No-Deal Brexit Has Same Customs Cost as `Max Fac,' Tax Head Says

(Bloomberg) -- The U.K. tax authority said leaving the European Union without a deal would cost the country’s businesses about 20 billion pounds ($27 billion) a year, or about the same as one of the two proposals being considered by the government for a post-Brexit customs regime.

Businesses would have to file customs declarations in both a no-deal scenario and the so-called maximum facilitation that Prime Minister Theresa May’s inner Cabinet is analyzing, Jon Thompson, chief executive of HM Revenue & Customs, told lawmakers in Parliament on Tuesday. That makes the cost similar, he said, although his estimate for “max fac” doesn’t include any shipment delays.

Less than a year before Britain is due to leave the bloc, the government has yet to set out what kind of commercial and customs relationship it will seek from its biggest trading partner after Brexit.

Brexiters favor maximum facilitation -- using technology and trusted trader schemes to minimize trade disruption -- while May herself has backed a so-called customs partnership, in which Britain would levy tariffs at EU rates and then refund any difference if U.K. tariffs end up lower.

Thompson said last month that the Brexit supporters’ preferred model would cost about six times more than the close customs partnership, which he estimated at no more than 3.4 billion pounds a year.

His calculation for maximum facilitation was based on each customs declaration costing 32.50 pounds, multiplied by 200 million -- the number of intra-EU consignments in 2016 -- and then doubled to account for businesses on both sides of the border. Another 3 billion pounds to 7 billion pounds is added for rules of origin requirements.

Earlier in Tuesday’s session, officials representing the ports of Zeebrugge and Calais said they expect shipping costs to rise as a result of Brexit, while their preparations are being hampered by a lack of detail on what the final agreement -- if there is one -- will look like.

“We know there is Brexit but we don’t know exactly what Brexit means,” said Port of Calais Chief Executive Officer Benoit Rochet.

©2018 Bloomberg L.P.

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