Isle of Man - wired up for success

Of course, there is a flip side to this coin – the challenge that with the growth of the internet and consequently e-commerce comes increased transparency and a sharper competitive environment in which to operate. Furthermore, companies – and in particular e-businesses – are becoming less restricted by physical location and are able to move from place to place with relative ease.

With a number of countries claiming to be at the vanguard of e-commerce excellence, at first glance at least, it can be difficult to differentiate one from another.

But what is clear is that those countries that can provide businesses with tangible reasons to locate and stay are the ones that will survive and thrive in the longer term.

From this list, four key attributes stand out as being fundamental to the success of an e-commerce centre – creating a sympathetic fiscal environment; ensuring an abundant supply of skilled labour; developing a robust infrastructure; and all supported by dynamic legislation.

Over the past five years the Isle of Man has quietly emerged as one of the world’s leading offshore e-commerce jurisdictions.

The creation of a sympathetic fiscal environment, sufficiently attractive to e-business, has been central to the island’s e-commerce strategy. In June 2000, the Isle of Man announced an overhaul of its taxation strategy. At its heart lies the simplification and modernisation of the existing income tax code with a strong emphasis on maintaining a competitive and business-friendly tax environment that meets international standards of regulation.

On the domestic front the proposals are that both the corporate and personal income tax rates will be cut to 10% at the lower rate and 15% at the higher rate within a period of three to five years. Substantial progress has already been made in achieving the desired objectives. A 2% cut in the rates was announced in March 2001 and in the March 2002 Budget a further significant step was taken.

With effect from 6 April 2002 e-commerce companies and others resident and trading from the island enjoy a lower tax rate of 10% on the first £500,000 of its income and a top rate of 15% on the balance. Relief for capital expenditure on plant and machinery will continue to attract 100% write-off against income tax. With financial grants of up to 40% on such capital expenditure and on marketing and professional fees, it places the island among the countries with the most competitive tax regimes in the European arena.

Furthermore, if ownership of the company rests outside the Isle of Man and no trade is conducted with island residents, the company may qualify for exemption from Isle of Man tax. Importantly, the Isle of Man realised some time ago that the future of its e-commerce centre relied upon the ready availability of a pool of properly trained computer literate labour.

The education department has actively sought to provide the island’s current and future workforce with the skills that will be necessary to maintain and enhance the island’s competitive position in relation to e-commerce. With this in mind the department has invested heavily in modern technology in schools and colleges – institutions in which can now be found some of the best ICT facilities anywhere.

Schools in the Isle of Man are characterised by the ready availability of technology. All primary schools achieve a ratio of 1 computer to 7 pupils and in secondary schools this ratio is 1 to 5. The island also achieved a world first when, In September 2000, the Isle of Man became the first country in the world to issue laptops to all full-time teachers. Since then many part-time teachers and nursery nurses have also been provided with laptops.

With regards to the island’s infrastructure, the government pays the connection charge for businesses and homes to ADSL and ISDN. The island is also well served by high bandwidth and international connections via both the UK and Ireland.

Finally, all of these building blocks must be underpinned by effective ‘light touch’ legislation – ensuring there is a balance between providing workable regulation while simultaneously fostering the growth of e-business applications.

The island moved quickly to become one of the first offshore jurisdictions to have e-commerce legislation on the statute book. This legislation effectively comprises the existing comprehensive suite of intellectual property/computer laws and a dedicated new Act – the Electronic Transactions Act – which essentially puts paper and electronic transactions on the same legal footing by eliminating many of the legal distinctions between the two.

For many countries, the ubiquity of the internet – and consequently the growth in e-commerce – now provides an opportunity for them to diversify their economies in ways that, historically, would have been thought impossible. To succeed, though, requires a long-term commitment from both the public and private sectors to work together and to put in place the support mechanisms that allow existing e-businesses to flourish and that makes the country an attractive place in which to locate.

A failure to appreciate this will mean that a country’s e-commerce rhetoric will forever fail to match the e-commerce reality.

• Tim Craine is director of e-commerce, Isle of Man government