The Common Purse Agreement entitles the Isle of Man to a share in the United Kingdom'sCustoms and Excise revenues in return for being in customs union 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 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. 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 without the permission of the UK Treasury. In addition, this means that VAT must be charged on Mann at the same rate as in the UK, and all VAT receipts are paid to the UK Treasury, 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 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.
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.
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:
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, and ensuring good governance within the Island. This payment was first introduced by the Isle of Man Customs, Harbours, and Public Purposes Act 1866. 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. 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 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. 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.
