Saturday, 3 August 2019

UKMPG comments on "no-deal" Brexit


With Free Ports on the agenda, the UK Major Ports Group has reiterated its priorities as, officially at least, the country’s new Prime Minister Boris Johnson prepares to leave the EU without a deal if the Irish "backstop" is not removed from deal negotiated by Theresa May.



In his PM acceptance speech Boris Johnson remarked that "free ports...will drive growth and thousands of high-skilled jobs in left-behind areas." There is clear support for this. For example, Ben Houchen, The Mayor of Tees Valley Combined Area, has said that turning Teesport into a Free Port is just "common sense." Johnson previously stated that he would like to see about six Free Port clusters in the UK.

“Regardless of your views on Brexit, the right thing to do is to prepare for a range of Brexit outcomes and do so quickly," said Tim Morris, CEO of UKMPG. "Most of Britain’s ports already successfully handle huge volumes of non-EU trade and have the systems and processes to do more.

"The ports sector has successfully navigated major change in the past and has been working hard to prepare for Brexit. But it is clear that significant parts of UK business are not ready for Brexit and are facing difficulties in becoming so."

As such, Morris continued, the Government must do four very practical things as a matter of urgency to speed the preparation of UK business for Brexit:
  • Reset the short-term border measures that were in place for March 29th to October 31st so industry has more certainty on what it’s preparing for
  • Substantially step up the public information campaign on getting ready for Brexit and look at proactively issuing international trader registration numbers
  • Make sure that short-term border measures for ferry ports apply to all ports so British business has the widest possible range of options for easier post-Brexit trading
  • Deliver the upgrades to common customs IT systems necessary for handling substantially higher volumes of declarations
Turning to the controversial topic of Free Ports, which the UK cannot introduce as a member of the EU, Morris said: "Ports welcome all positive interest in boosting investment opportunities...What sits behind this interest is an overdue recognition of the role ports and the maritime sector more generally can play in growing employment and prosperity in coastal communities all around the UK. These are communities who do often face challenging socio-economic conditions and in most part voted to leave the EU.

"Free Ports are a potentially transformational opportunity for locations with the right conditions and strong local support. They have proved to be successful in stimulating investment and jobs in a range of locations around the world. However, they are not a silver bullet for all locations nor the only way of boosting the UK’s main global gateways as Britain prepares for Brexit. They are one of a range of measures which would improve productivity and trade in and around the UK’s ports, adding more value to the UK and local economies.

"Free ports are one part of a broader package of reforms to development rules that the UK’s ports sector is calling for to boost investment in coastal regions. Critical to realising the benefits from this investment for the rest of the UK is improved connectivity for ports with inland economic and population centres.”

Free Ports are not just controversial within the UK, but would be contested by continental ports even if the UK leaves the EU. The Dutch, in particular, are vehemently opposed, as Free Ports in the UK would threaten the Netherlands’ status as a single logistics space. 

One industry expert, Sue Terpilowski, MBE, FCILT, recently told WorldCargo News that if Free Ports are introduced, they have to bring genuine economic value to the communities where they are located and not just be tax havens, as they have proved to be in many developing countries.

Officially the EU regards Free Ports as spaces for money-laundering. From a different perspective, ruling out Free Ports is one way of protecting North Continent ports from ports in economically deprived areas elsewhere in the Bloc. 

For certain, the EU will not countenance Free Ports in the UK and agree also to maintain more or less tariff-free UK access to the European market post-Brexit. Hence, raising the "spectre" of UK Free Ports in this way could be a negotiating card for Prime Minister Johnson and his team.






Liz Truss's plan for tax-free zones condemned by Labour

Proposal equated to setting up tax havens and money-laundering hubs on British soil
Free ports like the ones Liz Truss suggests have been criticised for enabling tax evasion.
 Free ports like the ones Liz Truss suggests have been criticised for enabling tax evasion. Photograph: Frank Augstein/AP
Liz Truss, the new trade secretary, will promise to create up to 10 new tax-free zones at ports and airports in a move condemned by Labour as setting up tax havens and money-laundering opportunities along Britain’s coasts.
The cabinet minister, a free marketeer whose political hero is former chancellor Nigel Lawson, said the plan for so-called “free ports” could revitalise transport and trade hubs like Margaret Thatcher did for the London Docklands in the 1980s.
Boris Johnson championed free ports when he took office last week, but the Singapore-style tax-free zones are controversial and have been identified by the EU as a money-laundering risk.
Under the plans, ports including Teesport, Milford Haven, Port of Tyne and London Gateway could become standalone economic zones, considered independent for customs purposes, that charge no taxes or tariffs on imports.
Free ports are typically used to store high-value items such as valuable artworks, precious stones or antiques in places such as Luxembourg, Singapore, Beijing, Monaco and Delaware. They were heavily criticised by a European parliament report last year for facilitating “illegal activity” such as tax evasion and money laundering.
Those advising Truss on a new free port panel will include Eamonn Butler, the director of the rightwing, libertarian Adam Smith Institute, and Tom Clougherty, the head of tax at the Thatcherite thinktank the Centre for Policy Studies (CPS). Emma Jones, who runs a small business network, and Daniel Korski, a former adviser to David Cameron will also be on the panel.
One CPS report by Rishi Sunak, now chief secretary to the Treasury, claimed that free ports could create 86,000 jobs for the British economy if they were as successful as in the US. But others have warned that investment and jobs can simply end up moving there from other parts of the country with a loss of revenue for the exchequer.
Speaking on a visit to Teesside, Truss will say: “Freedoms transformed London’s Docklands in the 1980s, and free ports will do the same for towns and cities across the UK. They will onshore enterprise and manufacturing as the gateway to our future prosperity, creating thousands of jobs.
“We will have a truly independent trade policy after we leave the EU on 31 October. I look forward to working with the free ports advisory panel to create the world’s most advanced free port model and launch the new ports as soon as possible.”
The Department for International Trade described free ports as hubs for business and enterprise that “could be free of unnecessary checks and paperwork, and include customs and tax benefits”.
It would mean areas of the UK where businesses did not have to pay the usual taxes or go through normal planning laws. The department pointed to 250 free trade zones in the US where 420,000 people are employed.

