Lost in Translation

Jul 30, 2018

Sunday Business Post, 29 July 2018
Perhaps a big part of the reason English has become the default language for much international trade diplomacy and culture is the capacity of its speakers to borrow.  No word for night attire, or no word for a single-storey house?  Well then, borrow pyjamas and bungalow, both from India.  As a general rule, borrowings of words like pyjamas and bungalow (and even smithereens from Irish) used in former British colonies become fully assimilated as proper English words.  But English seems to keep its distance with other borrowed words by insisting on inverted commas or italics to denote their alien origins and genesis within a different mindset, hence terms like schadenfreude to connote malicious glee. 

Some concepts can only be adequately described in another language.  So what word can be used to describe the latest EU enquiries into the conduct of the UK which were buried beneath the clamour of the Westminster chaos of the last fortnight?  Maybe schadenfreude.  Certainly chutzpah.  Is the Commission totally politically deaf to the Brexit scenarios now unfolding?

A New Phenomenon?

It is curious how little the EU institutions seems to care about Brexit.  This is not a new phenomenon.  Prior to the 2016 Brexit referendum, the then UK Prime Minister David Cameron went to Brussels to try to persuade the Commission to deliver some concessions which would sweeten the referendum debate and help ensure that the United Kingdom remained in the EU.  He didn't come back with very much in February 2016.  There was an agreement that EU aspirations for closer member country unity would not apply to the UK.  Also the regulatory dividing lines between the City of London and the Eurozone were strengthened.  

But Cameron made little ground in the critical area of limiting the provision of welfare benefits by the UK to EU migrants, and this became a toxic element within the Brexit referendum campaign.  Contrast those limited concessions to the gymnastics the EU institutions have been capable of performing to keep Greece in the Eurozone, or to ensure that the EU state aid rules which are designed to maintain a level playing pitch for business did not prejudice German reunification.  How different might the Brexit referendum campaign have been, had Cameron received the same degree of flexibility?

Consistent

At least the Commission rigidity towards the UK is consistent.  Just last week the Commission announced it would be chasing the UK for three separate alleged breaches of EU tax rules.  The first of these has to do with how the VAT system is operated.  The Commission is maintaining that the UK isn’t providing the other member countries with enough information to deal with cross border VAT refunds, in breach of EU regulations on cooperation.  The second has to do with the UK seeming to offer better tax relief for losses on shares in UK businesses than for losses on shares in EU businesses.  The last alleged breach is similar to the second, except this time involving the tax relief available on bad business loans where a lender is better off having loaned to a UK business than to an EU business.  

In the overall scheme of things these breaches, if they are indeed breaches, would seem to be relatively minor and technical in nature.  Yet they are corrosive at a time when the UK is putting forward plans for its future relationship with the EU.  Those UK plans, if adopted, would involve a high degree of trust between Brussels and the UK in the administration of VAT and customs. 

Countering Speculation

On Tuesday this week, Jim Harra who is the deputy chief executive of the UK Revenue authority HM Revenue and Customs, had a letter published in The Times newspaper.  He was attempting to counter speculation that his organisation would not be capable of dealing with future Brexit related obligations, and referred to customs obligations in particular.  This latest round of EU infringement proceedings do little to help Mr Harra’s case.  More significantly, they do little to help the current round of Brexit negotiations between the EU chief Brexit negotiator Michel Barnier and the UK team, now led by the Prime Minister.

The authorities within the EU charged with policing member country activity, like the State Aid division headed by Margrethe Vestager or the tax and customs division headed by Pierre Moscovici, are formidable adversaries.  Within their policy remit, arguably they do a good job and the rules can’t just be suspended to suit the priorities of the day.  But how sensible is any policy which prioritises the functioning of the single market rules above a unique political crisis among the EU Member States?  As Michel Barnier has observed, he wants to ensure that the Brexit negotiations are unique – a once off event.  Are his former colleagues in the Commission really helping him when they raise minor breaches against member countries already struggling with the rules? 

The European Union is a tool for its members, not a stick to beat them with.  The infringement proceedings launched against the UK last week do not make the UK decision to leave the EU more justifiable, but it certainly makes it more comprehensible.  English has had a word of its own for such EU proceedings since the 16th century.  The word is crazy. 

Brian Keegan is Director of Public Policy and Taxation at Chartered Accountants Ireland