Final Expenditure Revenue Sharing Arrangement (FERSA)

Summary

The requester asked for copies of the 2016 Final Expenditure Revenue Sharing Arrangement (FERSA), the 2018 Customs and Excise Amendment Agreement, and other active VAT sharing arrangements. The Treasury withheld the 2016 and 2020 FERSA agreements citing international relations exemptions, while confirming the 2018 amendment is publicly available.

Key Facts

• The 2016 FERSA is a strictly confidential arrangement between the Isle of Man Treasury and Her Majesty's Treasury (HMT).
• Disclosure of the FERSA was refused under Section 29 of the Freedom of Information Act to avoid prejudicing relations with the UK.
• The Customs and Excise (Amendment) Agreement 2018 is publicly available on the Tynwald website.
• A new FERSA agreement was signed in March 2020, superseding the 2016 version, and is also held as confidential.
• The public interest test concluded that maintaining the exemption outweighs the benefits of disclosure due to potential damage to the Island's reputation and future negotiations.

Data Disclosed

• 2016
• 2018
• 2020-02-17
• 2020-04-27
• 2020-05-06
• 2nd March 2016
• March 2020
• GC 2018/0006
• Section 29(1)(a)
• Section 20(1)
• 1979

Exemptions Cited

• Section 29(1)(a) - International Relations (qualified exemption)
• Section 20(1) - Information available to the applicant by other means (absolute exemption)

Original Request

A copy of the Final Expenditure Revenue Sharing Arrangement (FERSA) and a copy of the summary which appears to have been prepared in 2016 (see for example from 2016 https://www.gov.im/news/2016/mar/15/isle-of-man-indirect-tax-revenue-sharing/) Unfortunately the government website information regarding revenue sharing appears to be at least 4 years out of date. https://www.gov.im/categories/tax-vat-and-your-money/customs-and-excise/international-trade-and-the-isle-of-man-requirements-and-standards/revenue-sharing/

Data Tables (3)

Full Response Text

Freedom of Information Seyrsnys Fysseree

The Treasury Government Office, Douglas Isle of Man, IM1 3PU

Telephone: (01624) 685605 Email: FOI.Treasury@gov.im

Government Website: www.gov.im

Our ref: 1183849 27 April 2020

Dear ###

Thank you for your request dated 16 February 2020 and for the clarification you subsequently provided on 20 April 2020. Subject to us providing you with some further advice and assistance in respect of the information you initial requested, you subsequently confirmed that you required - i. A copy of the full version of the FERSA that was signed in 2016 ii. A copy of the Customs and Excise (Amendment) Agreement 2018 iii. Any other agreement or arrangement relating to the VAT sharing process between the UK and Isle of Man that remains in force. I am pleased to respond to each part of your request in turn. i) A copy of the full version of FERSA that was signed in 2016 In 2016 a revision of the formula that governs the sharing of joint indirect tax revenues under the 1979 Customs and Excise Agreement, was initially agreed between Treasury and Her Majesty’s Treasury (HMT). The arrangement is known as the Final Expenditure Revenue Sharing Arrangement, or FERSA. FERSA is a strictly confidential arrangement between the Treasury and HMT. Since it was made, officers have been working on producing a separate stand-alone document which, once agreed with HMT, will be published.
As FERSA is strictly confidential there is no expectation on either parties part that it will be published. HMT have not agreed to disclosure of the 2016 FERSA and consequently, any action by the Treasury to make such a publication will damage relations between Treasury and HMT.

For these reasons, in this instance we are unable to provide you with a copy of the 2016 FERSA and section 29 of the Act (International Relations) is engaged.
Specifically, information is qualified exempt information under section 29(1)(a) of the Act if its disclosure would, or would be likely to, prejudice relations between the Island and the United Kingdom. In this instance, we are satisfied that disclosure would prejudice those relations.
As section 29(1) of the Act is a qualified exemption, a public interest test is required in respect of the disclosure. This has been considered as shown below – Factors in favour of disclosure Factors against disclosure There will be general public interest in understanding the detailed FERSA. Disclosure would provoke a negative reaction from the UK Government, which would damage the Isle of Man’s relations with the UK. Disclosure would promote transparency in respect of the agreement and its impact on the Island. Disclosure would undermine the Isle of Man’s reputation as a trustworthy jurisdiction, which may have ramifications beyond the damage to the immediate relationship. Disclosure would likely damage future negotiations between the IoM Government and the UK, which overall, would have an adverse impact on the Island. In taking into account these factors, the Treasury considers that the factors in favour of maintaining the exemption outweigh the factors in favour of disclosing the information. ii) A copy of the Customs and Excise (Amendment) Agreement 2018 The Customs and Excise (Amendment) Agreement 2018 (GC 2018/0006) is publically available through the Tynwald website via – http://www.tynwald.org.im/business/opqp/sittings/20182021/2018-GC-0006.pdf For this reason, an absolute exemption under section 20(1) of the Act applies (Information available to the applicant by other means) as the agreement is reasonably accessible to you free of charge, other than by virtue of this request. As advised in our previous correspondence to you, a copy of the Customs and Excise Agreement, which incorporates the changes arising through the 2018 amendment, is already publically available via -https://www.gov.im/categories/tax-vat-and-your-

