The Isle of Man is, as they say, a place with a past. Perception follows all countries and the small self-governing crown dependency of 85,000 people that sits in the Irish sea handily equidistant between Wales, England, Scotland and Ireland is no different.
In the UK Ellan Vannin, as it is known in old Manx, is still seen by many as a low-tax haven where people hide money and the rich retire, an oddity best known for its perilous TT motorcycle race, the fact that its native cats have no tails and a habit of birching felons that it turns out was abolished decades ago.
These days, there is a palpable keenness in the island’s government to move the story on from the old tale of money stashed out of sight. Anyone asking about tax havens is reminded of a range of anti-money laundering and transparency legislation passed in the last three years and steered instead towards the subjects of startups and how the Isle is in the midst of a plan to rebrand itself as a 21st Century hub for technology firms, particularly those in e-business, e-gaming and cryptocurrencies.
It’s a big change of direction for an island with the population of a small English town but does the new narrative hold enough water? One hurdle is simply unravelling a complex story featuring twists and turns in which the old and new have had to be accommodated.
The island is still a low tax location, a major draw for enterprises and individuals alike. Personal taxation is 20 percent plus VAT on goods and services, which partly explains why half its population aren't from the island. There is no corporation tax although National Insurance is levied. There is no inheritance tax. Unemployment is around 1.8 percent and house price inflation has been surprisingly low for years. Economic growth is around 4.5 percent, way above anything recently seen on the mainland.
The enthusiasm for tech is not a coincidence. As good as things seem, the population is ageing and the range of sectors on which tax revenues depend pretty narrow. Everyone you meet in the Isle of Man agrees that the place must keep developing or face trouble. One of the ways it is doing that is by encouraging firms across high-growth ‘disruptive’ tech sectors to set up operations on the island, a plan that includes the announcement last year of a £50 million Enterprise Development Fund offering grants, loans and equity investment.
PokerStars
Two events seem to have been key to the island’s entanglement with tech. The first was the 2005 decision by gambling giant PokerStars to up sticks from Costa Rica over regulatory worries and relocate to the island. It now sits in a landmark building overlooking the seafront in Douglas and has since become the Isle’s most important tech employer in a sector, online gambling, that has reached 17.5 percent of GDP to banking’s 33 percent.
It was a stroke of good timing. In a single company the island acquired a big foothold in the online world.
A second influence was the financial turmoil unleashed three years later by the banking crash. The island survived that relatively unscathed but according to Brian Donegan, head of fintech and digital development for the Isle of Man Government, the message was clear: diversification from the money industries would be a wise course.
“It is fast becoming the next financial services and is growing exponentially,” he says of e-gaming, a sector the Isle decided to embrace on the condition that it was “high end” enough.
“It was chosen because of the potential for job creation. It also came with concerns,” he admits. “We decided to mitigate risk by going after premium end of the business and establishing a best of breed regulatory framework.”