Britain, Economic, European Union, Government, Politics, Society

Brexit: The Single Market & Related Options

BREXIT – ACCESS TO MARKETS

Single-Market

Brexit Briefing: The Single Market

AS Brexit negotiations begin to extricate the UK from the European Union, one of the biggest factors ministers will have to contend with is the issue of the single market. The EU has said that Britain will not be allowed to benefit from the free-trade arrangements once it has left the bloc, a major part of why the EU exists for the mutual benefit of constituent members. So, if the UK were forced to leave the single market (very much against its wishes), what could we end up with?

. The Norway Model

MEMBERSHIP of the European Economic Area (EEA) would put Britain alongside Norway, Iceland and Liechtenstein, and is what Remainers mean when they talk about staying in the ‘single market’. It would keep existing trading rules but take Britain out of the Common Agricultural Policy. However, we would also have to swallow EU laws without being able to influence them, accept rulings by European judges and carry on paying into the budget (Norway’s fee is estimated at around 90 per cent of the UK’s per person). Uncontrolled immigration would continue. Unacceptable to Tory Eurosceptics.

. The Swiss Model

A SORT of EEA minus. The Swiss are members of the European Free Trade Association but not the EEA. They have a series of bilateral trade deals with the EU, which cover trade in goods but very little in services such as banking. The Swiss can negotiate trade deals with third countries, but also make a huge financial contribution to the EU. They are inside the passport-free Schengen zone and have to accept free movement. This option is also toxic for Eurosceptics.

. The Ukraine Model

A JANUARY 2016 agreement between the EU and the Ukraine could form the basis for the UK deal. It includes trade market access and co-operation on defence and security but doesn’t require free movement or the application of EU law. However, the UK would also require a deal on financial services.

. PM’s ‘free trade deal’

IN JANUARY, the Prime Minister said she wanted a ‘deep and special partnership’ covering trade and security. At the same time she says – echoing the Leave campaign – that Britain should take back control of its laws, borders and money. That means no acceptance of EU laws, no more free movement and an end to ‘vast contributions’ to the EU budget. Open issues include immigration rules, how much the UK pays to belong to EU agencies such as Europol, the ‘divorce bill’ and what the new trade rules are. The time it takes to implement such a deal could give Mrs May room for manoeuvre.

. No deal

BRITAIN would revert to World Trade Organisation rules – meaning tariffs on some goods and services. Likely to mean no ‘passporting’ rights for the City of London to trade on the continent. It would create a legal and administrative vacuum on the rights of EU nationals in the UK and British ex-pats, the Irish border, security co-operation, and deals on aviation, agriculture and fishing. Chaotic in the short term.

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Business, Government, Legal, Society, Taxation

New tax offence to be made within Criminal Finances Act 2017

TAX EVASION

The UK Government is expected to bring into force a new tax offence in the Criminal Finances Act 2017. It is likely to become law in September.

What is startling about the new offence is that it will make a business guilty as a result of the criminal conduct of its employees and others who may act on its behalf.

Where an individual facilitates tax evasion the business will be guilty of failing to prevent that facilitation unless it can demonstrate that, at the time of the employee’s conduct, it had appropriate procedures in place to prevent facilitation arising.

This new offence will have an immediate impact for many firms. Implicitly, it also shows the UK Government’s preferred direction of travel for corporate liability, i.e. to criminalise business for the actions of connected persons.

The new tax offence will be of concern to banks, accountants, Independent Financial Advisors, and to anyone providing tax advice. Businesses are now eager to know what they should have in place to make sure that employees and others who act on their behalf are not facilitating tax evasion for clients and customers. They will also want to know how they can show that they have taken every reasonable step to prevent the facilitation of tax evasion in the first place. An organisation that is criminalised because of the actions of its employees or third parties will have serious implications for its long-term future and health.