money/customs-and-excise/international-trade-and-the-isle-of-man-requirements-and- standards/revenue-sharing/ iii) Any other agreement or arrangement relating to the VAT sharing process between the UK and Isle of Man that remains in force. In March 2020, it was announced that the Treasury Minister had now signed an agreement between HMT and IoM Treasury concerning the implementation of FERSA. This agreement supersedes the previous FERSA dated 2nd March 2016. As with the previous FERSA agreement signed in March 2016, this agreement signed in March 2020 is a strictly confidential arrangement between the Treasury and HMT.
For this reason, section 29 of the Act (International Relations) is again engaged.
Specifically, information is qualified exempt information under section 29(1)(a) of the Act if its disclosure would, or would be likely to, prejudice relations between the Island and the United Kingdom. In this instance, we are satisfied that disclosure would prejudice those relations.
As section 29 is a qualified exemption, a public interest test is required. This is set out below – Factors in favour of disclosure Factors against disclosure There will be general public interest in reviewing the document as soon as possible. Disclosure would provoke a negative reaction from the UK Government, which would damage the Isle of Man’s relations with the UK. Disclosure would promote transparency in respect of the agreement and its impact on the Island. Disclosure would undermine the Isle of Man’s reputation as a trustworthy jurisdiction, which may have ramifications beyond the damage to the immediate relationship. Disclosure would likely damage future negotiations between the IoM Government and the UK, which overall, would have an adverse impact on the Island. The document will be published once agreement has been reached between the parties of that publication date. In taking these factors into account, the Treasury has determined that the factors in favour of maintaining the exemption under section 29 of the Act outweigh the factors in favour of disclosure.

In addition, and as previously noted, since 2016 there has always been an intention to publish a stand-alone summary of the aforementioned agreement, once agreed by HMT. That agreement has not yet been reached. In this instance therefore, a qualified exemption applies under section 41(1) of the Act (Information for future publication) is engaged as this document is being held by the Treasury and HMT, with a view to it being published at some future date. As section 41 is a qualified exemption, a public interest test is required. This is set out below - Factors in favour of disclosure Factors against disclosure There will be general public interest in reviewing the document. Disclosure would contravene a previous undertaking in respect of the publication by the Treasury. Publication may be delayed if reaching an agreement is postponed owing to the ongoing pandemic situation. Publication is expected to take place within the next few months. Publication would damage relations between the Isle of Man and HMT. In taking these factors into account, the Treasury has determined that the factors in favour of maintaining the exemption under section 41 of the Act outweigh the factors in favour of disclosure. Please quote the reference number 1183849 in any future communications.

Your right to request a review

If you are unhappy with this response to your freedom of information request, you may ask us to carry out an internal review of the response, by completing a complaint form and submitting it electronically or by delivery/post.

An electronic version of our complaint form can be found by going to our website at https://services.gov.im/freedom-of-information/Review . If you would like a paper version of our complaint form to be sent to you by post, please contact me and I will be happy to arrange for this. Your review request should explain why you are dissatisfied with this response, and should be made as soon as practicable. We will respond as soon as the review has been concluded.

If you are not satisfied with the result of the review, you then have the right to appeal to the Information Commissioner for a decision on;

1. Whether we have responded to your request for information in accordance with Part 2 of the Freedom of Information Act 2015; or
2. Whether we are justified in refusing to give you the information requested.
   In response to an application for review, the Information Commissioner may, at any time, attempt to resolve a matter by negotiation, conciliation, mediation or another form of alternative dispute resolution and will have regard to any outcome of this in making any subsequent decision. More detailed information on your right to a review can be found on the Information Commissioner’s website at www.inforights.im. Should you have any queries concerning this letter, please do not hesitate to contact me. Further information about freedom of information requests can be found at www.gov.im/foi.

I will now close your request as of this date.

Yours sincerely