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Intrastat

February 27, 2014

You’re going to have to bear with me.  I’m going to talk about Intrastat, and about Administrative Burden, and unless you’re a statistician by trade or inclination, they’re about the most snooze-worthy topics imaginable.  Try and stay awake at the back  –  I’ll smuggle in a joke or a quiz somewhere- (or consider printing this entry out and reading it in bed and you’re almost guarantzzzzzzzz…)

I’m awake.  Honest!

OK then, look at this page of incredibly boring trade statistics.  Or don’t, but DO read this explanation:

These statistics record the movement – for trade purposes – of goods between the UK and both EU and non-EU countries.

They are collected from the EU-wide Intrastat survey and from Customs import and export entries, both administered by HMRC.

Now, I read this as meaning we’ve got trade statistics collected by two different methods; within the EU via Instrastat, and outside the EU from “Customs import and export entries”.  So my first thought is, are we comparing like with like?  I’m guessing that there are good reasons why not, because the EU is supposed to be a free trading zone and there are different customs duties applied to goods from outside the EU.

Intrastat is statistics (the “stats” part) from trading inside, “intra”, the EU.  With me so far?  But there’s no need, theoretically, for people to tell the authorities what they’re exporting and importing within the EU, so the Intrastat process seems to be finely balanced between forcing people to provide data that gives them no individual benefit, and obtaining data which does have some kind of collective benefit.  The benefit or otherwise of having trade statistics at all is left as an exercise for the class.  Write on one side of the paper only, and, please, refrain from showing your workings.

Now the UK is pretty groovy in the field of administrative burden; we have a high threshold for VAT registration (is it still the highest in Europe?  Anyone?  Bueller?) We used to have a serious programme of reduction in administrative burden …

All right, it’s probably time to talk about administrative burden now.  Get an expresso, I’ll wait.

“Administrative burden” is a way of conceptualising the cost of regulatory action.  Think about it this way.  If the government makes you spend one afternoon a year filling in your tax return, you lose an afternoon out of your life.  You could have been reading a book, watching bad telly, taking your kids to the park…  But there isn’t – theoretically – a monetary value to stick on that.  But if a business has to spend an afternoon filling in forms, there conceptually is a hard monetary cost to that.  The three hours your hairdresser spends filling in her tax return is three hours that she isn’t cutting hair, so she’s theoretically lost 3 x her hourly profit.  That’s the measure of the “administrative burden” of regulation.

(Sidebar for the excessively caffeinated; in 2010 the government decided  your time in the “reading a book, watching bad telly…” example does have, if not a cost, at least a value.  It’s £14.20 an hour.  So there.)

So.  There’s an “administrative burden” – a cost to business of the time they spend filling in and sending off the forms – to “intrastat” – the statistical information about movement of goods inside the EU.

Now interestingly enough the last government had a five year mission… I mean, it set up a five year programme to reduce the administrative burden on business by 10%.  Although, rather heartbreakingly for those of us who might have agonised over some of the work on it, by the time they’d gloriously achieved the target there was a new government who didn’t give a hoot about what the previous government had done but certainly wasn’t going to let anyone crow about them having reduced the regulatory burden when the new narrative was all about the red tape challenge.  So the results were in an unpublicised Budget paper called “Delivering a new relationship with business” and oooh look at paragraph 2.5 on, would you believe it, Intrastat:

2.5 On 1 January 2010 the exemption threshold for completing Intrastat forms for arrivals was reduced from 97 per cent to 95 per cent. All VAT registered businesses who reach the threshold for their value of arrivals or dispatches (goods arriving from or going to other Member States) are required to submit Intrastat declarations on a monthly basis. The threshold reduction means that around 6900 businesses will no longer have to complete the arrivals declaration and will benefit from a share of the estimated £1.8 million admin burden savings.

Now my calculator says that £1.8m divided by 6900 is £260.  So it cost £260-ish to fill in an Intrastat survey each year back in 2009?  It says it in the impact assessment, so it must be true.

Well if we look at the consultation into a further “simplification” of intrastat (closing date for comments 8th April) there are a couple of draft TIINs for the options under consideration.  Tick v.g. to the policy team for correct use of TIIN to cost out the options under consideration, by the way – the idea of doing an impact assessment is to look at the costs and benefits of options and decide on the best policy action according to the balance of costs and benefits.

