Boris Johnson, the frontrunner to become the UK’s next prime minister, has announced plans to establish a series of freeports around the country, which can be used to store valuable works of art, cars and jewellery without incurring customs or sales tax. Johnson’s vision involves turning parts of the UK into Singapore-style tax-free zones, but the use of freeports in the European Union has sparked controversy.
At hustings held yesterday in Northern Ireland for Tory party members, Johnson said: “We could do freeports [if the UK leaves the European Union (EU) as scheduled on 31 October]. It would be a massive boost to this economy, but only once we come out. I will have about six of them, by the way. We should definitely be doing freeports and tax-free zones. They have delivered around the world. I think there are around 130 countries that have them. We don’t, because of our membership of the EU. And there are plainly areas that would benefit from them.”
There were nonetheless around 82 “freezones” (normally an area of a country where taxes and tariffs do not apply) in Europe in late 2017, according to a report published last October by the European Parliamentary Research Service. Guy de Jonquières, a former correspondent at the Financial Times, tweeted that “the EU does allow free zones and there are more than 90 of them, including the Isle of Man. How can Boris Johnson be so badly informed?”
In a letter dated 8 January, the German MEP Wolf Klinz called on the European Commission president Jean-Claude Juncker to close loopholes that potentially allow for financial crimes to be committed at freeports after concerns were raised by the EU’s Tax3 committee. Klinz called for an investigation into the management of Le Freeport Luxembourg but Juncker rejected allegations of irregularities related to its management.
David Arendt co-founded Le Freeport in Luxembourg and resigned as the managing director in late 2016. “I don’t know which freeports or freezones Boris Johnson has in mind,” he tells The Art Newspaper, adding that the creation of freezones and freeports in the EU’s customs union is regulated according to its Common Customs code under very strict guidelines. These include the operation of freeports and freezones under the supervision of customs officers to whom incoming and outgoing goods have to be declared in detail.
“The quid pro quo is a suspension of VAT and customs duties on goods placed in the freeport and when traded while there. When the UK eventually leaves the EU and depending on any exit agreement with the EU 27 [member states], these rules and others in the Common Customs code may no longer apply,” he says.
East coast towns in the UK such as Teesside, Aberdeen and Peterhead could become free zones under the plans submitted to Johnson for consideration. But his proposal drew fire from other politicians including the Liberal Democrat MP Ed Davey who told the Guardian: “We should be leading the world in business transparency, not promoting structures that have the potential to facilitate money laundering.”
Boris Johnson did not immediately respond to a request for comment.