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Tax receipts to be hammered

UK warned of huge cost of leaving EU

Port of Grangemouth

Port of Grangemouth

The UK would suffer from being outside the single market and could lose £8 billion in tax receipts, according to the Institute for Fiscal Studies.

It says that failure to agree satisfactory trade arrangements outside the EU could add up to 4% or £70 billion of lost economic output.

 

“While leaving the EU will free the UK from having to make a budgetary contribution, loss of trade could depress tax receipts by a larger amount,” the IFS report says.

It argues that the UK signing its own free trade agreement with the EU, or adopting the rules of the World Trade Organisation would still involve tariffs or other barriers to free trade in goods and services.

The IFS casts doubt on arguments that the UK can still negotiate access to the EU’s markets without any form of membership.

“Any country in the World Trade Organisation – from Afghanistan to Zimbabwe – has ‘access’ to the EU as an export destination,” it says.

“Single Market ‘membership’ by contrast involves elimination of barriers to trade in a way that no existing trade deal, customs union or free trade area achieves.

“In particular it means reducing ‘non-tariff’ barriers like licensing and other regulatory constraints to supplying goods or services.

Ian Mitchell, IFS research associate and co-author of the report, said: “From an economic point of view we still face some very big choices indeed in terms of our future relationship with the EU.

“There is all the difference in the world between ‘access to’ and ‘membership of’ the single market. Membership is likely to offer significant economic benefits, particularly for trade in services.”

The report says that the special advantage of being an EU member is that its single market reduced or eliminated barriers to trading in services – such as the need for licences or other regulations.

European leaders say that the UK cannot expect to be part of the single market without accepting the free movement of labour.

 

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