FIFTY years ago the three-legged triskelion on the Isle of Man’s flag summed up the Manx economy. On the island were three struggling industries: farming, fishing and tourism. These days, though, things are very different. One-tenth of the island’s income comes from online gambling and one-third from financial services. Behind America and Britain, the Isle of Man is home to more commercial-satellite operators than any other jurisdiction. These industries have contributed to economic growth which over the past 30 years has been three times as fast as Britain’s.
The Isle of Man is a crown dependency: it is not part of the United Kingdom but its 90,000 islanders are British citizens. Since the late 1950s the government has enjoyed considerable autonomy and has offered ultra-low taxes. The top rate of income tax is only 20%, compared with 45% on the mainland, and the standard corporate-tax rate is 0%, compared with 20%. Manxmen, though, rail against those who say the island is a tax haven; after years of anti-secrecy reforms the OECD, a club mostly of rich countries, no longer considers it to be one.
Low taxes help plutocrats and the finance firms which accompany them. Otherwise, the island is not an obvious candidate for economic success. The ferry from Liverpool takes three hours; there is no university; and the island is not the most exciting place to set up a business. Shops close early and Douglas, the capital, is short on good restaurants and hotels.
Its political system may explain its strong growth. The island has its own parliament, the Tynwald (which has a somewhat dubious claim to be the longest-running in the world). Businesses say that government officials are accessible and regulations stable. Politicians, most of whom are independents, tend to have modest backgrounds in business; the last chief minister used to be an electrician. They end up taking a pragmatic approach towards commerce, says Charlie Woolnough of CoinCorner, a bitcoin exchange based on the island.
Locals enthuse about the quality of the infrastructure. Mobile reception is better in Douglas than in much of London. Strong communications are partly the result of geography: situated between England and Ireland, the island is connected to heavy-duty internet cables from both. And although prices are high, the telecoms industry’s fat profits allow it to make big investments: Manx Telecom was the world’s first to launch 3.5G mobile broadband.
Regulation of the island’s online-gambling sector is similarly efficient. Internet casinos are often hosted in jurisdictions with lax rules; when they go bust, players lose their money. To avoid that, the Isle of Man government insists that online-gambling businesses must keep players’ funds separate from their working capital, and make sure those funds are protected. Being regulated in the Isle of Man is a “seal of approval” for an online-gambling business, says Fredrik Ekdahl of PokerStars, an internet-poker firm with headquarters just outside Douglas.
With the success of online gambling, the Isle of Man is getting a reputation for turning dodgy industries into reputable ones. Small wonder, then, that it now plans to become a world centre for bitcoin. To many, cryptocurrencies are too risky; the value of a bitcoin has fluctuated wildly, and in 2014 one exchange collapsed, taking $500m of customers’ cash with it. But whereas the British government has held back, in March the Manxmen shoved a regulatory framework through the Tynwald. If one place can make bitcoin respectable, it might be here.
This article appeared in the Britain section of the print edition under the headline "Cleaning up"
