The Common Purse Agreement entitles the
Isle of Man
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in Europe ...
to a share in the
United Kingdom
The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the European mainland, continental mainland. It comprises England, Scotlan ...
's
Customs and Excise revenues in return for being in
customs union
A customs union is generally defined as a type of trade bloc which is composed of a free trade area with a common external tariff.GATTArticle 24 s. 8 (a)
Customs unions are established through trade pacts where the participant countries set up ...
with the UK and not charging any import duties on goods from the UK, or that have been imported through the UK.
The agreement is so called because it effectively sets up a 'common purse' for the receipt of excise duties and revenue, which is then split between both treasuries according to agreed formulas.
Common Duties Agreement
There were various agreements dating back to the 17th century. In 1911 the Isle of Man Constitution Committee (the MacDonnell Inquiry) described the Common Purse agreement in these terms:
In summary, the combined Customs revenue was first divided proportional to population. In addition to this, the Island's government received a sum per visitor. It appears that this additional allowance was significant:
Customs and Excise Agreement 1979
The latest formalisation of this arrangement was signed on 15 October 1979 as the Customs and Excise Agreement 1979, and introduced by the
Isle of Man Act 1979 (An Act of Parliament). It is basically a revenue-sharing system, and is the latest agreement that builds on the Customs Etc. Agreement 1957, which stated that Tynwald could not introduce any differences to UK indirect taxation (except on beer) without the permission of the UK Treasury (in preparation for the UK Parliament empowering Tynwald with control over Manx indirect taxation in the
Customs (Isle of Man) Act 1958).
In addition, this means that
VAT
A value-added tax (VAT), known in some countries as a goods and services tax (GST), is a type of tax that is assessed incrementally. It is levied on the price of a product or service at each stage of production, distribution, or sale to the en ...
must be charged on Mann at the same rate as in the UK, and all VAT receipts are paid to the UK Treasury (but then repaid to the Manx Treasury through this agreement), but the agreement is generally accepted as being advantageous to the Isle of Man.
There have been differences in indirect taxation agreed, for example in 2003 UK betting and gaming duty was set at 15%, whilst the Isle of Man brought in a lower rate of 10%.
According to the Isle of Man Treasury, 'Neither the amount actually received, nor the exact method of calculation of the Island's share of the common duties and taxes, is in the public domain'. It is therefore not known how much is received by the Isle of Man from the United Kingdom. Despite this, in a
Tynwald
Tynwald ( gv, Tinvaal), or more formally, the High Court of Tynwald ( gv, Ard-whaiyl Tinvaal) or Tynwald Court, is the legislature of the Isle of Man. It consists of two chambers, known as the branches of Tynwald: the directly elected House of ...
debate in December 2005, the Minister for Tourism and Leisure revealed that every visitor to Mann from the UK, even if only on a day visit, was worth £50 to the Isle of Man Treasury in additional Common Purse allowance.
''Recortys Oikoil Y Chiare As Feed'', Volume 123, No. 6
Sharing the common duties
Until 2007
# The common duties collected by the two jurisdictions are pooled.
#: Revenue attributed to specialist business and government sectors is excluded from the pool, and retained by the originating jurisdiction.
#: Taxes not pooled include those relating to:
#:* accommodation
#:* sports and recreation
#:* film-making
#:* financial services
#:* gambling and betting
# Taxes are then distributed in one of three ways:
#* Actual consumption basis
#* Residential population basis
#* Fiscal population basis
=Actual consumption basis
=
Revenue is shared on the basis of actual consumption, and therefore actual revenue yield in each jurisdiction.
Taxes apportioned in this way:
* Hydrocarbon oil duty
* Lottery duty
=Residential population basis
=
Revenue is shared proportional to the number of residents in each jurisdiction.
Population estimates used for 2005 financial year:
* United Kingdom: 60,303,151
* Isle of Man: 78,391
Taxes apportioned in this way:
* Value added tax
* Pool betting duty
* Agricultural duties
=Fiscal population basis
=
The fiscal population is calculated to adjust the real population to take account of visitors to the Isle of Man. No account is made of visitors to the United Kingdom. Each visitor adds approximately 0.18 of a head to the population count.
