Free ports: business boosters or dirty money havens?

London – Britain has launched a 10-week consultation aimed at creating 10 so-called ‘free ports’ to stimulate the post-Brexit economy.

The specially designated ports, which exist in various forms around the world, are seen as a boost to businesses.

But some question their ability to stimulate trade and argue that they facilitate money laundering and tax evasion for the wealthy.

 

– Tax incentives

 

Free ports — similar to free zones or enterprise zones — are usually located near ports or airports.

Like “duty free” zones, they are considered outside the host country’s normal tax and customs territory.

Such zones are typically subject to special regulatory requirements, tax breaks and government support.

However, free ports specifically aim to encourage businesses that import, process and re-export goods.

They allow businesses to import goods or raw materials and then re-export them with simplified customs documentation and without tariffs.

 

– Variants worldwide

 

The EU counts more than 80 free zones — in countries including Germany, Luxembourg, Ireland and France as well as in Britain — which are similar to free ports but more restrictive.

Several thousand variants of the zones exist globally, particularly in the United States and Singapore.

Britain previously experimented with the concept under prime minister Margaret Thatcher in the 1980s, and some 38 free zones were designated between 1981 and 1996.

They were concentrated in regions undergoing deindustrialisation, notably the suburbs of Newcastle and in London’s Docklands, which went on to become the financial hub around Canary Wharf.

Britain does not currently have a free port, and the government has not revealed where they will be located.

But it is widely expected to choose sites in relatively poor parts of northern England, where Prime Minister Boris Johnson’s Tories won numerous seats in December elections on pledges of revitalising the region.

 

– ‘Unleash potential’

 

By leaving the EU, Britain will be able to create free ports without having to comply with the bloc’s rules, such as on state aid, or even the more flexible strictures of the World Trade Organisation.

Johnson’s government says it wants to “unleash the potential” of Britain’s historic ports by attracting new businesses to the sites, in turn spreading jobs and investment.

Number of goods vehicles travelling from the UK to EU ports per year

 

– Invitation to dirty money?

 

The merits of free ports are contested.

Critics say they merely move economic activity that would naturally occur in one place to another, without creating real net gains while eating into public finances.

The Tax Justice Network (TJN) has called them “free self-storage” for the rich and powerful.

Meanwhile the European Parliament called for the bloc’s free zones to be scrapped following a report on tax evasion and money laundering.

The largest collection of art in the world is said to be currently sitting in Geneva Freeport, a warehouse area near the Swiss city’s airport.

Alex Cobham, of the non-governmental TJN, said the Mona Lisa could be put in a secret deposit box in a free port and it would be “almost impossible” for authorities to locate it.

“If I want to reward a drug dealer or to corrupt a politician, I just give them the key to the secret box and no one will know it (the painting) has changed hands,” he told AFP.

Meanwhile Duncan Hames, of Transparency International UK, warned that Britain already had difficulties tackling money laundering — which could worsen with free ports.

“The government is recognising the need to deal with dirty money in luxury UK property… It needs to take great care that it does not open another door through which illicit wealth can enter the country,” he said in a statement.

By Véronique Dupont