Introduction

There are more than 100 offshore jurisdictions (many of them, perplexingly, firmly onshore) which provide low-tax regimes to their inhabitants and/or to non-resident companies or individuals, and almost without exception they have nailed their colours firmly to the mast of e-commerce, understanding that the Internet will allow many types of commercial activity to be carried out offshore which were previously anchored physically in their destination (high-tax) market-places.

Broadly speaking, e-commerce development offshore has so far been limited to existing offshore specialities such as banking, with so far perhaps only the betting and gaming sector having given a demonstration of how easy it is for an entire industry to up sticks and leave if domestic legal and tax regimes are too restrictive.

There is widespread acknowledgement that, sooner or later, there will be a mass exodus from high-tax jurisdictions of many other types of company which no longer need sales-forces, manufacturing plants or distribution systems on the ground, but some surprise that it hasn't happened yet to any large extent. This is reasonably understandable given that e-commerce still represents only a tiny fraction of sales in most sectors, and that customers are still reluctant (rightly or wrongly) to trust the new medium for transactions involving money. Firms therefore don't feel that they can risk burning their bridges by giving up their legacy systems and installations - and the move offshore is not one that can be carried out on a trial basis. In order to get the tax benefits, there has to be a clear split with the old existence.

For an offshore jurisdiction hoping to develop into the location of choice when the flood does begin, there can't be any waiting around though: it's necessary to demonstrate now that one is bulging with connectivity, support staff and server space, because there are a dozen or more competing jurisdictions doing the same thing. It can also be argued that the lack of established, proven facilities offshore is one of the contributory factors to the slowness with which mainstream businesses are making the move. Other factors, apart from buyer reluctance, include the uncertain corporation tax environment pending a final report from the OECD's Technical Action Group on permanent establishments, and the emerging split on sales tax practice between the US with its moratorium on e-commerce taxation and the EU's keenness to extend VAT as quickly as possible to digital downloads.

In this survey we are taking a look at the degree of e-readiness of the main competing offshore jurisdictions from a number of different perspectives.

The Jurisdictions: Part IV

 

The Isle Of Man

There is something of a competition between a number of offshore jurisdictions to offer the most advanced e-commerce environment to businesses seeking an offshore base for part or all of their operations. The Isle of Man is clearly one of the leading jurisdictions, being one of the very few which has enacted e-commerce legislation and which is already host to an active e-commerce community of providers and users.

The Isle of Man's first Director of E-Commerce took office in late September 2000, with responsibility for co-ordinating the development, promotion and implementation of an e-commerce strategy for the island. As part of this programme to encourage e-businesses to set-up on the island, the government also aims to offer tax breaks.

In June 2001, the government's e-commerce division published a report which set out in detail the Island's approach to becoming one of the world's leading e-commerce centres and most advanced 'e-societies'. Entitled 'The E-Commerce and E-Society Strategy Report,' (see below) has obtained the approval of Tynwald and is now being actively promoted by the government.

The island has set itself an ambitious goal, since the world, both onshore and offshore, is full of countries which have said they mean to become global e-commerce leaders. The UK may have shot itself in the foot with its misconceived 'RIP' legislation and its general slowness, but Ireland, Bermuda and Malta are just three of the competitors which are arguably ahead of the Isle of Man in various respects. In the Far East the authorities in Manila have earmarked the equivalent of £150 million to create a computer mini-city which they hope to establish as the global 'capital' of E-commerce, while Hong Kong and Singapore are forces to be reckoned with.

The Isle of Man's advantages are its position in the EU, both geographically and structurally, an established base of professionals, liberal legislation, good telecommunications and the Ronaldsway Freeport. Although the island has been criticised for some of its offshore tax practices, it is probably going to be able to adjust its regime without unduly restricting offshore business operations, and will then, like Ireland, be able to offer a secure and stable home to international businesses wanting to serve EU and international markets. The problem for the Isle of Man alongside Ireland is that it is small, and inevitably has less depth in terms of infrastructure, skilled workers and support services.

Still, like other offshore jurisdictions, the Isle of Man can take advantage of the natural link between the Internet and Offshore stemming from the fact that both, of their nature, manage to avoid tax and the regulatory blanket that tends to smother larger countries (Ireland, unlike the Isle of Man, can do nothing about its membership of the EU). Businesses which can operate on the Internet without, so to speak, touching ground in a high-tax jurisdiction will naturally migrate to offshore jurisdictions; while businesses that already have offshore existence will find it highly convenient to be able to use the Internet to trade with their high-tax customers without having to make a landing in their countries.

