Up to £10 billion per annum in taxes and another £10 billion per annum in spending are disappearing out of the UK thanks to a perfectly legal abuse of the Freedom of Establishment within the EU Single Market.
Multinationals are working in tandem with the governments of the smaller EU Member States – Ireland and Luxembourg in the forefront – to book their UK sales revenues into European bases in those countries, pay next-to-no-Corporation Tax here, and staff their UK supply chains with low-skill, low-wage labour. The high-value jobs and the majority of the spending goes to the Member State where the European base is located.
Those Member States have constructed aggressive tax regimes to attract multinationals, whose business models major on nebulous royalty and intercompany charging, and on construing their UK operation as being an agent, acting “on behalf of” their European base to sells its goods and services.
The same business models that have been assessed as yielding only £500 million in UK taxes now and £5.6 billion in spending, could in future yield £10.3 billion in taxes and £15.8 billion in spending – increases of approximately £10 billion in both taxes and spending. The taxes equate to 17% of the UK’s public spending deficit of £60 billion and the same amount as our annual net cash contributions into the EU. Leave the EU and cut the deficit by 33%.