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IoM Seeks Fair Split From UK Revenue-Sharing Deal

by Jason Gorringe,, London

23 November 2012

The Isle of Man government is to ask more than 1,000 households to submit details of their spending to help assess whether the island receives a fair share of revenues under the long-standing value-added tax (VAT) and customs revenue-sharing agreement with the United Kingdom.

Under arrangements dating back centuries but formalized in 1979, the Isle of Man and the United Kingdom share revenues from hydrocarbon oil duty, lottery duty, value-added tax, pool betting duty, agricultural duty, and tobacco, alcohol and customs duties.

The system was introduced to enable the two countries to share a customs union, allowing the Isle of Man duty free entry into the European Union, and preventing UK import duties from being levied on goods bound for the Isle of Man but transiting through the UK.

However, in October 2009, the UK government announced that it would revise the Isle of Man's share of revenues. The change equated to a fall in revenue for the Isle of Man worth GBP50m (USD80m) in 2010; GBP100m in 2011; and GBP140m each year thereafter, representative of a quarter of total revenues received by the Isle of Man from the agreement in 2009. Presently revenues from the agreement account for more than half of the Manx government's annual income.

Explaining the purpose of the survey, Stephen Carse, Government Economic Adviser and Head of the Economic Affairs Division, stated: "When the Customs and Excise Agreement was revised it was announced that updated information about the island's spending patterns would be required to underpin the calculation of our share of VAT and customs revenues. The importance of this household survey cannot be overstated. With 57% of government's revenue coming via the Customs and Excise Agreement, the outcome will potentially be critical for the public finances. It is by necessity a huge survey, and we will be relying on the voluntary participation of residents. [This is] a historic exercise to make sure our island gets its fair share of revenues for the future funding of important public services."

TAGS: Isle of Man | tax | value added tax (VAT) | fiscal policy | law | international financial centres (IFC) | United Kingdom | offshore | import duty

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