Hurrah, pass the Pimms! After decades of near-slavery, 52% of Britons have voted to leave the European Union. A move long overdue. This decision was immediately validated when the Prime Minister resigned and the pound sterling plummeted to a historic low. Hurrah! Here on the continent, brave Albion’s rush towards bigger and better things raises questions about Nexits, Frexits and Spexits. This can’t be good.
Speaking as a Brit who was raised in the Netherlands and obtained dual nationality in 2003 (“just in case”), I am seriously disappointed by the outcome of the Referendum. It feels like a betrayal. The EU was established as a way of ensuring peace between the European nations. Given this continent’s grim recent past, the idea of a structural approach to preserving peace is anything but gratuitous. The EU is not a “super state” waiting to happen; it is a permanent conversation between a large group of countries over issues ranging from the very important to the slightly bizarre. The EU is the embodiment of what Winston Churchill referred to as “jaw jaw” (which is infinitely preferable to the alternative, “war war”).
I have trouble understanding how European unity survived the Cold War but not Nigel Farage (but here’s a party political gangsta rap which should make us all feel better:)
Freedoms and State aid: You can’t pick and chose
I have no idea what the ultimate impact of the Brexit will be on taxation. No one does. The answer obviously depends in part on the terms negotiated between the UK and the EU. There has been talk of cherry picking by the UK; some think that the Island race hopes to keep the nice bits of the EU (fundamental freedoms, exchange of information) whilst ditching all the nasty stuff (State aid prohibition, BEPS-directive). And I admit: perhaps Brexit is a stroke of fiscal genius – I can’t rule it out – but it doesn’t seem very likely.
By its own volition, the UK will soon be a third country and – this is cruel fact of life – third countries don’t get the same cushy deal as Member States. The UK cannot reasonably expect continued access to the internal market, but with no strings attached. I get why the future of cross-border loss utilisation and the compensation of withholding tax is not trending on Twitter right now. Still, the ‘have your cake and eat it’ tactic seems sufficiently telling to be true. Indeed, a two-faced approach would be in keeping with the UK’s broader position vis-à-vis corporate tax. Remember, we are talking about the country that wants to crack down on tax planning whilst at the same time sporting the world’s most competitive tax system. When it comes to tax competition, the UK reminds me of Schödinger’s cat.
Taxpayers’ rights: New obstacles to cross-border activities?
The EU offers a number of benefits for taxpayers. This includes the rights to freedom of establishment and capital. Over the years, there has been a significant amount of litigation and law-making to ensure these rights are engrained in the UK tax system. The EU provided protection for UK taxpayers both against those evil continentals and against certain forms of discrimination by the UK itself. Although the UK’s tax treaty network will probably provide some solace, leaving the relative safety of the European rules will likely be disadvantageous to taxpayers. Will there be another Marks & Spencer or Cadbury Schweppes once the TFEU is gone? Or will taxpayers just have to endure discriminatory treatment? With a stiff upper lip and a bit of Blitz spirit?
What about the UK’s tax havens?
I am also curious whether Brexit will affect the treatment British tax havens such as Jersey and Gibraltar. Is it time to include these territories on the proposed EU blacklist? And would it be churlish to say that it’d serve them right? Only time will tell.