Freeport

Freeport

Freeports (also called free trade zones) are designated areas where the normal tax and tariff rules of the country in which they are based do not apply.

Freeports allow goods to be imported, manufactured and re-exported without being subject to checks, paperwork, or import taxes, known as tariffs. This means raw materials can be imported, then engineered into whole products for export.

Typically, companies operating in the zone pay lower taxes, such as reduced VAT and lower rates of employment tax.

But critics argue they simply defer the point when import tariffs are paid, which then still need to be paid at some stage.

UK freeports

In August 2019 the UK government announced it was planning to create up to 10 freeports across the UK after Brexit. Until 2012, the UK had seven freeports (including Liverpool, Southampton, the Port of Tilbury, the Port of Sheerness and Prestwick Airport) and Prime Minister Boris Johnson believes they could create jobs in "left-behind areas". International Trade Secretary Liz Truss said the move would create "thousands of jobs":

"Freeports transformed London's Docklands in the 1980s, and freeports will do the same for towns and cities across the UK."

Labour said the move involved no new investment and could attract money launderers and tax dodgers. Shadow International Trade Secretary Barry Gardiner said the planned UK freeports did not constitute new investment:

"It is a race to the bottom that will have money launderers and tax dodgers rubbing their hands with glee. Free ports and free enterprise zones risk companies shutting up shop in one part of the country in order to exploit tax breaks elsewhere, and, worst of all, lower employment rights."

"The British people did not vote for this new administration and they certainly did not vote to see their jobs and livelihoods threatened in favour of gifting further tax breaks to big companies and their bosses."

Freeports are allowed under EU law, although backers argue the benefits would be greater after Brexit if the UK is allowed to diverge from EU rules.

EU freeports

There are around 80 freeports in the EU, mostly in nations that joined the bloc after 2004.

Countries must respect EU State Aid rules and cannot financially support manufacturing firms located in the areas.

The EU does not encourage them, arguing it creates unfair competition between firms operating within them and those adhering to normal EU rules.

Supporters argue that after Brexit, their creation could bring greater benefits to the UK if the country no longer has to follow EU rules on subsidies.

Geneva Freeport: "premier place" to store valuable works of art

Eamonn Butler, a member of both free market think-tank the Adam Smith Institute and the government's new Freeports Advisory Panel, said freeports would set the UK "on the right course" after Brexit:

"they would provide safe harbour for trade in turbulent times and show that hi-tech hubs of enterprise, low taxes, deregulation and trade without restriction can rebalance the economy."

Freeports and Crime

Due to their lack of supervision, freeports are ideal for organised crime, both by intelligence agencies like the CIA and by crime gangs.

Several weapons and drugs smuggling schemes have connections to them. Panama’s Colón Free Trade Zone, with its proximity to the Panama Canal, is a beehive of illicit activity, having cooperated with smugglers to transport weapons and illicit goods to and from private militias across South America..

They don't even have to be by the ocean. The Geneva Freeport is a warehouse complex in Geneva, Switzerland, for the storage of art and other valuables and collectibles. The freeport has been described as the "premier place" to store valuable works of art, and users "come for the security and stay for the tax treatment". In September 1995, Swiss and Italian police raided the building and uncovered 3,800 historic artifacts worth an estimated $35 million and arrested the art dealer Giacomo Medici. He was later found guilty of "receiving stolen goods, illegal export of goods, and conspiracy to traffic" in May 2005.

 

Related Document

Title	Type	Publication date	Author(s)	Description
Document:Boris Johnson's first two priorities for post-Brexit Britain	Article	1 February 2020	Richard Murphy	Boris Johnson has admitted what Brexit was for. He wants to control and constrain people. The market in labour will be constrained. And let’s not for a moment pretend that a Freeport supports markets: freeports are instead about permitting the free movement of capital beyond the control of the state and without the imposition of any taxes.

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