Wednesday, April 04, 2007

EU Rebate Defeat

Forget it pal

So Gordo hasn't been able to renegotiate Bliar's EU rebate giveaway.

We blogged the original December 2005 debacle here. As you will recall, it was rushed through in the closing days of the glorious Bliar EU Presidency, never likely to be a great time for safeguarding the interests of British taxpayers.

Officially it cost us £1bn pa, but stripping out the spin, we reckoned the true cost was closer to £20bn over the next 7 years (projected net contributions of £42bn compared to £23bn over the previous 7 years). Bliar presumably felt we needed to pay for Warsaw's new metro system, given that our own Northern Line is already so superb (I'm very surprised he doesn't use it more often).

Gordo reckoned he could surely do better than that grandstanding idiot, and tried to blag some of it back. He's failed.

And he's failed because our "partners" told him unless he stuck with the original rebate giveaway, they wouldn't let us impose our new VAT collection system to cut down our muti-billion VAT fraud losses (the massive missing trader Carousel fraud- see BOM primer here, and all previous blogs gathered here).

Of course, the supreme irony- and you're going to like this- is that the only reason we have a VAT fraud problem in the first place is that we're in the EU. Because of that, we have to implement the complex French designed VAT system- which imposes reclaimable tax at every single stage of the production and wholesale supply chain- rather than the much simpler sales tax, which imposes tax only on the final retail sale, giving much less scope for fraud.

Once again, with the EU, it's heads you lose and tails you also lose. As we've blogged before, most serious analyses already said the net economic benefit of EU membership was roughly zero, even before the loss of rebate. We're now firmly in negative territory.

Of course, people like Bugs Bunny do argue that all the economic costs are worth it because of the huge political benefits.
Like help from our partners in springing the hostages from Iran.

PS According to telecoms industry expert Keith McMahon at the excellent Telebusillis, we should have held off. For one thing, "carousel fraud is being exported from the UK to all over Europe, and if Gordo could have waited a little longer, then the rest of the EU would have been begging HMRC for a solution. We could have sold the other 24 states consultancy services on solving the problem..."

And for another, "HMRC has temporarily put a block on paying out vat refunds which is really starting to bite on legitimate wholesalers, so can you imagine the problem being caused to the dodgier elements? In other words, hmrc is currently (if the telco jungle grapevine is to be believed) being very successful in the fight, and maybe doesn't need to introduce the changes. I'm not sure if this is legal though - I'm sure the French would just sit down and spent months examining the records before paying out anything - we could take a leaf out of their book and set up an office in Whitehaven for processing vat refund claims who businesses have to take all their paperwork.

Interestingly, I can't see a single point, apart from price arbitrage and fraud, why anyone who want to export mobile phone handsets and high value computer chips from the UK - we have zero manufacturing in these products (although a lot of r&d + design is done here) and most of the stuff comes into the uk from ali baba's bazaar in Dubai..."

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