Michel Barnier says the UK cannot collect taxes on behalf of the EU, undermining the notion of a “combined” customs area as defined by the UK.
The UK government is proposing a system a customs arrangement that would maintain the status quo for trade in industrial and agricultural goods. Such “frictionless trade” is essential for pan-European value chains – from food supply logistics to car manufacturing – as well as the desire to avoid a “hard border” in Ireland.
However, the EU will not allow the UK to collect taxes on its behalf, which means that the “combination” of the two customs territories would be impracticable.
“The EU cannot and the EU will not delegate the application of its customs policy and rules and VAT and excises duty collection to a non-member who would not be subject to the EU’s governance structures,”Barnier said.
Brussels had good reasons to distrust UK tax collection capacity. Even prior to Brexit, the UK has been the Single Markets “soft underbelly.”
For years, Chinese gangs used Dover and Felixstowe to flood the Single Market with systematically undervalued goods. In April 2017, the EU’s anti-fraud office, the UK was ordered to pay a €2bn fine for its “systemic incompetency.”
This is more the case since, after Brexit, the UK will no longer accept European Court of Justice jurisdiction in case of any dispute that may arise.
Following the rejection of the system proposed by the UK, Brexit Secretary Dominic Raab announced the two parties would meet by mid-August to continue negotiations with a view to sealing a deal by October 2018.