By locating websites in the Isle of Man to carry out functions previously based in high-tax jurisdictions such as sales and marketing, treasury management, supply of financial services, and most of all, the supply of digital goods such as music, video, training, software etc, businesses can take advantage of low rates of taxation for increasingly substantial parts of their operation.

In many countries, the distribution of goods from a warehousing facility does not constitute the carrying on of a trade or business in that jurisdiction, so that even for physical goods, in many cases it will be possible to avoid a permanent establishment (taxable presence) altogether in many high-tax jurisdictions where trading activities currently take place.

Government Strategy

A Strategy Report by the Council of Ministers was adopted by the Government in May 2001 and published in June. The following summary of the Report highlights some of its key features.

The Vision The vision of the Isle of Man Government is to firmly establish the Isle of Man as the leading e-commerce platform in the offshore world. The Government’s commitment was demonstrated by the personal support and involvement of the then Chief Minister Donald Gelling and the allocation of money for the E-Commerce Fund during 2000/01 and 2001/02 amounting to some £19.5 million. The Mission Statement

Donald Gelling

The Isle of Man Government has two main goals that it wishes to achieve. Firstly, it intends to ensure that commercial organisations, already located on the Isle of Man, embrace e-business solutions and technologies. Secondly it intends to attract more e-business to the Island by:

• creating and maintaining an attractive environment for such businesses; and
• by raising the profile of the Isle of Man and the many e-commerce related benefits that it is able to offer.

Responsibility And Organisation

The Chief Minister established a new Council of Ministers’ E-Commerce Committee, consisting of the Treasury Minister, the Minister for Trade and Industry, the Chairman of the Communications Commission and the Chairman of the Information Systems Strategy Committee. The purpose of this Committee is to ensure that there is effective political co-ordination across Government at policy level. In addition, a new Officer Level Committee has been formed with representatives of the Chief Secretary’s Office, the Treasury, the Communications Commission and the Department of Trade and Industry.

Alongside theses official bodies, a new Private Sector E-Commerce Consultative Committee has been formed, made up of representatives from the Private Sector, who are involved at the cutting edge of e-commerce related developments. A Director of E-Commerce had already been appointed, with a main responsibilities of co-ordinating Government’s activities and support for e-commerce and maintaining a regular dialogue with the Private Sector to ensure that both the Public and Private Sectors are working in harmony to harness the full potential of the opportunities presented by e-commerce.

Key Advantages

The Isle of Man summarises its main e-advantages as follows:

• Clear and unequivocal Government support for e-commerce.
• State of the art telecommunications infrastructure.
• High bandwidth self-healing fibre ring connectivity.
• 3rd generation (UMTS) mobile phone service.
• Unmetered Internet access.
• Legislation in the form of the Electronic Transaction Act 2000 to provide the necessary legal framework for e-commerce to grow.
• Political stability and enviable international reputation.
• New tax strategy designed to reduce standard rate corporate tax to nil and personal tax to 10% within a period of 3-5 years.
• High computer to pupil ratios in schools, coupled with training programmes designed to meet business needs on the Island.
• Generous financial packages of support available to qualifying businesses.
• Comprehensive support services of the type and quality expected of an international finance centre.
• A clear commitment to deliver seamless Government to the citizen and business electronically.
• Internationally accredited financial regulation providing customer and investor confidence.
• Proportionate and effective consumer and data protection, again, providing confidence to the customer and businessman.

Telecommunications Infrastructure and Regulation

Recent developments are described more fully below; the Government's strategy is to maintain and enhance the already very high level of telecommunications infrastructure on the Island. The existing telecoms provider, Manx Telecom, has until 2006 under its existing Telecommunications Licences, although Government, in conjunction with Manx Telecom and outside consultants, is in the process of determining the future profile and composition of a new licensing regime.

By 31 December 2002, the Government plans to have in place new Telecommunications Licences, and to benchmark Manx Telecom’s pricing structures against those in other jurisdictions.

As regards regulation, the Government means to create a regulatory regime in which the provision of high quality and comprehensive telecommunications services are provided to the Isle of Man community at competitive rates.

The role of the Communications Commission is to ensure that Manx Telecom and others who run telecommunications systems on the Island comply with the terms and conditions of their licences. The Commission is currently reviewing the present and future telecoms regime and the regulatory structure in order to develop a blueprint for the next generation of telecommunications provision and how it should be regulated.

The future strategy for the development of the telecoms infrastructure and the regulatory regime will largely depend on the conclusions and recommendations of a consultantcy exercise currently underway.

