Brexit 'will be an exercise in complexity management' says tax expert

Pictured at the PKF-FPM post-Budget breakfast in Newry are Brian Keegan (left) with PKF-FPM directors Paddy Harty, Lowry Grant and Malachy McLernon. At centre is Irish News business editor Gary McDonald, who chaired the breakfast. Photo: Darryl Mooney Photography
Gary McDonald Business Editor

BREXIT is going to be "an exercise in complexity management" for businesses on both sides of the border, a leading tax expert believes.

"And every time we kick over a stone, we'll find another serious problem," Brian Keegan told a business audience in Newry.

Mr Keegan, who is director of taxation at the Chartered Accountants Ireland, was delivering the keynote address at the annual PKF-FPM post-Budget breakfast in the Quays.

The nuts and bolts of Philip Hammond's October Budget were dealt with by PKF-FPM directors Paddy Harty (he spoke on income and capital tax budget outcomes), Malachy McLernon, who spoke on business tax budget implications, and Lowry Grant, who focused on the practicalities of Making Tax Digital.

But Mr Keegan concentrated his talk on Brexit, and offered up advice and answers - and set some conundrums - for the 200-strong audience.

On the border, he pointed to Niagara Falls and its location at a major junction between the US and Canada.

"This is a border which, technologically, is the most sophisticated that exists anywhere in the world, between two of the most advanced economies in the world, and yet they have queues upon queues upon queues, notwithstanding that they have broad trade agreements," he said.

"When you look at those queues you ask: how can anyone seriously suggest that digitalisation or IT is going to fix the border ills Brexit is going to bring for us, because it's not."

He said the withdrawal agreement being negotiated has nothing to do with withdrawal or extension, but is effectively to keep the UK de facto in the union until December 31 2020 for two reasons - firstly because EU operates seven-year budgets and the current one runs out on that date, so it keeps the bookkeeping simpler; and also because nobody is ready for the kind of checks and balances and controls that unwinding 43 years of cooperation have put in place.

Mr Keegan said that regardless of talk around Chequers and backstops "there has to be a border somewhere".

"Where's the border for the free movement of people? It's never going to be down the road from Newry or at the airport - it's going to be with employers, in recruitment agencies, with social security, in the health service.

"Free movement of people is not about individuals physically moving, but about their entitlement to access services and to access benefits and to access employment.

"And regarding the future arrangement around goods, there's going to have to be a border somewhere as well, and it might as well be in your warehouse or manufacturing plants, because somewhere there's going to have to be controls. That's inevitable. We can't have anything other than that, because the whole idea of a customs union and single market is to ensure that within that there is no barriers to trade.

"But there has to be some barriers to trade. Even if there are no customs tariffs, there must be controls somewhere, because the single market is about the movement of standards.

"For example, you might have a pallet of manufactured goods, where there's already an arrangement where there are no customs duties. But there'll still have to be a check.

For instance, what if the pallet isn't up to safety standards? What if the pallet is containing some sort of infestation of malignant worm that will do damage? They're the kind of checks we're going to have to deal with, and that makes life very difficult.

"Indeed Brexit is going to be an exercise in complexity management, and every time we kick over a stone we'll find another serious problem - like the Open Skies Agreement looking at where planes can and can't fly, or Euratom, which impacts the transport of nuclear materials round health centres so that cancer can be treated."

He added: "Inevitably there will have to be some form of extension and some form of future deal, but that will also mean that every single person in this room, whether you are an adviser or a businessperson, is going to have to deal with much more complexity."

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