IoM govt hits back at Darling's promise to review its tax haven status

The Isle of Man Government has branded Alistair Darling’s comments about reviewing the Isle of Man’s tax haven status as ‘unfortunate’. 

Darling’s promise to take a ‘long, hard look’ at the Isle of Man (IoM) following the collapse of Kaupthing Singer & Friedlander Isle of Man (KSF IoM) showed he was in the dark about the island’s relationship with the UK, said the IoM government's chief minister Tony Brown.

Hitting back at Darling's comments Brown said the closure of the Icelandic-owned bank was the direct result of the UK government actions.

‘While Mr Darling appears to be in the dark over this issue, the position of the IoM government is clear,’ he said. ‘We are not asking the UK for any favours, but they do have a constitutional responsibility to represent us internationally.’

Darling told the Treasury Select Committee last night that the government would look to review its relationship with the offshore tax haven in the wake of the Icelandic banking crisis but added there would be no knee-jerk reaction. 

‘I actually think when we look at what has happened over the last few months we really do need a long, hard look at the relationship between this country and the IoM tax haven sitting in the Irish sea,’ said Darling. ‘We can’t have a situation where all sorts of tax advantages accruing to the IoM but when things go wrong people say what about the British compensation scheme?’  

Darling (pictured) said it was not likely that the British government would protect savers with IoM-based Kaupthing Singer & Friedlander and Landsbanki Guernsey adding that guaranteeing deposits in another jurisdiction would be a significant step. The chancellor denied the freezing of Landsbanki's UK assets triggered a run on Kaupthing leading to the collapse of KSF IoM.  

Michael Fallon said that while the government had guaranteed the deposits of Bradford & Bingley's Manx branch and Northern Rock Guernsey, it had 'washed' its hands of KSF IoM. In response Darling said the difference was Bradford & Bingley was a British company. ‘My obligation is to people who put their money into UK banks,’ he said.  

The chancellor said the passport system, where banks in the European Economic Community could operate in the UK, was not satisfactory. ‘It is not a satisfactory situation, where we had a branch here, where it had more deposits than back in Iceland but we were not regulating it,’ he said.   

The new Financial Services Authority (FSA) chairman Lord Adair Turner confirmed that the regulator did not order the IoM Financial Supervision Commission to make KSF IoM transfer £550 million of deposits into the UK-based Kaupthing to recompense UK saver with IoM accounts. Rumours of a transfer had led to savers calling for the money to be released.