I also guess they can't upset the CAA all that much... well not for the time being.
As I understand it the CAA have got no say in the matter. It is purely a matter for DfT whether the Isle of Man can run a register and under what conditions.
I mean, look at the rest of the new EU members - any of them would make many millions by the simple expedient of accepting FAA licenses and ratings (and certification) in their own reg planes,
Are there millions to be made from running a flag of convenience for the lower end of the market. If there were, why do Bermuda, Cayman Island and IoM only aim their registers at business/corporate market. In any case EU members (new or otherwise) are bound EASA type certification standards for CofA aircraft. So far as PPLs are concerned all Member States have undertaken to follow the requirements of JAR-FCL so far as practicable. Arbitrary departures from those requirements would, I'm sure, not be looked on favourably by the European Commission or other Member States