As the Paradise Papers continue to spew out more and more revelations comes news that the Isle of Man (IoM) and Malta are facing possible financial sanctions for their handling of affairs relating to VAT rules on yachts and aircraft.
The news agency Reuters is reporting that Pierre Moscovici, the EU Commissioner for Taxation, has written the British finance minister about the Isle of Man’s tax-exempt practices and to the Maltese minister about VAT on yachts and private jets.
The release of the so called Paradise Papers, have given EU ministers fresh impetus to look into tax havens and the story about Lewis Hamilton and his IoM aircraft registration has fuelled their investigations.
EU officials said the Isle of Man, is suspected of exempting from VAT buyers of jets even when there is no grounds to grant the waiverIf a jet is bought for business reasons, no VAT is applied, but on the Isle of Man the Commission believes authorities do not check sufficiently whether buyers effectively use the planes for business or private reasons. In the latter case, VAT should be paid.
The Isle of Man, falls under UK sovereignty but is self-governing in matters of taxation. “It has,” the EU Commission suggest: “Issued VAT exemptions for private jets and yachts when there is no grounds for granting the waiver.” Moscovici added, “There are practices that we have reasons to think are suspect, I have asked that the rules be changed but if they are not, the European Commission will launch an infringement procedure that can bring extremely heavy financial sanctions into being.”
The UK’s finance ministry confirmed it was working closely with tax administration officers on the Isle of Man looking into how VAT is paid on aircrafts and yachts. A finance ministry spokesperson said in a statement; “We intend to reply to the EU Commission by the end of the year.”
The Maltese Prime Minister Joseph Muscat denied publicly that Malta was a tax haven and he stated that he vigorously rejects the label of tax haven, when applied to the island. He further explained that the decision to cut the VAT rate on superyachts was approved years ago by the European Union.