Taxation

See below for a fuller summary of the IOM's tax regime as it applies to e-commerce activity. The Government's goal is to create and maintain a competitive tax environment that is attractive to e-business.

For business-to-business e-commerce activity, the Isle of Man is a very attractive jurisdiction for the locating of an organisation’s inter-EU trade. Combined with the low or exempt direct tax possibilities, the availability of a VAT registration can make the establishment of an e-commerce entity on the Isle of Man physically very beneficial from both a reduced administration as well as a reduced cost basis.

Key strategies for the future include:

• Analyse and identify niche markets for taxation purpose.
• Continue to forge strategic links with other offshore jurisdictions and monitor "onshore" developments for any impacts.
• Continue to enhance the personal taxation regime with reduced rates, simplification of the tax system and introduction of a current year basis of assessment.
• Offer enhanced on-line services to individuals and employers.
• Monitor EU, OECD and FATF initiatives and respond with appropriate measures.
• Establish and maintain a dialogue with representatives of existing Island resident companies, regarding their e-tax needs.
• Consultation with companies and individuals to shape service delivery of taxation services.
• Consider and facilitate file transfers with employers to aid end of year data exchanges.

Marketing

The Government is very aware of the need to raise the Island’s profile so that the benefits it has to offer are better known, particularly amongst financial and legal intermediaries. In other words, there is a need to bring the Isle of Man’s many and varied advantages to the attention of those who advise onshore e-businesses.

In January 2000, the Isle of Man Government’s Treasury engaged Charteris, a firm of consultants from London, to provide a position statement and health check on how well placed, or otherwise, the Island was in terms of its e-commerce offering. The conclusions of that report were that the Isle of Man was, in fact, very well placed, compared to most of its competitors in this market, but what was needed was better co-ordination and a higher profile. The co-ordination issue has been addressed by the appointment of a Director of E-Commerce who has, in turn, established a number of new co-ordinating committees at political, officer and private sector level.

Much has already been done to raise the Island’s e-commerce profile. For example, a new E-Island brochure has been produced in conjunction with the private sector; a new e-commerce website has been launched; speaking slots have been identified and secured at national and international e-commerce conferences and media interest has been greatly increased, which has resulted in an increased quality of press coverage.

The Government's E-Commerce Marketing Strategy is likely to include specific plans and programmes to:

• identify those target audiences with the most potential to be attracted to the Isle of Man;
• make personal visits to those companies identified as having potential to be interested in the Isle of Man, such visits to include key senior officers and politicians from Government;
• make personal visits to those legal and financial intermediaries identified as having potential to be interested in the Isle of Man;
• increase the amount of editorial and key publications;
• improve the Island’s profile via an advertising campaign in targeted publications;
• attend key conferences and seminars in those parts of the world where target audiences have been identified.
  

Financial Assistance

The Government intends to continue to provide appropriate financial assistance to encourage new and existing businesses to develop their e-business applications on the Island. The Department of Trade and Industry has for many years operated a Financial Assistance Scheme aimed at encouraging diversification of the economy. This Scheme provides a range of grant, loan and tax holiday support to eligible businesses that can meet the commercial criteria laid down. Technology/e-commerce based businesses can already apply for financial assistance under the Scheme.

The Financial Assistance Scheme is a key tool to encourage existing businesses to adopt new technologies and practices and new businesses to develop on the Island. With the potential for the Department to become an active investor, the opportunity exists not only to encourage new projects but also to develop projects in conjunction with private sector partnerships and contacts.

For example, the Department is currently involved in a business partnership with a local provider of e-commerce security solutions. The outcome of the partnership will be to deliver, to the population, an electronic identity by means of electronic signature. This next generation technology is a vital piece of Internet infrastructure, which will unlock the potential of a multi-billion dollar industry for the Island’s residents and businesses.

The Department is currently reviewing ,with the Attorney General’s Chambers, the legislation under which the Financial Assistance Scheme operates. The aim of this review is to ensure that the eligibility criteria will continue to meet the needs of technology/e-commerce based projects and which emphasise the fact that Government is actively targeting businesses in these sectors.

The Department also intends to use the Financial Assistance Scheme to develop an initiative to encourage the private sector to market the Island as a centre for e-commerce.

Legislation

The Government's strategy is to maintain a "light touch" in relation to e-commerce legislation and, by so doing, maintain the necessary balance between providing effective regulation whilst, at the same time, ensuring that legislation facilitates and fosters the growth of e-business applications. The Government will ensure that e-commerce related legislation from either the UK or EU is not followed in the Isle of Man automatically but, instead, is first closely scrutinised and consulted on in order to ensure that it is in the Island’s best interests.

