The allegations are still not known but the Isle of Man and offshore law firm Appleby are trying to preempt potentially damaging media stories resulting from a data breach at the Bermuda-headquartered law firm.
In a press conference held on Monday that one local journalist described as “surreal,” Howard Quayle, chief minister of the Isle of Man, indicated that some of the allegations made by investigative journalists surround the tax structures of commercial and corporate jets and aircraft used by wealthy individuals.
The government of the Isle of Man said members of the International Consortium of Investigative Journalists have been working on a story on how buyers of aircraft may have been using the Isle of Man for abusive value added tax (VAT) avoidance.
“Media attention is centered on the importation of business jets into the EU through the Isle of Man with a particular focus on the VAT treatment of aircraft leasing arrangements,” Mr. Quayle told reporters at the press conference.
The ICIJ, which broke the Panama Papers stories in 2015, claims to have obtained the documents providing evidence for the allegations from a law firm.
Appleby confirmed on Tuesday that the ICIJ has approached the law firm with allegations based on documents that may have been subject to a hack at the firm last year.
In a statement released on Tuesday, Appleby refuted the unspecified allegations made by investigative journalists and stated that after review, there was no evidence of any wrongdoing on the part of the firm or its clients.
Appleby said it believes the allegations are based on a lack of understanding of the legitimate and lawful structures used in the offshore sector. Whether the allegations are unfounded or not, the Isle of Man government is clearly concerned that news headlines about the superrich avoiding taxes on their jets would result in reputational damage for the jurisdiction and the firms involved.
The chief minister said his government had taken “pre-emptive” action by responding to the allegations before their publication.
“Our strategy has been to engage with journalists to defend the Isle of Man’s reputation as a responsible jurisdiction. Ministers and officers have been dealing with The Guardian, the BBC in the U.K., Le Monde in France, leading German media and Japanese TV.
“Tomorrow morning, I will be interviewed by BBC’s Panorama program,” he told local Isle of Man journalists Monday.
Mr. Quayle said, as a responsible member of the global community, his government takes allegations of this nature extremely seriously.
However, the ICIJ had so far rejected repeated requests to provide written evidence to support their claims, he said.
“During the course of our own ongoing review, we have found no evidence of wrongdoing or reason to believe that our Customs and Excise has been involved in the mistaken refunding of VAT,” Mr. Quayle added.
In light of the claims made by the ICIJ, the government of the Isle of Man has asked the United Kingdom Treasury to look at all elements involved in the process of the importation of business jets via the Isle of Man into the EU, Mr. Quayle said.
Given the highly complex nature of the tax treatment of aircraft leasing arrangements, the chief minister said, “without sufficient technical knowledge, we believe there is scope for the ICIJ to misunderstand” the tax position.
Cayman Finance anticipates negative publicity
Cayman Finance referenced the Isle of Man’s and Appleby’s announcements in a notice to members on Wednesday as one of several examples of the headwind offshore jurisdictions are likely to face.
“The past couple of weeks have served as a reminder that as we get closer to the upcoming [Joint Ministerial Council] meetings in London, and the final decisions by the EU on their expected blacklist of uncooperative jurisdictions, we can all expect significantly greater media scrutiny,” the organization representing the financial services industry in Cayman said.
Although the examples may have “little or nothing to do with Cayman,” the members will need to monitor the developments and anticipate “the need to engage and educate about our industry and jurisdiction,” Cayman Finance said in its statement.
Cayman Finance’s International Relations Committee is responsible for analyzing threats and attacks on the jurisdiction and developing strategy, tactics and key messages, the organization said.