In all the discussion about the Irish border, most of us can end up feeling pretty bamboozled by the whole thing. However, there are some facts that are worth remembering which actually provide the keys to a future solution.
Firstly, it is worth reminding ourselves of the present situation. The UK and Republic of Ireland have a Common Travel Area which means that there is completely free movement of people between the UK and the Republic. There are different currencies, VAT rates, agricultural support regimes and rates of Excise duty applicable on either side of the border.
If a Northern Irish trader exports something to the Republic, they invoice it without VAT under the despatch code and will then show on their monthly sales list the value sold to that customer in the preceding month. The customer in the Republic will declare the import VAT at the applicable Irish rate on their VAT return for the period in question. This system is policed by the customs authorities on either side of the border and throughout the EU by random inspections and the analysis of submitted Sales Lists and “summary declaration” Intrastat reports.
Interestingly, if the Guinness factory ships a consignment to a customer in Northern Ireland there is not only VAT but also Excise Duty to be paid in Northern Ireland. Excise Duty is not VAT and has VAT charged on it and it is applicable principally to alcohol, tobacco and fuel. This is not collected at the border, as in days of old, but from the customer after the consignment has been received. This is the culmination of a chain of steps that starts with the shipper advising the customs authorities in the Republic that the Guinness is being shipped and its destination. It relies on co-operation between customs authorities on both sides of the border but has been proven to work well. Enforcement takes places with spot checks by customs officials and trading standards inspectors as well as analysis of the traffic taking place as evidenced by the document trails.
Fuel is another interesting one and shows how even with an open border at present, the authorities on both sides have been putting enormous efforts into controlling the illicit use of untaxed Agricultural Diesel. Many have witnessed officials from the Republic stopping cars to check that they are running on taxed fuel.
The Prime Minister has proposed an elegant way of addressing problems raised by the EU and others in order to keep the border open and trade free. However, his plans are really not necessary as even in the event of a “No Deal” their concerns can easily be dealt with.
Firstly the Common Travel Area predates our accession to the EU and therefore means than all non-trade traffic will continue to move back and forth without impediment. Stories of people who work on the opposite side of the border from where they live, being prevented from doing so, is therefore misplaced.
Secondly, there is no – and I repeat no – requirement by the WTO, for either side to install any border infrastructure. What the WTO does require is that the law applicable to goods crossing the Northern Ireland border is the same as that applicable to goods crossing the UK border elsewhere.
The problem therefore boils down to an accounting issue: how do we make certain that the relevant tariffs are paid and that the goods sold by Northern Irish businesses into the Republic and EU Single Market comply with its rules. The vast majority of the traders in question will have turnovers of more than £85,000 and therefore will be registered for VAT, subject to VAT rules and required to make monthly or quarterly VAT returns.
As we saw above, we already have two very good systems for handling the collection of UK and Republic of Ireland Excise duties and accounting for the VAT on cross-border trade. These systems are entirely electronic, require no border infrastructure and are fully tried and tested. Therefore by making a few small changes to the Sales List and Intrastat supplementary declarations, it would be perfectly possible to collect any tariffs due. HMRC has already developed a system along these lines for importers to use in the event of a “No Deal” called TSP, Transitional Simplified Procedures.
Making sure that goods entering the EU Single Market via the Republic meet the applicable standards and regulations of the Single Market is a bit of a non-issue. It is always up to an importer who seeks to sell goods in their market to make sure that those goods meet the requirements of the laws and standards of that market. When procuring goods, they will be aware of this and therefore require of the supplier to only supply the correct versions. At present this is policed by national authorities on the whole as a result of intelligence and away from borders.
Trade is determined by supply and demand. Whether they are seen as hard or soft, open or shut, borders are simply one of a number of steps in the process of the willing seller supplying what the willing buyer wants. I strongly believe that if there were a will from the EU and Dublin to find a way to co-exist with an open border, then there are a number of ways – and the simplest are already being used at this moment by their own officials.
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