success by working closely with all stakeholders
to produce a commercial environment that encourages
entrepreneurial effort and inward investment
whilst providing for secure and well remunerated
employment," Bell added.
The
establishment of Freeport on the Island, alongside
the Ronaldsway airport,
has boosted earnings from the manufacturing
sector. However the finance sector is the main
basis of the island's prosperity, accounting
for 45% of GDP, with banking, insurance and
fund management being the main contributors.
With
a low population density and plenty of development
land, the Island is in a better position than
some other physically smaller IOFCs (International
Offshore Financial Centres) to sustain population
and economic growth for years to come.
The local currency is the Manx pound, which
is on a par with the British pound. There is
no exchange control.
In
July, 2005, international ratings agency Standard
& Poor's renewed its 'AAA' international credit
rating on the Isle of Man, reflecting the island's
robust economy and strong fiscal position.
"The
government's balance sheet remains very strong,
despite the unauthorized borrowings of the Manx
Electricity Authority (MEA)," noted S&P credit
analyst Trevor Cullinan.
S&P
also stated that the ratings are supported by
the Isle of Man's "open, export-oriented, and
increasingly flexible economy".
"Inward
investment, a stable business environment, and
net immigration have supported robust economic
growth over the past decade," observed the report.
However,
S&P warned that the European Savings Tax Directive,
which went into effect on July 1, 2005, and
requires banks in the jurisdiction to apply
a withholding tax to the savings income of European
Union residents, may have a negative impact
on the island's financial services industry,
although it is uncertain to what extent this
will affect the foreign deposit base.
Nevertheless,
the report was welcomed by Treasury Minister
Alan Bell.
"Standard
& Poor’s have made it clear that the Isle of
Man Government’s balance sheet remains very
strong, supported by robust economic growth,
with a stable outlook for the future," Mr Bell
commented.
"The
renewal of the Island’s valuable ‘AAA’ rating
- combined with the recent news that our real
economic growth rate has exceeded expectations
at more than six per cent – is a major boost
to confidence in the Isle of Man."
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Isle of Man Import of Foreign
Capital
There are no capital or exchange controls on
the Isle of Man. The Island's currency is Sterling
and deposits are accepted in all major international
currencies. The banking system is similar to
that in the UK. Current accounts, deposit accounts
and most other services offered by UK and international
banks are also offered from the Isle of Man.
Interest rates are comparable to those in the
London Money Market. Competitive returns are
available in all currencies and interest is
paid without any withholding tax deduction to
non-residents.
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Isle of Man Investments by Foreigners
The government encourages the development of
new businesses and industries. Assistance is
available to both existing and new businesses
if the following criteria are met:
-
the development does not adversely affect
the existing amenities of the Isle of Man
or its environment;
-
the goods produced will have a high added
value; and
-
there will be a good level of profitability
and high return on capital investment
If
these conditions are met then the following
incentives are available:
- Investment
grants: 40% of the cost of new building and
plant and machinery
- First
year grants: 40% of non-recurring commissioning
and running-in expenditure, including business
plan preparation costs and personnel transfer
costs.
- Training
costs: 50% of approved training costs
- Loans:
50% of working capital requirements
- Rent
reduction: a rental grant is available where
premises are rented, rather than purchased
or built, to reflect the capital grant forgone.
The
Government subsidises the film industry and
has established the Isle of Man Film Commission.
Attractive tax incentives are available for
both companies and film-makers wishing to use
the island as a location and production base
and for film management companies or co-ordinating
producers of offshore productions.
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Isle of Man Ronaldsway
Freeport
The
Manx Government has established a 20-acre freeport
next to the Ronaldsway airport. The area is
secure and patrolled, and has good support services
including excellent telecommunications. A wide
variety of manufacturing, processing and assembly
operations can take place inside the freeport.
No customs duties are payable on goods for the
Isle of Man or member states of the EU until
they enter their country of final destination.
Goods can be stored in the freeport until they
are required for use. Planning controls are
very light inside the freeport. Currently ten
companies have established themselves in the
freeport, which is the only such area in a European
offshore financial centre.
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Isle
of Man The OECD
The
Isle of Man was included in the OECD's list
of jurisdictions practising 'unfair tax competition'
in June, 2000, and the EU's Code of Conduct
Committee included the Isle of Man's International
Companies in its list of 'unfair tax practices'.
In addition, the EU's agreement to information-sharing
procedures in place of a common withholding
tax, at Feira in June, was made dependent on
the agreement of key offshore centres to participate,
and this increases pressure on the Isle of Man.
In
December 2000 the island issued a 'commitment'
letter to the OECD which resulted in its removal
from the blacklist. The commitments made included
the abolition of the international company form
by 2005. In 2001 the Treasury announced a package
of measures intended to reduce the discriminatory
nature of parts of the island's tax regime.
However, given the failure of the OECD to impose
many of its proposals after resistance from
the US, it is now unclear whether the Isle of
Man will need to implement all of its proposals.
In
any event, the Isle of Man, in common with Jersey
and Guernsey, has stated very definitely that
it does not propose to undermine the success
of its financial sector by introducing major
changes to its offshore regime, or adopting
information exchange procedures unless other
main centres participate.
After
the EU agreed to a mixed information-sharing
and withholding tax regime under its Savings
Tax Directive in early 2003, the Isle of Man
decided, along with Jersey and Guernsey, to
apply a withholding tax to the returns on personal
savings for citizens of EU Member States.
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