After days of wrangling with his EU counterparts, and some tense meetings with his own cabinet, Prime Minister David Cameron stood outside 10 Downing Street on 20 February and announced the date of the referendum on Britain's membership of the EU as Thursday 23 June. In doing so, he fired the starting gun on four months of campaigning that will lead to, in his words, "one of the biggest decisions this country will face in our lifetimes – whether to remain in a reformed EU or to leave".
It's a subject that's likely to dominate the media until the vote has taken place (and more than likely for some time after that). But it's not just mainland UK that will be affected by whatever result comes in. There are 14 Overseas Territories and 3 Crown Dependencies that will be affected by the June vote, and the consequences for some of these small economies might be more significant than would initially be imagined.
Perhaps unsurprisingly it is easier to group together the consequences for the more distant Caribbean and other Overseas Territories such as BVI, Cayman and Bermuda. None of these jurisdictions is part of the European VAT zone and none has access to the EU market for their financial services, so a UK exit from the EU probably has little immediate consequence for them.
Moving closer to home the Channel Islands and the Isle of Man's relationship with the EU is governed by Protocol 3 of the UK's 1972 Accession Treaty, so each gets access to the "Common Market", as it was once called, for agricultural and manufactured goods, but not for financial services etc. The one major difference between the Channel Islands and the Isle of Man, however, is that the Isle of Man is part of the European VAT zone whilst the Channel Islands are not. You might think that coming out of the EU would therefore have a much greater effect on the Isle of Man, but I'm not sure that this would be the case. The UK cannot re-engineer its finances (at least not in the short term) to do without VAT, and nor could the IOM, so the sales tax will remain for the foreseeable future (and in all likelihood ad infinitum, although it could be labelled differently). What a Brexit would allow the UK to do would be to amend the rules unilaterally to take advantages of commercial opportunities, or to redress imbalances as they saw them, which they would never have been able to achieve through Brussels. An amended VAT arrangement for the IOM, so that its only contracting party was the UK rather than the other 27 Member States, might also allow the Island some greater leeway in the way VAT is applied to the various industries within its economy. This might be attractive to parts of the Financial and Professional Services sectors who currently have to charge VAT to individual customers who are unable to reclaim the VAT and therefore suffer a 20% uplift in fees that they do not suffer when buying the same service from the Channel Islands. To the extent that the IOM is able to reduce its prices to the international market place by 20% this is something that the Channel Islands should be particularly concerned about.
However, there are businesses that have established themselves specifically on the Isle of Man to take advantage of the fact that the Island is part of the EU VAT zone, and to use the Island as a point of entry into the EU market. The advantage being that a Company set up in the Island can register for VAT and supply goods to all 28 Member States without having to register elsewhere in the EU (subject to certain rules), and yet still enjoy the Island's 0% Corporate Tax rate. This line of business would presumably be lost to the IOM upon a Brexit and the untangling of the UK's VAT harmony with the EU. So swings and roundabouts for the IOM then.
It's difficult to see any significant downside to a Brexit from the Channel Islands perspective, other than the increased competitiveness from the IOM mentioned above and the possibility of fewer tourists from the continent.
But the jurisdiction that I think will suffer considerably more than any of those mentioned above should Britain vote to leave the EU would be Gibraltar. Gibraltar's relationship with the EU is slightly different to the other jurisdictions already discussed. The Caribbean jurisdictions have no formal relationship with the EU other than certain bilateral trade agreements, whereas the Isle of Man and the Channel Islands are "Associate Members" by virtue of the arrangement mentioned above. Gibraltar, however, is a "full member with derogations". Conversely to the IOM position, Gibraltar is not part of the VAT zone, but its status as a "Full Member" allows Gibraltar's financial services to be able to be "passported" into all the EU members' market places – something that Associate Membership has not afforded the IOM or the Channel Islands. This has been to the great benefit of Gibraltar, and its financial services industry has almost entirely re-engineered itself over the past two decades to take advantage of this status. Gibraltar is currently able to offer insurance and fund access to EU markets for businesses established and regulated there, something that the Channel Islands and the IOM have looked enviously upon for some time. Brexit would, I think, not just threaten this, but render the ongoing access to EU consumer markets impossible.
Ironically the Gibraltar electorate are the only people from any of the jurisdictions mentioned that will get a say in the outcome. As part of the European Parliamentary constituency of South West England (the part of the UK closest to them as the crow flies!) they will each get a vote on the 23rd June. Quite whether the 25,000 odd voters of Gibraltar can make any meaningful difference in a vote of 45 million plus remains to be seen but I suspect that we may see a more decisive vote to remain in the EU from Gibraltar than almost anywhere else involved in the referendum.
It's unlikely that you will hear the main personalities in the referendum campaign give mention to the consequences of the vote for Jersey, Gibraltar of the Isle of Man over the next few weeks. Cameron, Johnson, Farage et al have bigger fish to fry, but the result announced on the 24th June may have significant economic consequences for these small nations – some of whom won't even get a say in the vote!
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