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**Hugh** · 05-05-2019, 14:55

Quote:

Originally Posted by Sephiroth

would you need to work out the tariffs if it’s VAT? And how does it work with Switzerland which is not in the CU but has open border with France?

Switzerland Is an Associate Member of the Schengen Area, which allows free movement of people.

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As you come to the end of the airport approach road and hang a right, aiming to drive through Geneva city centre and then back into France, you are immediately stopped by heavy border infrastructure.

Three beige buildings with French and Swiss customs confront you, along with offices for both tax authorities. Europeans, accustomed to crossing other internal land borders within the EU, find this quite odd. Switzerland is part of the EU’s Schengen area, so there are no passport checks required for entry. For food and almost all tradeable industrial and agricultural goods, Switzerland’s regulations are also fully aligned with those of the EU. Both sides accept the others’ regulations. In reality, the Swiss copy and paste Brussels regulations into their domestic laws, allowing the landlocked state effectively to be a member of the EU single market for goods.

Border infrastructure and customs declarations are necessary, however, because Switzerland is not part of the EU’s customs union or value added tax regime, which are separate from the single market. This difference requires both sides to build and staff a hard border with sometimes significant delays.

The French worry that someone might, for example, buy a frighteningly expensive Swiss watch, receive a Swiss tax refund since the watch is for export, and then not declare it for French VAT. The Swiss rigorously check that people have not spent more than €300 each on goods from France, depriving its exchequer of sales taxes.

For trading companies, each load requires a customs declaration, multiple forms and stamps by the tax authorities to ensure that the formalities are closed on each side before goods cross the tax border. Within the Union none of this applies because complete regulatory alignment is married to an EU VAT regime, all within the customs union. This VAT system has its problems, but ensures that goods can flow across borders with no formalities.

The Swiss-French border is efficient. There are no applicable tariffs. Regulations for goods are fully aligned. There is a common travel area between the two countries without the need for passport checks. But the border requires hard infrastructure because Switzerland is not in the EU VAT regime nor its customs union. Border frictions have separated markets either side of the border to the detriment of consumers.