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Is Offshore Banking in the Isle of Man Coming to an End?

The anonymity afforded to account holders using offshore banking in the Isle of Man is under threat because of government crackdown. In an effort to track down tax evaders, the treasury have drawn up radical plans to reveal the individuals behind hidden accounts, trusts and companies set up on the Isle of Man.

Tax

The changes that are expected to come into force in 2014, could lead to investors leaving the Isle of Man, but the island will still offer tax breaks. The Manx government don’t collect capital gains tax, wealth tax or inheritance tax and income tax is limited to 20%.

US Foreign Account Tax Compliance Act

Although details are not expected to be revealed until next year’s budget, it is believed that the UK’s plans are along similar lines to the US Foreign Account Tax Compliance Act. The American act, which comes into force in 2013, will require foreign banks to list American account holders to the US Inland Revenue Service.

Overseas

Although government’s plans have not yet been revealed, they will have consequences for investors in all crown dependencies including Guernsey, Jersey and the Cayman Islands.

Consequences

Poorer countries lose billions each year to tax evaders and tax havens are often at the centre of this. It is hoped that the implementation of these new regulations will lead to similar rules being adopted in other nations in an effort to ensure an end to tax haven secrecy. If not, investors could stop offshore banking in the Isle of Man and move their money to other offshore banks.

Final word

Although the secrecy of offshore banking in the Isle of Man will disappear within the next few years, the tax breaks will still make investing offshore worthwhile. For most citizens of the UK, this change can only be a good thing, as more tax will be paid at a time when the country is in need of an economic boost.

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