UK government launches consultation on tax-free ports

The UK government has launched a consultation on the creation of up to 10 new freeports with tariff and duty exemptions.

The consultation is set to last 10 weeks, after which ports across the country will be invited to bid for freeport status.

Freeports are zones within countries that are officially declared to be outside of customs territory. Goods can be held in these zones without taxation before being re-exported. Raw materials can also be imported and used to manufacture products within the zone, before these products are shipped out.

The government has argued that freeports will encourage economic growth and investment, as well as creating thousands of new jobs. The idea was floated by Prime Minister Boris Johnson during his party leadership campaign last year.

However, acording to the UK Trade Policy Observatory (UKTPO), a partner of the University of Sussex, the benefits of freeports are minimal in terms of boosting trade, as tariffs still apply once goods move out of the freeport into customs territory; and the WTO Subsidies Code allows countries to impose off-setting duties on goods imported from these zones, if their subsidies and tax breaks are deemed unfair.

There is also a risk that freeports will be used for money laundering and the storage of illegal goods.

The UK had various freeports from 1984 until 2012, when the relevant legislation expired.

Source: GOV.UK, Reuters