So we are currently looking at options.

One of them, is the EU proposal to collect data only from exporters.  You can see the benefits: if you only ask one side of the transaction to report, you can halve the amount of data collected.  So I sell a million widgets to France and there’s only one form to fill in, the one saying I sold them, and not two – one by me and one by them – but provided the data is shared across europe the total information collected is still the same.

However we don’t seem to like that idea.  I’m not sure why, but the condoc drips condescension towards it:

“Theoretically, there are superficial benefits to be achieved by doing this…”

and

“It also appears to make the existing asymmetries between Member States data disappear overnight.” (and no, not my emphasis!)

Let’s have a look at the options and what they’d cost.

Option One – SIMSTAT proposal – removal of the requirement to submit arrivals declarations (with additional data requirements at dispatch)

In other words the EU proposal, to make the data collection one sided, from the sender only.  So you’d only collect information from exporters (and not from both importers and exporters) but you’d made the exporters give a bit more detail.

If you look at page 12 of the consultation document you’ll see the impact assessment suggests HMRC would have to spend £1.1m on computer equipment and the administrative burden on businesses would go UP by £0.6m.

(Irrelevant joke insert: What do you call a man with a plank on his head?  Edward.  I told you I’d smuggle in a joke if you stayed awake till the end.)

Then there’s option two, which seems to be the worst of all possible worlds: increase the data requirements on exporters and (slightly) reduce the numbers required to give information on imports, or, as the condoc has it

Option Two – SIMSTAT proposal (with additional data requirements at dispatch) – reducing coverage for arrivals to 90% to meet national requirements

This one still costs HMRC £1.1m AND increases the admin burden by £2.3m.  So let’s not do that, eh?

(oh, and Irrelevant Joke data: you have to pronounce it ‘ead wood)

Then there’s the Third Way.

Option Three – Alternative simplification proposal: 93% coverage for arrivals and dispatches (used for illustrative and comparative purposes)

This one apparently doesn’t cost HMRC anything AND it reduces the admin burden by £3.6m a year.  Oh, and it takes 8500 of the smallest businesses out of having to produce stats at all which, my calculator suggests, will save them £423 each and that seems quite a lot more than the £260 it was costing businesses in 2009 but there you go.

Now impact assessment theology would suggest it’s a no-brainer that you simply do that one; achieves the same objective and costs less.

So why are we having a public consultation on it?

The consultation is directed at people who either have to produce intrastat declarations, or make use of the resulting trade statistics.  But it’s the “how did we get here” bit of the consultation that interests me:

The EU Commission have put forward a proposal to modernise the Intrastat system which is targeted for implementation from 2017.

To offer a more immediate simplification, during 2013 HMRC informally consulted with businesses required to submit Intrastat declarations and users of Intrastat data on a proposal to reduce the coverage of trade on which data must be collected by the Intrastat system for arrivals from 95% to 93%. The UK, along with other Member States, worked with the EU Commission to deliver this change and as a consequence the EU legislation has been amended resulting in an increase to the Intrastat Exemption Threshold for arrivals from £600,000 to £1,200,000 from 1 January 2014.

So are we saying that we’ve already achieved option 3 and we don’t want any further change?  And that further change will add to HMRC and to businesses’ costs?  And we’re trying to persuade our fellow states that we don’t need to make any further change?

Well then, I go back to, why the consultation?

Are we – I wonder – hoping that affected international businesses will kick up a fuss in other european states and get them to back the UK proposal/status quo?  Or are we genuinely looking to confirm or refine our costing data, since there seems to be some question over the cost of the increased data requirements on the exporters if we went to the asymmetric method.

Speaking as a PhD student, wouldn’t it be cheaper, or at least more efficient, to spend some money on getting some research done?  Stick a few grand in the pot, get the other member states to do the same, and get someone to lead a research project and send a bunch of eager young PhDs and post-docs out to get some actual data from some actual businesses and write it up in a comprehensible way?  (And dear god no, I’m not pitching for the work!)

In other words, while Oliver Letwin might not think that consultation is the place to gather “views”, I’m not entirely certain it’s the right place to gather “data” either.  And maybe this is an instance where data would be more valuable than views.

(Irrelevant joke insert: What do you call a man with three planks on his head?  Edward Woodward.)

Thank you for staying awake.  As you were.

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