There are some easy first steps that businesses can take to strengthen their position. Policies and procedures in place at present should be reviewed, with an emphasis on explaining to people what is and is not acceptable. These should be updated if it is deemed necessary in clarifying the position. Any procedural improvements should be freely communicated to all employees and others providing tax services for the business.

To understand the wider direction of travel for corporate liability we need to understand why there is a need for change. The historic approach to successfully prosecute a company required the identification of a person in the business who possessed a “directing mind and will” and who, specifically, condoned or was aware of the crime. Known as “the identification doctrine” there are a number of difficulties with applying this approach. For example, it may not be difficult to identify the ‘directing mind’ in a family-owned run business where all of the major decisions are taken by a small group of people. It is quite another for a prosecutor to identify the directing mind within a global business that has a complex structure and sophisticated approach to decision-making.

The new offence follows the same methodology and approach as the Bribery Act.

The UK Government has also been consulting on wider reform of corporate crime. One of the options being given serious consideration is a wider roll-out of the “failure to prevent” approach across the spectrum of economic crime. This will place an onus on a business not only to show that it has done no wrong, but also to demonstrate that the organisation is properly policing its employees and others acting on its behalf. Whilst not quite the end of the presumption of innocence until proven guilty, any firm who allows their employee or connected person to break the law had better have a very good story to tell.

 

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Britain, European Union, Finance

Macron tells British PM that UK can ‘always’ change its mind on Brexit

FRENCH-BRITISH RELATIONS

French President Emmanuel Macron Receives British Prime Minister Theresa May At Elysee Palace

The summit in Paris was intended to set out a joint approach to tackling terrorism and online radicalisation.

The French President, Emmanuel Macron, has told Theresa May that the door is “always open” for the UK to change its mind about Brexit.

Emmanuel Macron appeared to hold out the prospect of allowing Britain to re-enter the EU as the pair held a joint news conference in the garden of the Elysee Palace in Paris.

Mr Macron said: “Of course the door remains open, always open, until the negotiations come to an end.”

But he stressed that “once the negotiations have started, we should be well aware that it will be more difficult to move backwards”.

Their first bilateral meeting had the uncomfortable backdrop of Mrs May – abroad for the first time since losing her majority – meeting the President following his recent comfortable election victory and on the brink of big gains for his party in parliament.

It comes as the UK’s Brexit strategy has been thrown into doubt by the shock election result, with pressure on Mrs May from factions within and outside her party to water down her threat to withdraw Britain from the EU with “no deal”.

The Prime Minister insisted that the Brexit negotiations – due to start next week – would start on time and that there would be no requests for a delay from the British side.

But she dodged a question on whether she now intended to pursue a “soft Brexit”, saying: “We want to maintain a close relationship and close partnership with the EU and individual member states.”

She added that after the election there was a “unity of purpose that having voted to leave the EU, that the Government gets on and makes a success of it”.

The President – asked if he believed that is what Mrs May intended as the leader of a minority Government – said it was for her to comment on the UK’s intentions.

Mrs May is said to be close to formalising a confidence and supply agreement with the Democratic Unionist Party, which has reservations about leaving the EU Customs Union and would refuse a hard border with the Republic of Ireland.

The summit in Paris was intended to set out a joint approach to tackling terrorism and online radicalisation, including levying hefty fines on the tech giants such as Facebook, Twitter and YouTube for failing to remove extremist content.

Echoing some of the rhetoric from British ministers about the need to allow the security services to access encrypted messages, Mr Macron said the intelligence agencies must be able to access digital content “no matter where it is located”.

Both leaders have stressed their “solidarity” in the face of terrorism. Mrs May said that “nowhere is our co-operation closer than in the area of defence and security”, with both countries leading international efforts to attack Islamic State with airstrikes.

Earlier, the German finance minister Wolfgang Schauble said in an interview with Bloomberg that if the UK changed its mind on leaving the EU, “of course they would find open doors” in Europe.

 

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