Vexed question of beneficial ownership: analysis

The Labour Party Leader has issued a very public threat to the offshore jurisdictions, or tax havens as he terms them. 

It is over the issue of a public register of company beneficial ownership, which Ed Milliband says is necessary to track down those who are not paying the taxes they should be to the UK Exchequer.

Mr Milliband this weekend told The Guardian he'd impose a six-month deadline on the Isle of Man, the other Crown Dependencies and Overseas Territories to 'show him the books', if Labour won May's UK general election.

That is a major 'if' - but are there reasons for the Island's financial services industry to be fearful? 

John Moss has been assessing the issues at the heart of Mr Miliband's quest for an end to secrecy over who owns and benefits from Manx-registered companies: 

(Play audio clip, text below)

What is beneficial ownership?

According to the action plan that emerged from the G8 summit of the world's most powerful economies in Northern Ireland in 2013, it's information as to who owns and controls a company.

Simple enough.  What complicates the whole thing is how widely spread that knowledge should be.

The Isle of Man started its modern life as a financial centre in the early 1960s after the abolition of surtax, a move designed to rejuvenate a flagging economy.

It was very successful in encouraging new residents, who subsequently required a range of financial services.

Little in the way of regulation existed at that time. It arrived in dribs and drabs and then after the SIB collapse in 1982, in something of a rush as the Island was faced with international blacklist after blacklist, and realised life could become impossible unless it cleaned up its act.

Now its boast is that the Island leads the way in terms of openness and transparency. However there are still hurdles and this next is a proposal for each jurisdiction to have a centralised, publicly available register of beneficial owners.

The facts about a company are known to the corporate service providers who deal with them, and to the authorities on request.  

At present, if a suitably qualified body from another jurisdiction needs information, it can apply to the Manx authorities to get it.

This new proposal is something else. It emerged after the G8  Statement of Intent in Northern Ireland two years ago.

In response, the Manx put out a consultation paper in the summer of last year.  Chief Minister Allan Bell said the Manx government had "further agreed to review whether a centralised registry would improve transparency of the ownership and control of companies in the Isle of Man."

Noted was the fact the Financial Action Task Force hadn't recommended a central register. That there would have to be certainty as to what constituted beneficial ownership in order to trigger an obligation for notification. 

Also noted was the fact that only the UK and France had made public pronouncements to establish public registers but that no public registry currently existed anywhere.

That Manx consultation closed in September last year. 

We understand that the results are still being looked at but they have not been publicly released, despite a promise that a summary of responses would be published within three months of the closing date. 

If asked, it is unlikely that the Manx financial sector would throw their hats in the air at the idea of a public registry, especially if the Isle of Man was to find itself leading the way - the Island is very keen on playing on a level playing field. 

Amongst the questions mooted for respondents to the consultations to consider were:

How will the Manx respond to the Miliband threat? 

Next week in his Budget statement and in the debate that follows, Treasury Minister Eddie Teare will have the attention of Tynwald Court and the financial sector. We wait to see what, if anything, he has to say on the matter there.