Brexit, Trade and Tax

Brexit, Trade and Tax Presented by: Timothy Lyons QC, BL, Brussels' Bar Agenda 1. Tax and the Brexit negotiations 2. Tax and third countries - like the UK 3. Tax and the Ireland/NI Protocol 4. Tax, the UK, WTO and post-Brexit trade agreements 5. The UK's post-Brexit tax strategy - external/internal Tax And The Brexit Negotiations - The Political Declaration para 77 • "uphold the common high standards ... at the end of the transition period in the areas of state aid....and relevant tax matters. The Parties should in particular...commit to the principles of good governance in the area of taxation and to the curbing of harmful tax practices" - COM(2016) 24 final • PD implements "External Tax Strategy for Effective Taxation" • "Certain negotiations were delayed as third countries found the wording of the clause to be unclear on the scope of the good governance requirements." (para 3.1) - Titles of the draft agreements: • UK: "Comprehensive Free Trade Agreement" plus mezedes EU: "New Partnership with the UK" • - Is it surprising agreement is difficult? EU draft includes: • LPFS 2:1, 2:25 and 2:26 state aid, tax good governance, standards - • Includes X-border tax rulings and tax-planning • Protocol - VAT and mutual assistance on taxes UK draft "International Tax Cooperation and Standards" (art 29.1) • "Promote good governance in tax matters and improve international cooperation in the tax area". • "Good governance...reflecting the OECD principles concerning fair tax competition, the global standards on tax transparency and exchange of information, and the OECD minimum standards against Base Erosion and Profit Shifting...." - Contrasts in LPF approach: • Extent, e.g., in relation to tax rulings? • Enforceability? • Conflict between "new partnership" and "FTA" continues Tax And Third Countries - Like The UK - UK draft agreement Art 3.3: an FTA provision? - A product originates in a Party: - When used there in production of a product, and it originates in: - - • The other Party; • A relevant partner country; (RPC incl. EU partners) • A GSP country. Deal or no deal - selected results of 3rd country status • Cumulation and EU agreements • UK binding origin and EU binding origin to UK EORI • UK binding tariff and EU binding origin to UK EORI • Various authorizations • UK/EU VAT imports and exports • LOB provisions in tax treaties • Direct tax directives • Instruments for X-border co-op and EU databases Deal or no deal - selected results • The Border Operating Model • GVMS and the Kent access permit • Increased use of transit regimes • Decreased attraction of UK land bridge Tax and the Ireland/NI Protocol - NI subject to: • TFEU Arts 30 and 110 - duties and internal tax (Art 5.5) • 2010/24/EU mutual assistance - tax recovery (Art 5.4, Annex 2) • EU VAT and excise law on goods (Art 8, Annex 3) • EU state aid (Art 10) - No duty GB → NI if direct transport unless “at risk" (Art 5.1) - Goods presumed "at risk" unless: • No commercial processing in NI • Joint Committee criteria met (Art 5.2) - What are the Joint Committee criteria? - Tax/duties "excepted matter" if applying to all UK: NI Act 1998 - The substantive and procedural tax law of UK/NI is affected - EU state aid law applies: • "In respect of measures which affect that trade between Northern Ireland and the Union which is subject to this Protocol." - Some administrative results: • 3 EU customs codes - GB (UK, CI, IoM), XI and XU • UK has 2 VAT regimes  GB: goods and services  NI: goods - EU VAT  Services - UK VAT - Some UK legislative results: • The Internal Market Bill • The Taxation (Post-Transition Period) Bill Tax And Post-Brexit Trade Agreements - Old question: What does EU law do to tax? - New question: What does the EU/UK agreement do to tax? - New question: What do UK and WTO agreements do to tax? - One answer: FA 2020, section 97 To retaliate with tariffs the SoS must: - - • Have regard to international arrangements • Be authorized under international law Tax exclusion clauses: • "The provisions of this Agreement shall not apply to taxation." • Denmark/Russia Bilateral Investment Treaty 1993 quoted in Rosin vest 2010 Tax exclusion in bilateral trade agreements: • "This Agreement applies to taxation measures only in so far as such application is necessary to give effect to the provisions of this Agreement." • - UK/Japan Comprehensive Economic Partnership Agreement Art 14.2 Other provisions affecting tax systems include: • Protection for tax agreements (Art 1.4.3) • Effective or equitable imposition/collection (Arts 1.4.6/8.3.2) • Subsidy includes "tax concession" (Art 12.6.2) Post-Brexit UK Tax Strategy - Why does the EU have an external tax strategy? - Does the UK need one? - If so, should domestic policy choices be made first? - What should a UK external tax strategy look like?