Existing legislation is more fully described below.

Development Of E-Government

In 1999, the Treasury agreed to fund a project, code named MAGIC, to provide all Government employees, who have desktop or laptop computers, with access to a number of desktop electronic services including email, voice-mail, fax, diary, Intranet and Internet facilities in a secure environment. The project, which was funded from the e-commerce/ICT fund, was completed ahead of schedule and within its £2.5million budget. One of the main objectives of the project was to address the cultural change needed within the Isle of Man Government to facilitate the implementation of "joined-up" Government. This objective has largely been achieved with a significant volume of transactions, previously carried out by paper or fax, now being carried out electronically.

The provision of information technology within the Isle of Man Government is undertaken by the Information Systems Division of the Treasury within the context of an agreed information systems strategy. This corporate policy, which has been in place for 25 years, has resulted in a number of advantages including the installation of common hardware and software systems as well as the establishment of a Government-wide communications network linking together over 300 Government buildings. This corporate approach to the implementation of IT systems has provided the necessary infrastructure to facilitate the development of "joined-up" Government.

The JUPITER Project (Joined-UP Information Technology for the Electronic Resident) will bring about a fundamental change in the way the IOM uses IT. In the 2001 Budget, the Treasury Minister announced a further £5 million to fund JUPITER, which would build on the success of the MAGIC project and utilise information technology for the delivery of "joined up" Government to the citizen and businesses on the Island. Following a series of fact-finding visits to other jurisdictions and full evaluation of available technologies, ISD has produced a statement of requirements to select a strategic partner to assist in the development of a corporate framework within which corporate and departmental applications can be developed.

The scope of the project has been defined as utilising information technology to :

• introduce improved e-Government service delivery mechanisms for interactions between Government and the citizen, using a number of different methods, including telephone, Internet and personal visits;
• enable the citizen to seamlessly interact with all Government Departments, Statutory Boards and Offices;
• provide an inexpensive and easy to use system;
• allow a single and simple authentication process;
• deliver services via a secure communications network;
• provide a common "look and feel" to the customer;
• identify common processes such as payments, change of personal information etc;
• change back office processes to reflect the speed of electronic communications;
• include other public bodies such as local authorities and utilities.
  

Services that will be considered for delivery online through e-Government include downloading of information relating to all Government services, completion of forms such as VAT returns, annual income tax returns, permits and licences etc, payments and receipts for Government services, and access to personal information to allow citizens and businesses to maintain their own data.

Social Inclusion

The Government means to provide technologically disadvantaged citizens with the opportunity to actively participate in an e-society. Manx Telecom, the Isle of Man’s telecommunications provider, has estimated that there are currently some 14,000 households on the Isle of Man who have an account with an Internet Service Provider (ISP). According to the results of the last census in 1996, there were some 32,000 households on the Isle of Man. Taken together, therefore, these two statistics suggest that 43% of households on the Isle of Man have access to the Internet. This degree of penetration compares very favourably to the rest of the world and, in particular, to Scandinavian and North American countries, which are at the forefront of Internet usage.

The Isle of Man is very well placed, as a result of effective planning, in that the modern computer to student ratio on the Isle of Man is 1:7 in primary (UK 1:13) and 1:5 in secondary (UK 1:8). The Island’s Department of Education has also achieved the objective of every secondary school leaver having attained an Information Communications Technology (ICT) qualification by the time they leave school. The Department of Trade and Industry has established Internet training courses for those who wish to develop a knowledge and understanding of the Internet and how to use this communication medium to its best advantage.

Despite the significant progress, as outlined above, there is a large proportion of the Island’s population which has no real knowledge of, or access to, the Internet. This part of society, which is "technologically excluded" will potentially become even more disadvantaged as Government progresses with its plans to make more of its services available 24 hours a day, 7 days a week, 365 day a year, by electronic means.

The Isle of Man Government is determined that society should not be divided along the lines of "IT haves" and "IT have nots" and is currently examining options for trying to ensure that everyone on the Island has the opportunity to gain access to this technology and the information associated with it. Investigations are under way to identify how social exclusion to this new technology can best be addressed.

Education And Training

The Government's strategy is to provide the Islands 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. The Department of Education has invested heavily in modern technology in its schools and college in recent years. These institutions house some of the best ICT facilities to be found anywhere in the world. A wide range of academic, vocational and leisure time courses in computing and information technology are offered. The recently opened International Business School is offering short courses in Internet and e-commerce.

