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Tax dodge sanctioned by Isle of Man law

8th November 2017

Isle of Man view

In 2004, the same lawyers who promoted a scheme with the intention of allowing Swiss bank clients to hide their money helped the authorities to amend the rules.

Seven months later, the law was changed, coming amid a clampdown on tax dodging by the EU. BBC Panorama has now spoken to the man behind the aforementioned scheme, who is claiming that an Isle of Man regulator was quite aware that the law now on the books would help tax evaders.

Tax adviser Mark Morris, who is a leading expert on tax loopholes, told regulators that offshore territories used to regularly help financial institutions in this way.

Morris said: "I think in those times, it was wrong, and there were regulators helping financial institutions,” and then adding, “But today, this would never be allowed.”

European Union Savings Directive

Morris helped devise the scheme which allowed wealthy clients to avoid the European Union Savings Directive (EUSD). The EUSD was introduced back in 2005 with the task of helping to stop people from one part of the continent putting assets into an account located in another country without first declaring it.

Therefore, most of the individuals targeted by EUSD were already engaging in tax evasion.

The scheme devised by Mr. Morris was designed to be exempt from the EUSD. A new Isle of Man company, Minerva Assurance Ltd, would then sell Swiss bank deposits which had been moved into a redeemable insurance product.

The idea was that banks based inside the EU and in other nations, such as Switzerland, would make automatic deductions for tax from interest payments.

Howard Quayle, the Isle of Man’s Chief Minister, says that the island is a “responsible jurisdiction” and does comply with international tax transparency regulations.

He also acknowledged that that these events will be investigated but didn’t believe that the regulator at the time would have been privy to the creation of a law that would help facilitate tax evasion.

Quayle told Panorama: "If it had happened I would be incredibly disappointed. Give me the opportunity to look at the evidence first and then we'll take action if it is proven."

Those currently working in legal jobs, and looking to get into the field, will be aware of the increased discussion in recent times regarding tax evasion and indeed tax avoidance, making this particular area of law ever more topical.