UK to slash import duties in no deal Brexit
In the event of a no deal Brexit, the UK will adopt a temporary tariff regime setting the majority of import duties at 0% for a period of up to 12 months, in a move which would have significant implications for cross-border trade between Northern Ireland and the Republic of Ireland
13 Mar 2019
Ahead of today’s no deal vote, the government has published details of the temporary regime, which would apply while a full consultation and review on a permanent approach to tariffs is undertaken.
British businesses would not pay customs duties on the majority of goods when importing into the UK if there is no withdrawal agreement by 29 March.
Under the temporary tariff, 87% of total imports to the UK by value would be eligible for tariff free access.
Tariffs would still apply to 13% of goods imported into the UK. This includes a mixture of tariffs and quotas on beef, lamb, pork, poultry and some dairy to support farmers and producers who have historically been protected through high EU tariffs.
A number of tariffs on finished vehicles would be retained to support the automotive sector and in light of broader challenging market conditions. However, car makers relying on EU supply chains would not face additional tariffs on car parts imported from the EU to prevent disruption to supply chains.
In addition, the Treasury says there are a number of sectors where tariffs help provide support for UK producers against unfair global trading practices, such as dumping and state subsidies. Tariffs would be retained for these products, including certain ceramics, fertiliser and fuel.
Tariffs would also be retained on a set of goods, including bananas, raw cane sugar, and certain kinds of fish, to meet the UK’s commitment to supporting developing countries.
Trade Policy Minister George Hollingbery said: ‘If we leave without a deal, we will set the majority of our import tariffs to zero, whilst maintaining tariffs for the most sensitive industries.
‘This balanced approach will help to support British jobs and avoid potential price spikes that would hit the poorest households the hardest.
‘It represents a modest liberalisation of tariffs and we will be monitoring the economy closely, as well as consulting with businesses, to decide what our tariffs should be after this transitional period.’
The government has also confirmed that it will take a temporary approach to avoid new checks and controls on goods at the Northern Ireland land border if the UK leaves the EU without a deal. The UK’s temporary import tariffs will therefore not apply to goods crossing from Ireland into Northern Ireland.
To prevent unfair treatment of Northern Ireland businesses, goods arriving from Ireland would still be subject to the same VAT and excise duty as today and the UK government would continue to collect these taxes on Irish goods in future.
VAT registered businesses would continue to account for VAT on their normal VAT returns. Small businesses trading across the border and not currently VAT registered would be able to report VAT online periodically, without any new processes at the border. As in Great Britain, businesses currently registered on the EU Excise system would register on a UK equivalent.
However, goods entering the rest of the UK from the Republic of Ireland would face tariffs which will be high in some sectors and be a particular threat to the Irish beef and dairy sectors, who sell a large proportion to the British market.
The decision not to apply tariffs to goods crossing the border means that although Britain will impose tariffs on beef and dairy products, all Irish beef and dairy products will be able to enter Northern Ireland tariff-free.
Northern Ireland secretary Karen Bradley said: ‘The government has been clear that a deal with the EU is the best outcome for Northern Ireland.
‘But we will do all we can to support people and businesses across Northern Ireland in the event that we leave without a deal. The measures announced today recognise the unique circumstances of Northern Ireland. These arrangements can only be temporary and short-term.’
HMRC has not provided detailed figures for the economic impact of cutting import taxes. In the event of a no deal scenario, full estimates of the exchequer impact will be produced and will be set out at a later date subject to scrutiny by the Office for Budget Responsibility.
However, in 2017-18, HMRC collected £3.4bn in customs duties, of which 80% was remitted to the EU.
If the UK leaves the EU without a deal, the UK would retain all of the customs duty it collected. It would also, under most favoured nation (MFN) rules, be required to apply the same rates of duty on a good from the EU as from any other Word Trade Organisation (WTO)-member nation with which it does not have a preferential arrangement in place.
Products whose duties have been set to zero will not generate any revenue whereas those that are imported at a non-zero tariff rate will generate some revenue. The overall amount of revenue generated will depend on many factors, including how the applied duties change consumer and producer behaviour.
Report by Pat Sweet