Courses offered by the Department of Trade and Industry range from basic computer awareness, through "application" competence to basic level web page design, etc. Also, two pilot courses were recently successfully held to offer an introduction to the Internet. These are aimed at individuals who had not previously had the opportunity to use the Internet. Following the success of this pilot programme, the Department has approved a plan to widen the scope of delivery and access to these courses, initially by offering the programme through a number of local authority offices throughout the Island.

The Department of Trade and Industry also operates a business support service to help improve business efficiency and competitiveness. This service covers 11 different disciplines, one of which is e-commerce. Eligible businesses can receive financial assistance towards the cost of employing specialist consultants to advise on all aspects of e-commerce to suit their particular needs.

In seeking to address a future potential shortage of e-based skills in the local business environment, the Department of Trade and Industry’s strategy is to:

• extend the existing "Introduction to the Internet" course to other parts of the Island, by either using Commissioners’ premises or other remote sites. A proposal is currently being prepared by the Training Centre;
• through the Manx Multi-Media Centre, continue to develop the skills base of young people who are engaging in work on a variety of media based projects. In seeking NVQ accreditation, the trainees will not only gain a portfolio of relevant practical experience, but also a nationally recognised qualification. It is also intended to place increased emphasis on encouraging trainees to exploit their new skills on the Island, either in existing businesses or through the establishment of existing businesses; and
• introduce workshops targeted specifically at businesses "e-needs".

Financial Regulation

The Government means to promote and secure high standards of integrity, solvency and competence within the Isle of Man financial services industry and corporate sector, to protect investors’ and depositors’ interests and to engender an environment in which financial institutions provide quality products and services for the economic benefit of the Island. With regard to e-commerce the Financial Supervision Commission and the Insurance and Pensions Authority consider the Internet to be a vitally important business opportunity, especially for many Isle of Man institutions whose offshore clients can readily take advantage of the convenience provided by electronic commerce. A key aspect of confidence in the Island’s attractiveness as an e-commerce centre is the regulatory approach to existing licence holders who may be considering entering into e-business and also to new e-business propositions.

Nevertheless, it is important to ensure that the Isle of Man’s hospitality towards e-business is not abused. The Island’s regulators take a lively interest in e-business. It is one that sets out to ensure that their regulated institutions are best equipped to handle the rapidly changing risks that e-commerce brings to the business environment, amongst them the greater risk of laundering the proceeds of crime. All licence holders must, therefore, have adequate policies and procedures in place with regard to anti-money laundering. The use of the Internet to transact business will raise issues in relation to the adequacy of procedures that are in place, especially where business is carried out on line.

A challenge is examining the extent to which "know your customer" measures and establishing a person’s true identity can be carried out over the Internet. The industry is looking at ways to see how this process might be further streamlined in a manner which continues to protect the integrity of preventative measures but, at the same time, utilises the new technologies available to make it easier to process transactions electronically. To date, no fully satisfactory way forward has been brought to the regulators’ attention and any methods will have to meet international and not only Isle of Man requirements. However, the regulators remain open to further dialogue on any new areas related to this issue.

The Government's key ongoing goals will be:

• To support Electronic Know Your Customer (EKYC) solutions when such solutions have received the endorsement of international regulatory bodies such as the Financial Action Task Force (FATF).
• For the Financial Supervision Commission to take on responsibility for administering and co-ordinating the .im Internet domain name registration process.
• To evaluate the possible regulation of e-money institutions in the Isle of Man.
• To constantly monitor the need for amendments to the legislative and regulatory framework having regard to e-business developments.
• To ensure that regulatory policy recognises and is in step with e-business developments.
• To develop a legislative and regulatory framework, which enables businesses operating on the Island to take advantage of the opportunities and benefits associated with e-commerce.

Consumer Protection

The Isle of Man aims to protect individuals and businesses from unfair trading practices by providing the appropriate legislation advice and compliance services. Although not obliged to follow EU or UK legislation, there has been a long-standing policy that local consumers should be afforded at least the same level of protection as that enjoyed by consumers in neighbouring jurisdictions. Equally, it is important that there are no significant barriers to businesses wishing to trade in or from the Island and so a certain level of equivalency is advantageous in attracting those businesses to the Island.

It is the belief of the Isle of Man Office of Fair Trading that appropriate legislation is necessary to protect local businesses from unfair competition and is essential to protect the good name and reputation of the Isle of Man around the world, which would be damaged if the Island was used as a haven by those seeking to avoid such internationally accepted legislation.