In the 2005 financial year there were 323,018 visitors to the Island, resulting in an adjustment of 58,903 to the population figure.
Fiscal population estimates used for 2005 financial year:
* United Kingdom: 60,303,151
* Isle of Man: 137,295
Taxes apportioned in this way:
* Tobacco duties
* Alcohol duties
* Customs duties
* Anti-dumping duties
Services contribution to UK Treasury
As with the other Crown dependencies, the Isle of Man makes a payment to the United Kingdom Treasury in respect of the services provided to the island: the constitutional responsibilities are defence, foreign representation (including consular assistance), and ensuring good governance
Good governance is the process of measuring how public institutions conduct public affairs and manage public resources and guarantee the realization of human rights in a manner essentially free of abuse and corruption and with due regard for th ...
within the Island.
This payment was first introduced by the Isle of Man Customs, Harbours, and Public Purposes Act 1866 (An Act of Parliament
Acts of Parliament, sometimes referred to as primary legislation, are texts of law passed by the Legislature, legislative body of a jurisdiction (often a parliament or council). In most countries with a parliamentary system of government, acts of ...
). This payment replaced a previous arrangement whereby the UK Treasury had retained all surplus Manx revenue – from 1866 onwards this surplus would be paid into the new Manx Accumulated Fund. No specific purpose or justification was stated for the payment.
The MacDonnell Inquiry in 1911 reported that it had received a request from Tynwald for a reduction in the contribution, which was still at that time fixed at £10,000 per annum. In refusing to reduce the figure, the Inquiry noted that the Island enjoyed 'national protection' and 'manifold national advantages'.
The annual contribution set in the Customs, Harbours and Public Purposes Act 1866 was supplemented by a new formula in the Isle of Man Contribution Act 1956 (An Act of Tynwald
An Act of Tynwald is a statute passed by Tynwald, the parliament of the Isle of Man.
Structure
Acts of Tynwald are structured in a similar format to Acts of the Parliament of the United Kingdom.
Commencement
Originally, each Act began with the ...
). This Act explicitly specified that the payment was for 'defence and other common services', and in the associated Annual Contribution Agreement the amount was set at 5% of the Island's Common Purse receipts, at the time around £100,000.
The Isle of Man Act 1958 (An Act of Parliament) repealed the 1866 Act of Parliament, thereby ending the legal obligation to pay £10,000 that had remained in force until that time.
In 1973, the Kilbrandon Commission on the Constitution stated that the contribution should be considered a voluntary payment.
In 1978, Tynwald halved the percentage of the Common Purse receipts that were remitted to the UK Treasury from 5% to 2.5%. This change was imposed unilaterally by the Isle of Man without consultation with the United Kingdom, who continued to press for a 5% payment.
The Contribution Act 1956 required annual extension by Tynwald, and this was withheld in 1992.
A new agreement was reached in 1994 whereby a payment of £1,750,000 would be made, to be increased in line with changes in GDP (for comparison, the 1992 payment had been £2,295,247). It was stated that the sum "does not and will not reflect either the range of, nor the net true cost of the respective services mutually provided by the two Governments" and that "the United Kingdom Government accepts such annual amount as a token of appreciation and support by the Isle of Man Government to the United Kingdom Government."
Common Services Agreement
Today, the Isle of Man has a Common Services Agreement with the United Kingdom, whereby payment is made for defence, foreign representation, and other work done by the departments of the UK Government on behalf of the Island and its people – excluding NHS health care in the UK for Manx residents, which is currently charged to the Isle of Man Government on an 'as-used' basis. In 2002 the payment made was £2.4 million, and is a set proportion of Common Purse receipts. However, if defence alone was proportioned according to the relative populations, the Manx contribution would be in excess of £29 million, some ten times larger.
References
{{reflist
External links
Customs and Excise Agreement 1979, as amended by the Customs and Excise (Amendment) Agreement 1994
* [https://web.archive.org/web/20110812023704/http://www.gov.im/lib/docs/cso/sharingarrangementsfurtherrevisionoc.pdf Further Revision of the July 2007 Modernisation of the Arrangements for the Sharing of Common Duties Between the UK and the Isle of Man]
Foreign relations of the Isle of Man
Economy of the Isle of Man