However, Barry Gardiner, shadow trade secretary, said it would create a “race to the bottom that will have money launderers and tax dodgers rubbing their hands with glee”.
“Free ports and free enterprise zones risk companies shutting up shop in one part of the country in order to exploit tax breaks elsewhere, and, worst of all, lower employment rights,” he said.

“The British people did not vote for this new administration and they certainly did not vote to see their jobs and livelihoods threatened in favour of gifting further tax breaks to big companies and their bosses.”
Owen Smith, a Labour MP and supporter of the People’s Vote campaign for a second EU referendum, said creating onshore tax havens would be “likely to suck away jobs from businesses that pay their taxes than anything else” and create a boom in self-storage for art thieves.
“If that happens at any scale it is likely to undermine the public finances and ultimately lessen the money available to fund the police, schools and hospitals,” he said.
“Free ports will do nothing to address the multitude of supply crises that no deal will create. Free ports do not make it easier or faster to get vital medicines or food or chemicals into the country. Free ports do not solve the problems of the Northern Ireland border, nor do they stop goods on our supermarket shelves being hit with import taxes.
“Free ports do, though, offer great new opportunities to anyone who wants to avoid customs checks while they store goods. One industry could indeed boom – self-storage for art thieves.”
Harry Theochari, chairman of Maritime UK, representing the shipping and ports industry, gave a cautious response, saying free ports were “one important piece of a larger puzzle” in terms of boosting growth.
“Implementing free ports successfully requires time, collaboration and careful planning, but we are keen to work closely with government to ensure their plans are a success for the long term,” he said.

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What is a free port? All you need to know about the free-trade zones

Plans have been mooted for tax-free zones to offset post-Brexit tariffs. But are they needed? And do they actually work? 
 Singapore, perhaps the biggest tax free zone - or free port - in the world. Photograph: Edgar Su/Reuters
Boris Johnson is considering establishing free ports in the UK if he succeeds Theresa May as UK prime minister in July. Belfast, Teesside and Aberdeen are among potential sites for the tax-free economic zones. 

What is a free port?

Free ports or zones are designated by the government as areas with little to no tax in order to encourage economic activity. While located geographically within a country, they essentially exist outside its borders for tax purposes.
Companies operating within free ports can benefit from deferring the payment of taxes until their products are moved elsewhere, or can avoid them altogether if they bring in goods to store or manufacture on site before exporting them again.

Are they are a new idea?

Free ports have existed for centuries. The medieval Cinque Ports of southern England and the northern European Hanseatic League benefited from special privileges, while bonded warehouses in the 19th century handed out tax breaks on alcohol and tobacco.
Ireland created the Shannon free zone in 1959 to encourage activity at its struggling airport.
Britain operated several free ports as recently as 2012, when the government stopped renewing their licences. Created in the 1980s, they included Birmingham, Belfast, Cardiff, Liverpool, Prestwick and Southampton. A free port remains in operation on the Isle of Man – a crown dependency and therefore not part of the EU or UK.

Does the UK need to leave the EU to establish free ports?

Within the EU, there are currently 82 free ports or zones in 21 EU member states, including historic free ports such as Copenhagen and Bremen, raising questions over whether the UK would need to leave the EU to make more use of them.
The UK has in recent years created 61 enterprise zones – which differ from free zones but still benefit from tax breaks – including the Ceramic Valley in Stoke-on-Trent and the Dorset innovation park.
Obstacles could arise, however, if the government created free zones with particularly aggressive benefits equivalent to tax havens, which could be contested under EU law. Other nations could still object at the World Trade Organisation, while aggressive tax policies and state support could hinder a post-Brexit trade deal with the EU.
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Would free zones benefit the UK?

Free zones could help avoid tariffs in case of a no-deal Brexit. The construction group Mace argues the creation of free ports could create 150,000 new jobs and add £9bn a year to the UK economy, while narrowing the north-south divide.
However, academics at the UK Trade Policy Observatory, run by Sussex University and the Chatham House thinktank and viewed as Britain’s foremost body of trade expertise, dismissed the claim and suggested there would be limited impact.
Free ports might simply defer the point when taxes are paid, as imports would still need to reach final customers across the country. The incentives may also promote the relocation of activity that would have taken place anyway, from one part of the UK to another.
Tax breaks could mean a loss of revenue for the Treasury. Free ports risk facilitating money laundering and tax evasion, as goods are usually not subject to checks that are standard elsewhere.

Since you’re here…

… we have a small favour to ask. More people are reading and supporting The Guardian’s independent, investigative journalism than ever before. And unlike many news organisations, we have chosen an approach that allows us to keep our journalism accessible to all, regardless of where they live or what they can afford. But we need your ongoing support to keep working as we do.
The Guardian will engage with the most critical issues of our time – from the escalating climate catastrophe to widespread inequality to the influence of big tech on our lives. At a time when factual information is a necessity, we believe that each of us, around the world, deserves access to accurate reporting with integrity at its heart.
Our editorial independence means we set our own agenda and voice our own opinions. Guardian journalism is free from commercial and political bias and not influenced by billionaire owners or shareholders. This means we can give a voice to those less heard, explore where others turn away, and rigorously challenge those in power.
We need your support to keep delivering quality journalism, to maintain our openness and to protect our precious independence. Every reader contribution, big or small, is so valuable. 

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