In general terms, the Office of Fair Trading’s strategy towards e-commerce is exactly the same as towards any other business and policies are applied to online businesses as they would be to those with physical premises.

In particular, the provisions of the Fair Trading (Amendment) Act 2001 will cover distance selling, which will impact on mail order, telephone sales and, of course, e-commerce. Most mail order businesses already apply many of the principles found in the legislation and fair competition requires that e-businesses should also comply with what are generally accepted to be world standards.

Data Protection The Government's goal is to protect the privacy of individuals in the e-environment by ensuring compliance with the Data Protection Act 1986 and other international conventions subscribed to by the Isle of Man Government. The Data Protection Act gives legal rights to individuals whose personal data is held by others. The Government's ongoing plans are:

• To enact new legislation that implements EU Directive 95/46/EC and thereby raises the level of data protection in the Island and ensures the continued free flow of data to the Island from EEA Member States.
• To facilitate on-line compliance with the Data Protection Act 1986.
• To keep a watching brief over legislation that could negatively impact upon data protection.
• To ensure that individuals whose data is held are aware of their rights and how to exercise them.
• To ensure that data users are aware of their responsibilities under the Act.
• To ensure that individuals can exercise their rights easily and cheaply.

A new Data Protection Bill was introduced to the House of Keys in March 2002. The purpose of the Bill is to enable the data protection laws of the Isle of Man to meet the test of "adequacy" under the EC Data Protection Directive, and thus, by facilitating the transfer of personal data between the Isle of Man and EC Member States, to improve the competitiveness of the Island's financial sector. The Bill, which is still making its way through the legislative process, repeals and replaces the Data Protection Act 1986. Its provisions extend the protection conferred by the 1986 Act to cover manual records containing data relating to individuals, as well as computer records, and are based on the UK's Data Protection Act.

Isle Of Man E-Commerce Legislation

The Isle of Man’s legislative policy towards e-commerce and the Internet is to "adopt a light touch". Accordingly, the legislative policy adopted by the Isle of Man in relation to e-commerce has been to facilitate its growth rather than to control or inhibit the opportunities that e-commerce brings with it.

Much of the Island’s economic success in recent years, however, has been due to the quality business that the Island has been able to attract, which, in turn, has been based on effective regulation. As a result, therefore, the Government sees that there is a balance to be achieved between enabling entrepreneurs to maximise the opportunities presented by e-commerce, and ensuring that no one uses the Isle of Man for purposes that could bring the Island into disrepute.

The Island’s "e-commerce legislation" effectively comprises the existing comprehensive suite of intellectual property/computer laws and a dedicated new Act passed in July 2000. The main pieces of legislation are as follows:

The Electronic Transactions Act 2000

The Isle of Man Electronic Transactions Act, which received Royal Assent in June 2000 and was effective from November 2000, is based on Australian legislation, which is in turn based on the model issued by the United Nations Commission on International Trade Law. Its purpose is to enable electronic commerce to be put on the same legal footing as paper-based commerce, as well as removing any legal impediments to the use of electronic communications with public authorities.

The Act ensures equality of electronic transactions with paper ones, subject to precautions to ensure that electronic communications are authentic and accessible, and is technology neutral. As a general rule, electronic communications are treated as being sent from the originator's place of business and received at the recipient's place of business. It incorporates the common law principle that a communication which appears to be from a person can only be treated as such if it was sent with their authority.

Electronic signatures are given parity with written ones, and there is provision for a system of Certification Service Providers to verify the authenticity of communications.

Internet Service Providers and telecommunications operators are not required to monitor the content of communications, and will not be liable for such communications provided they take appropriate action when they are brought to their attention.

The Electronic Transactions (General) Regulations 2000 issued under the Act contain the following main points:

• Regulation 1 sets out the title of the Regulations and when they come into operation;
• Regulation 2 specifies transactions which are excluded from the operation of Section 1 (1) of the Act (which provides that, in general, a transaction is not invalid merely because it takes place wholly or partly by means of one or more electronic communications). This is an essential provision because there are certain transactions, wills, mortgages etc. where, for the foreseeable future, it is not possible or practical to transact them by electronic means.
• Regulation 3 excludes Section 2 of the Act (which makes provision for the time and place of despatch and receipt of electronic communications) in the case of value added tax (VAT). This is necessary to avoid a potential conflict with Customs and Excise rules concerning the place where a transaction is treated as taking place for VAT and other purposes;
• Regulation 4 gives an exemption for 12 months from Sections 4, 5 and 6 of the Act in relation to dealings with Public Authorities by electronic means. This effectively gives Public Authorities some time to review their systems and procedures in order to comply with the Act.

