Freeports favoured by Boris Johnson could be used to dodge tax, warned expert

Boris Johnson’s plan to build Brexit “freeports” could open to the door to money laundering, according to an expert report.

The scheme could allow areas to operate outside the UK’s customs regime, meaning taxes on imports would not apply.

Grimsby, Teesside and Aberdeen are among potential locations.

Supporters estimate the trade zones could trigger a 150,000 jobs bonanza, generating billions for the economy, while revitalising struggling industrial regions.

The race frontrunner has spoken of his support for freeports

They can also offer other tax breaks, including waiving business rates and giving companies in the free zones a holiday from paying employees’ national insurance contributions.

But an October 2018 report by the European Parliament’s special committee on financial crimes, tax evasion and tax avoidance revealed fears over freeports.

Giving evidence to MEPs, financial intelligence expert Charles Carr said: “I’ve studied financial crime for the last 25 years in and out of Europe and around the world, and economic zones and freeports, you have to conclude, are vulnerable locations for money laundering and financial crime.

“The reason why I say this is because there is a lot of information that we don’t know about freeports and economic zones.

“There’s a lot of trade that goes on between the parties and the owners in these zones that we’re not fully aware of.”

Grimsby Town
Grimsby could become home to a freeport

He added: “There is a huge amount of money laundering going through trade, and freeports are all about trade, so we start making logical conclusions to this.”

However, Mr Carr also told how freeports could unleash an economic boom.

“There are a few freeports where high value product is kept, so there are some benefits to this because it’s a secure location, it helps with foreign direct investment, it helps promote trade, it’s good for efficiencies of tax, it breaks down barriers, and it also adds a layer of confidentiality, which is not always bad,” he said.

An introduction to a separate European Parliament study, also from last October, compared freeports to offshore tax havens.

“Freeports are conducive to secrecy,” it said.

Teesside is also in the frame

“In their preferential treatment, they resemble offshore financial centres, offering both high security and discretion and allowing transactions to be made without attracting attention of regulators and direct tax authorities.”

Mr Johnson has backed freeports, signalling he would roll them out after Brexit if he wins the Tory leadership race.

He said: “As Prime Minister, I will do everything I can to boost investment and economic success across the entire United Kingdom, and taking advantage of the opportunities afforded by leaving the EU on October 31 to introduce freeports is an excellent way to boost businesses and trade in regions that Westminster has neglected to pay attention to for far too long.”

Supporters point to the success of Le Freeport in Luxembourg, which was pioneered by EU Commission chief Jean-Claude Juncker when he was the country’s Prime Minister.

Jean-Claude Juncker was PM of Luxembourg when Le Freeport was launched

The super-rich use it to store art, fine wine and vintage cars – and crucially, they do not have to pay import taxes, VAT or capital gains tax on anything held or sold within the zone.

But concerns about the system spiralled when Le Freeport’s biggest shareholder, Swiss businessman Yves Bouvier, was arrested in 2015 on charges of defrauding clients by misrepresenting the value of artworks.

He denies all charges and legal cases are ongoing.


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