Brexit bureaucratic onslaught deepens as UK economy loses £47bn as businesses drown in cross-border tax complexities

Wednesday 18 May 2022 12:09 pm

Red tape has increased significantly since Brexit, including new and additional tax rules

Cross-border tax complexities cost the UK economy £47.6bn in lost revenue last year, an average revenue loss of 16 per cent on total EU exports, according to recent industry data shared with AM City this morning.

The stress of navigating complex post-Brexit regulations continues to hold back growth for UK exporters and is causing major anxiety among business leaders, according to tax compliance technology firm Avalara, analyzing recent data from the Research Centre. Economic and Business (CEBR).


As the economy works to recover from the pandemic, many UK businesses remain optimistic about future growth opportunities in Europe, with almost three-quarters (72%) of respondents saying they have plans to expand into Europe. at least one more EU market.

In practice, however, the weight of compliance burdens and the realities of the EU’s sweeping tax reforms on sales outside the bloc appear to be weighing on these plans.

Just under a third (32 per cent) of respondents currently exporting to the EU plan to exit at least one market, with 3 in 5 (62 per cent) of companies revealing that the fear of being fined for compliance tax has recently caused them to reverse plans to sell property in a European country.

With little room for change in terms of UK exporters’ levels of tax compliance obligations, the research predicts that investment loss due to cross-border tax complexity is expected to result in a further loss of value of £16.1bn. sterling for the UK by 2026. .

“From the cost of Brexit-based regulatory changes to the uncertainty of the pandemic, anxiety levels have skyrocketed as tax complexity has become a major bureaucratic headache for business leaders. many sleepless nights,” said Alex Baulf, senior director of Global Indirect Taxes in Avalara.

Baulf said AM City that “compliance burdens on business are becoming almost unmanageable, and the fear of not meeting compliance standards is hampering growth opportunities for UK exporters. This is hurting the economy.”

He added that “businesses need greater support and clarity from regulators to help them navigate these changes and remove roadblocks, and they need to invest in digitization to remove more administrative and compliance burden.”

Nina Skero, chief executive of Cebr, further said that: “If the EU were part of the internal market, exporters would get just over £300bn in revenue, rather than the £252bn they actually earned.”

In addition to these lost sales to the EU, the export activity taking place carries an increased administrative burden which led to a further £386m loss in gross value added (GVA) last year, Skero emphasised.

“These company-level losses are hurting the outlook for economic growth, preventing an estimated £8.7bn of investment that could support GDP by a further £16.1bn over the long term.”

He explained that “this means that if UK companies were not hampered by the EU’s cross-border tax complexity, UK GDP in 2026 could be 0.63% higher,” it noted.

sleepless nights

Change is uncomfortable at best, but the constant stream of new regulations and increased workload to comply is causing significant stress for business leaders.

A third of respondents (33 percent) said they had lost sleep more than once due to anxiety caused by tax and compliance issues, and nearly two-thirds agreed that complying with tax obligations and regulations is the most stressful of running your business. .

Anxieties weighing on leaders’ minds include fear of the legal consequences of noncompliance (49 percent), concern about the complex terms and conditions they need to navigate (43 percent), concern that keeping up with with compliance means that they will lose the necessary time. for other tasks (33 percent), and fear of fines (31 percent).

Time spent on tax administrative tasks in particular is hurting productivity, and research estimates this caused a £386m loss in gross value added (GVA) overall.

To reduce the administrative burden of compliance, companies are increasingly investing in technology to free up capacity and automate these processes.

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