Thread by @faisalislam

So what is the rather important VAT issue as it applies to Brexit & Irish border?

Already a difference in the applied rates of VAT north and south -and yet there is no need for border checks...

But..that is underpinned by access to EU VAT IT system, protected in backstop: /1

So the Backstop Article 9/ Annexe 6 said the following aspects of EU VAT law would continue to apply to NI - in order to prevent need for VAT border checks - common system- scope, refunds, anti-fraud cooperation, exemptions, application to Norway/ Swiss: /2

The basic point is that this “solution” on VAT was in the backstop but was intended to be fleshed out in the transition period. As this negotiation promises to find final arrangements form NI - an operable legal treaty text needed now if backstop goes... /3

The key issue - indeed the whole point of having a common VAT system - is to prevent “unfair” competition and fraud.

So existing solution (which I’m told is still basis of what is being negotiated tonight) is NI in UK VAT area but in full alignment with those VAT laws above /4

Basically having to do now what was left to Joint Committee to sort out over year or 2

balancing act for EU: extent of the distortion to single market - NI producers having advantages not available to French/ ROI. For UK: extent NI is left de facto if not de jure in EU VAT area

... the problem is not just having to sort this quickly. The commitments to a generally level playing field helped fudge & smooth things along - now gone (?). VAT cases very common at the European Court of Justice - indeed UK itself facing £2bn one over Chinese imports. /6

... this is about import VAT. Normally chargeable at point of import, which requires a “tax point” to be created via a customs declaration.

Declaration can be avoided with quarterly VAT returns, but only if there is information sharing with EU member states and exporters.../7