Courtesy Isle of Man government

Chief Minister Richard Corkill: Part of the global community

Elected to his position only two months after Sept. 11, Chief Minister Richard Corkill’s priorities have in part been dictated by events not of the Isle of Man’s making and largely unrelated to his nation.

Offshore jurisdictions such as the Isle of Man have long been accused of harboring dirty money from drug lords or terrorists, although evidence for these claims has been scarce. In fact, no links between terrorist funds related to the Sept. 11 attacks could be traced to the Isle, nor have any other financial scandals rocked the place for a long time. But for a financial center, perception is as important as hard fact.

In response to the scrutiny offshore centers have received, Corkill insists that his administration will follow all international standards as a good member of the global community, but will not forge ahead with commitments that much bigger, more powerful nations are not willing to make.

Corkill defends the quality of the Isle’s regulatory regime. The Isle’s regulations with respect to money laundering or ‘know-your-customer’ rules are clearly ahead of many onshore places, he says. As a consequence, the barrage of negative stories has caused some cynicism on the island. Many here, in government as well as in business, believe that international criticism is mixing unfounded concerns about low regulatory standards with displeasure over low taxes that attract many international corporations and investors to the island.

“The thing that is frustrating is that we find so many comments that equate low tax with low regulation,” said Corkill in a recent interview. After Sept. 11, the government wanted to make sure the Isle was not unwittingly aiding the terrorists’ cause. It turned out that all the needed regulation was in place already; still directives to reinforce these safeguards were put out right away.

But the Isle will not allow the international community to undercut its competitive edge under the guise of concerns over terrorism. Corkill says his administration will follow international standards as they emerge, but not accept to be pushed into a position where his small island nation has to stick its head out when the likes of Switzerland or the United States are not be willing to do the same.

“We fight hard on the taxation front to keep our autonomy and to assure that the Isle of Man is in our hands and we will set the tax rates that are appropriate. Having said that, if people are moving to new world taxation standards, then yes, we want to be there. But on taxation, we prefer to be on the same line as the international standards, while on the regulation front, we can even be a little ahead of the line.”

In fact, the United States has turned out to be an ally for the Isle. While international bodies such as the Organization for Economic Cooperation and Development (OECD) or the European Union are pushing for international tax harmonization to reduce the migration of companies and investors offshore, the U.S. administration has focused on exchange of information. “We agree with that,” says Corkill. “We are more in line with the United States than with the United Kingdom on this issue. Authorities should focus more on criminality than on taxation competition issues. Competition is a healthy thing.”

A growing international confidence
While the Isle of Man is constitutionally independent, it is a crown dependency and relies on London for international representation. A disagreement with London over an issue of international affairs therefore represents a real problem for the Isle’s government. How can London represent Manx interests if they clash with those of the British government?

Corkill thinks that the Isle has to step up to the plate and represent itself when that is in the interest of the Manx economy, especially as this economy has been booming for many years, and Corkill wants to keep it this way.

“We are not a sovereign state, and we have to acknowledge that, but we have very strong independent ways. We are British, but we have never been part of the United Kingdom. Being British is a looser thing than being part of the U.K.,” he explains. “We do rely on the British government to represent us, but where we have the opportunity to represent ourselves, we do. We have done that within the OECD [on the contentious issue of harmful tax practices], and on some environmental issues, but within the confines of a crown dependency.”

The growing confidence is part necessity in defending the Isle’s bread-and-butter financial sector, part a reflection of the incredible success the tiny island economy has enjoyed.

In the 1950s, the mainstay of the Manx economy was agriculture, fishing and, most of all, tourism. Corkill grew up at a time when tourism dried up owing to the availability of package holidays to warmer climes. In the 1960s, the tax structure began to change, with comparatively low rates for investors and corporations.

But these are not corporate tax policies favoring the big over the little guy. Corkill points to social policy. “We have always spent heavily on social services,” he argues. “We want more social services, so we tell the guys at the Chamber of Commerce to grow the economy more, because we need the money.”

In fact, the Isle is racking up surpluses. Forbidden from running deficits, the government is building up reserves for capital projects. At this point, about $460 million are waiting in five different reserve accounts for a good project to be spent on.

Willing to keep on growing
Success has caused stresses to occur. The biggest problem on the island today is housing. At full employment, employers are bringing personnel over from the United Kingdom and other parts of Europe. Housing prices are soaring, and life is getting increasingly expensive.

A debate is raging about zoning restrictions. Should the government preserve the rural character of the island, or should it allow developers to build housing in rural or suburban areas? Corkill takes a cautious pro-growth stand.

While acknowledging the attraction of being a clean, unspoiled, rural community where people know their neighbors, he says, “we have plenty of space to build, in terms of regeneration of areas and [development of] new land. The island is pretty big for 76,000 people, so we have space to grow.

“We have a debate on residency control, but we take a slow approach to this. There is contingency residency control legislation that can be enacted when needed. At the moment, government policy is not to rush into residency control, but to show the world that the Isle is very much open for business, and if that means physical growth, then so be it.”

Government by consent
The Isle of Man is still a traditional, community-based democracy. Everybody knows everybody else, and politicians’ greatest fear is that angry constituents will phone them up or confront them in the neighborhood store. Corkill is known as a pharmacist as much as the Chief Minister, and even lists his profession on his government business card.

“Because we are a small place, people with very varied political opinions are unified when it comes to best interests of the island and its people right across the political spectrum,” says Corkill. There are no political parties, candidates stand in their own right, and on serious issues of concern to the entire community all pull together, including the labor unions that are constant cause for concern just across the water in England.

“We have a very proud indigenous culture which Manx people defend very jealously,” Corkill says. “And that is one of the benefits of a growing economy, that you can use resources for these things. But we also have to take into consideration the changing composition of the island, with new residents coming here all the time. “We have to weld these things together,” he concluded.