It is no secret that high-net-worth individuals and corporations look for tax-free zones as a way to maximize profits and investments. Countries must straddle a fine line regarding taxes. They want to collect taxes to fund the government and public projects, but also want to offer lower tax rates to attract new businesses, supporting employment and economic growth. Recently, Boris Johnson indicated that Belfast could potentially become a tax-free zone in the style of Singapore.
Boris Johnson’s statement came in response to a question in early July when he was in Belfast, the capital of Northern Ireland. Someone from the audience asked Johnson about that possibility and he indicated that it is a possibility. Johnson said that free ports were a potential option as a way to boost the country. In fact, Johnson indicated that this type of tax-free zone in various ports is part of his vision for the United Kingdom following Brexit.
Not Just Belfast
Based on his response, it seems as if Boris Johnson gave the idea of tax-free zones in port cities serious consideration even before officially becoming Prime Minister. Not only did he indicate this is a possibility for Belfast, but Johnson also said that he planned to create around six free ports in total if his vision comes to fruition. The key here is that this would be following the completion of Brexit.
Other potential economic zones under consideration include Teesside, Peterhead, and Aberdeen, all along the eastern coast of the United Kingdom. If these areas became economic zones, they would be independent when it comes to customs and not charge tariffs or taxes on imports.
Typical Uses of Free Ports
Historically, high-net-worth individuals usually use free ports as a way to store items of high value, like antiques, precious stones, and art. There is a great deal of government criticism of these free ports due to the lack of taxes paid there. Some in authority will always express concerns about those free ports encouraging money laundering and/or tax evasion.
Free ports have also found themselves in the middle of scandals in the past. The art scandal known as the Bouvier affair is one example. That scandal involved fraud and money laundering allegations connected to expensive paintings.
What Others Say
Locals in the area have suggested for a while that the area of Northern Ireland all function as a free port. That would be one way to get away the potential issue of customs duties in Northern Ireland. Leaders are struggling with the issue of customs duties in a post-Brexit landscape, making this an appealing option. If Northern Ireland served as a free port, imports could get processed there and avoid a great deal of hassle.
The region’s Federation of Small Businesses’ head, Tina McKenzie, indicated that free port status would transform the society. Those on Johnson’s leadership team had previously indicated that turning Peterhead or Aberdeen into a free port could potentially attract business investments and create 17,500 jobs. Chris Walker, the former Treasury economist, determined that creating free ports in seven existing northern ports would result in the creation of 150,000 jobs and an increase in trade by £12 billion.
Others, however, feel that even offering the idea of free ports seems like a desperate measure. Those same critics expressed concerns that turning Belfast and other ports into tax-free zones could open the gates to illegal activities. Specific concerns include money laundering and tax evasion. The Tax Justice Network has expressed these concerns vocally, citing past examples.
Now that Boris Johnson is Prime Minister, time will tell whether he goes ahead with the plans to create five or six new free ports in the United Kingdom following Brexit.
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