The Data Protection Act 1986

This Act gives effect to the Convention for the Protection of Individuals with regard to Automatic Processing of Personal Data. It requires data users and others processing personal data by computer to be registered, and to observe the principles of the Convention. It gives data subjects certain rights, including qualified rights of access to data about themselves and the right to compensation for inaccurate data, loss and unauthorised disclosure.

The Data Protection Bill 2002

This new Data Protection Bill, which will replace the 1986 Act, will enable the data protection laws of the Isle of Man to meet the test of "adequacy" under the EC Data Protection Directive, and thus, by facilitating the transfer of personal data between the Isle of Man and EC Member States, to improve the competitiveness of the Island's financial sector.

The On-Line Gambling Regulation Act 2001

During 2001 the Department of Home Affairs progressed first the primary and then the secondary legislation to legalise the operation, from the Isle of Man, of well regulated on-line gambling sites. The primary legislation, the On-line Gambling Regulation Act, came into force in May. Four sets of Regulations were approved by Tynwald in June. The first three licenses under the regulations were issued in September.

The application fee is £1,000 and the licence fee is £80,000 per annum; in addition licence holders are required to deposit £2 million as a guarantee for the payment of customers and to establish a formal reserve for gaming based on a stated formula. The goverment plans to collect on-line gaming duty as a percentage of gross yield, defined as the total amount of all bets or stakes made, less the value of all the winnings and prizes due. For on-line gaming, there is a single rate of duty of 2.5%. This rate will apply to all such business irrespective of where the person playing the game is based.

The current rate of duty for domestic betting has also been reduced from 6% to 2% of the amount staked. This new rate is roughly the equivalent to a 10% rate based on gross yield. For international bets the rate will remain at 0.3% of the amount staked.

The then Treasury Minister Richard Corkill said of the changes: 'By taking appropriate and prompt action now, we have removed the uncertainty attached to the future of Island-based businesses operating gaming on the internet. We have also on behalf of the betting industry maintained a competitive environment for all bookmakers licensed and situated in the Isle of Man.'

Computer Security Act 1992

The Computer Security Act 1992 penalises unauthorised access to, and misuse of, computer data. The Act creates offences of unauthorised access to and modification of computer material.

Interception of Communications Bill

This Bill is to replace the Interception of Communications Act 1988 with new powers to intercept postal and electronic communications and to access traffic data.

Telecommunications infrastructure

The Isle of Man’s principal telecommunications service provider is Manx Telecom Ltd, a wholly owned subsidiary of British Telecom plc. Because of its association with British Telecom, Manx Telecom has been able to provide a leading edge telecommunications system, including sophisticated telephony services. The Isle of Man is also within the UK Numbering Scheme, which means that a business call from London to Scotland is the same as a call from London to the Isle of Man, both in terms of how it is dialled and the cost. Broadband (ADSL) connectivity and full coverage GSM mobile phone services are among the many "business as usual" facilities available on the Isle of Man.

As the Isle of Man`s licensed telecommunications provider, Manx Telecom has invested over £50 million in infrastructure over the last five years alone and the result is a network with enough capacity to run all the trans-Atlantic Internet traffic between Britain and the USA ten times over. The Island is well served by high bandwidth international connections via both the UK and Ireland. Completion of the new fibre optic cable link to Northern Ireland in December 2000 was the final step in creating a "self-healing ring" topology which will ensure that traffic continues to flow even in the event of a break at any point in the network. It is this sort of investment in future growth and in new products and services which is necessary to keep pace with technological advances.

The size of the market in the Isle of Man (population just over 75,000) might have meant that it fell behind in some of these advances. But Manx Telecom, as a wholly owned subsidiary of BT, is backed by BT`s resources and has continued to make the Isle of Man a world leader in this field. During 2001, Manx Telecom, backed by BT and in partnership with NEC and Siemens, launched the world`s first commercial Third Generation mobile phone service.

This offers fast access to the Internet through mobile handsets and will mean a range of exciting services, such as video telephony, video download, interactive gaming and location-based services becoming available to people, on the move. It also takes e-commerce a stage further, into `m-commerce`, or mobile commerce. Some industry pundits believe that the availability of all the benefits the Internet can bring, through a mobile handset, will mean mobile Internet access will outstrip access through desktop PCs within the next five years.

