Labour leader Jeremy Corbyn says Westminster should impose direct rule on the Isle of Man and the other Crown Dependencies and British Overseas Territories if they flout UK tax law.
He made the comment in the wake of the Panama Papers leak.
Speaking ahead of the launch of Labour’s local election manifesto, Mr Corbyn said offshore jurisdictions should be told: ‘Hang on, you are a government of a British dependent territory, a Crown territory, you must obey UK tax law, you must not become a harbour for tax avoidance and tax evasion.’
He said there was precedent for direct rule to be imposed. He said: ‘The point is that they are not independent territories. They are self-governing, yes, but they are British crown dependent territories. Therefore, surely, there has to be an observance of UK tax law in those places.
‘If they have become a place for systematic evasion and short-changing the public in this country, then something has to be done about it. Either those governments comply or a next step has to be taken.’
He said this could be done ‘almost immediately’.
The unprecedented leak of 11.5m files from the database of the world’s fourth biggest offshore law firm, Mossack Fonseca lifts the lid on how offshore companies are used by the global elite to conceal ownership and control of assets and property worth billions.
British Virgin Islands is named more than 113,000 times in the leaked documents from Mossack Fonseca, the Bahamas more than 15,000 times and Aguilla more than 3,000. Jersey has 39 mentions and the Isle of Man just eight, while the UK is named 148 times.
Chief Minister Allan Bell said: ‘We are not in the frame at all. If you wanted to hide money the Isle of Man is the last place you would choose as our oversight is so strict.’
The Isle of Man was one of the first jurisdictions to sign up to the automatic exchange of tax information. Companies and trusts are required to know the identity of beneficial owners and inform the authorities if requested. But such information is not made public.
Mr Bell has pledged to introduce a central register of beneficial ownership but says that making this register public is a red line he will not cross.
Adviser to the Labour leader is Richard Murphy, arch critic of tax havens who claims credit for the Isle of Man losing £200m a year in VAT revenue.
He points out that a precedent was set with Turks and Caicos when direct rule was imposed in 2009 to beat corruption.
In his blog, he says: ‘So let’s stop pussy-footing around here. Let’s demand reform or say we will deliver it. And if they really object? The answer is direct rule. And don’t doubt we can do that.’
In a statement, the Manx government said: ‘The Isle of Man is not a place where criminals can find a welcome. We have in place robust defences to assist efforts against corruption, tax evasion and money laundering.
‘We have been working with the UK government for some time to implement additional measures to further strengthen these defences. We have a strong record of cooperation with international investigations and have provided effective access to overseas law enforcement and tax authorities over many years.
‘The Isle of Man has a long-standing policy of active engagement on tax transparency and information sharing. We started sharing information automatically for tax purposes with EU Member States in 2005 and were the first Crown Dependency to sign a FATCA-style agreement with the UK.’