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.
Where they are identical, and where, in consequence, goods may be moved freely between the two countries without Customs restrictions, an arrangement called a 'Common Purse' exists, whereby the Island receives in respect of such duties the same amount per capita as Great Britain does, plus an addition, calculated according to a formula which allows for the number of persons temporarily visiting the Island and the larger quantity of dutiable commodities which it is calculated they consume.In summary, the combined Customs revenue was first divided proportional to population.
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'.
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.
Subject to the charges aforesaid the sum of ten thousand pounds out of the duties shall be brought and paid into the Receipt of Her Majesty's Exchequer distinctly and apart from all other branches of the public revenue, and shall go and make part of the Consolidated Fund of the United Kingdom of Great Britain and Ireland.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 our view, if this matter is to be pursued at all it should be by means of direct discussion between the United Kingdom and Island Governments.In 1978, Tynwald halved the percentage of the Common Purse receipts that were remitted to the UK Treasury from 5% to 2.5%.
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.