The Isle of Man was also one of the first ten countries in the world to receive ADSL technology and the availability provided by Manx Telecom continues to exceed that offered by BT in the UK. ADSL, which delivers broadband Internet services to households and businesses over copper telephone wires, is an effective gateway for businesses wishing to improve the speed and efficiency of their data download.

Manxnet Direct was developed to provide Internet connectivity for organisations which generate large amounts of traffic to be sent over the Internet by offering dedicated access to BT`s Internet backbone. The circuit capacity is provided at a level appropriate to the organisation`s needs, normally from 64Kbit/s to 4Mbit/s. The service also enables businesses to adapt to higher bandwidths as their needs change.

Manxnet Express employs ADSL technology for high-speed digital access, at speeds up to 25 times faster than today`s typical modems. The service is `always on`, so there is no need to waste time dialling up to the Internet and it does not affect telephone use - businesses can make and receive telephone calls or faxes whilst they are online. Manx Telecom`s hosting products Web Hotel and Web Park, offer companies everything they need to unlock their e-business potential.

The mirrored servers of the Web Hotel are based in Manx Telecom`s advanced web hosting facility in the Isle of Man and are served by a highly resilient network infrastructure. Manx Telecom`s diversely routed Internet backbone connection, together with full UPS (Uninterrupted Power Supply) and diesel powered back-up generators, will ensure that sites are up and running all of the time. Web Park is available as a dedicated or colocated service and is supported twenty-four hours a day, seven days a week. A full range of value-added services is available, including pro-active monitoring and statistics reporting.

The Isle of Man Government has demonstrated its support for high-speed Internet links by offering a subsidy for connections to ISDN and ADSL for both business and residential customers. This is one element of its strategy to position the Isle of Man as a leading centre for offshore e-commerce. Manx Telecom is a key player in the development of this strategy.

Internet Service Providers

Apart from the Internet services delivered by Manx Telecom, there are a number of independent Internet Service Providers, Web Hosting Operators, Business Continuity and IT Co-location Providers, all of which combine to provide a vibrant, competitive and increasingly creative telecoms and IT Sector.

The Isle of Man was the first country in the world to roll out third generation mobile phone services (UMTS), which, in turn, makes the Isle of Man the first country in the world to be able to offer both fixed and mobile digital, broadband telecommunication services in a full commercial environment.

In 1996 the Isle of Man Government obtained permission to use the .im National Top Level Domain (TLD) and has ultimate responsibility for its use. The domain is managed on a daily basis by Advanced Systems Consultants, an Island-based Internet Service Provider. A naming committee consisting of representatives from the Manx Government and local industry considers all domain applications.

There are in fact at least five Internet Service Providers on the Isle of Man, all of whom also offer hosting facilities. There are also a number of firms on the Isle of Man which offer e-commerce packages or e-business support, and several of these are consortia. In one case, for instance, there is a joint venture between a management consultancy, an Internet facilities house, a law firm and Manx Telecom. This approach ensures that all necessary skills are brought to bear on the setting-up of an offshore e-commerce operation.

Several firms offer comprehensive support to retail e-commerce operations, typically including the following components:

• domain name, hosting and site statistics;
• secure space for customer ordering form;
• home, company information and other pages as required;
• product catalogue, shopping basket and ordering facility;
• catalogue design and construction including photography;
• keyword-based search engine positioning;
• payment-processing solutions from an external service;
• continuing site updating service.

Some of the more prominent Internet Service Providers in the Isle of Man include:

Domicilium

Domicilium is located in the Isle of Man's capital, Douglas, conveniently close to the airport and the city centre. Domicilium focuses exclusively on offshore solutions for international business. Domicilium has extensive experience of operating offshore and is capable of delivering the broad range of services required by offshore e-business. Working closely with onshore and offshore professionals, the firm help businesses implement solutions to the challenges of operating offshore.

Domicilium understands the critically important need for e-business to demonstrate offshore presence, avoid crossing fiscal thresholds and provide multi-currency payment options to customers.

Domicilium's proprietary IPP service offers intermediaries and corporate administrators worldwide an easy-to-use, low-cost email and web service for offshore companies.

The firm offers a choice of hosting services from facilities located in Barbados, Bahamas, British Virgin Islands and the Isle of Man. Sites may also be 'mirrored' from one server in one location with another server located in a different jurisdiction. This can take advantage of regional time differences, improve efficiency for a busy site and offer jurisdictional resilience.

Domicilium provides the following range of services:

• Hosting: From shared hosting to complete outsourcing.