The ConDem government has launched a new web site — called Your Freedom — that is dedicated, it says, to scrapping unnecessary laws.
I think there are a considerable number of laws that threaten my future liberty by preventing the collection of proper taxation payments from those who owe them, so meaning I and the rest of the population of this country will have to suffer cuts in services we can ill afford. I’ve already suggested one; here’s my next.
Low Value Consignment Relief (LVCR) relates to the import of goods, very largely from the Channel Islands on which VAT is not charged because of the exemption provided in UK law, and allowed under EU law, which permits with a sale value of less than £18 to be imported VAT free, even though VAT would be due on such imports if worth more than £18.
The relief has been massively abused, in my opinion. Most major retailers from Amazon to Tesco to Debenhams abuse the relief, either themselves or through independent fulfilment houses to whom their orders are re-directed. Those fulfilment houses ship goods from the UK, largely to order, and then post them back again. The export from the UK is VAT free. The return is VAT free and the UK High Street price including VAT is undermined, so undermining UK tax revenues by more than £100 million a year, undermining the UK High Street by forcing shop closures and undermining UK jobs as a result: a massive triple whammy.
This abuse could be stopped vey simply. The LVCR limit could be reduced to the minimum level allowed by the EU — at under £10. And a £5 minimum collection fee could be charged by the Post Office for collecting the tax. The market for re-shipped goods and services would end over night and the UK would be a richer, more employed and more invigorated place as a result.
So, in the bin goes LVCR.
.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Buy me a coffee!
How about chucking IR35, all this settlements stuff applying to family comapnies and replace it with a simple tax charge on income not liable to NIC? we could call that something like “Investment Income Surcharge”.
James, if that logic is accepted, then we should also scrap both NIC and ‘investment income surcharge’ and roll them into something called ‘income tax’.
@lusakajoe
You’ve got a point there, Lusakajoe! Now this would be tax simplification!
If LVCR were to be abolished, this means you would have to pay import charges (plus the handling charged proposed above) when your Aunt Betty in Baltimore sends you a birthday present… LVCR is legitimate tax avoidance – unless one adopts a purposive approach to legislation.
@Julian Marsh
Sorry – get Aunty to send cash and let the government have £100 million
Let’s get priorities right here and not play with feeble excuses
@ Julian Marsh.
With respect, that is total nonsense. LVCR as abused by major multiple retailers cannot be described as “legitimate” in any meaningful sense. It has for many years been ignored by the UK Government for reasons that have remained obscure. The situation is grossly unfair to any onshore business obliged to collect VAT and it surely incites evasion through desperation. Now, with the coalition telling us that all avenues have to be explored to make savings perhaps we can look forward to something being done although I’m not holding my breath.
If (and it’s a big ‘if’) LCVR is being ‘abused’, then the solution is relatively simple – a change in legislation to deny zero-rating of exports where the goods will be subsequently imported into the EU and for businesses that have no EU presence, a single EU VAT registration once a threshold has been breached for pan EU sales – analogous to the special scheme for electronically supplied services. This would not impact on Aunt Betty and would put all businesses on an equal footing. In my opinion, the issue isn’t whether there is anything ‘wrong’ or ‘immoral’ with exploiting the LVCR but rather the issue of unfair competition.
[…] population of this country will have to suffer cuts in services we can ill afford. I’ve already suggested a couple; here’s my […]
Julian
You’ve caught up at last! This is exactly the point. Onshore businesses are disadvantaged by unfair competition by those who have a 17.5% margin advantage over them.
Not a case of catching up – it is merely achieving a commercial advantage. There is nothing to prevent EU businesses from doing likewise. I do not see this as abuse at all – it is merely arranging one’s affairs in such a way as to minimise one’s exposure to taxes. In that respect, it is little different from any other form of legal avoidance. And that is the right of every taxpayer – even though governments do their damnedest to restrict that right. In a free enterprise economy, making use of the LCVR is legitimate. My solutions mentioned (somewhat tongue-in-cheek) above are, however, typical of the micro-management that is so beloved in Brussels. Surprised they haven’t proposed it already.
And, James, those businesses do not “have a 17.5% margin advantage over…” EU based businesses since they have logistics costs and establishment costs in the non EU country in which they are based. The alternative to using the LCVR is multiple VAT registrations across the EU with all the attendant compliance costs.
@Julian Marsh
It does look as though you’re a bit out of your depth here
The distance selling directive does require exactly what you note in the last para if LVCR does not apply
And respectfully your argument that this is not abusive is about as solid or ironic (take your pick)as Madonna’s claim to be a virgin
Richard
Hmmm – resorting to rudeness doesn’t make you right. I have advised several businesses in relation to LVCR…
@Julian Marsh
I apologise if you thought my answer rude
I genuinely felt you were out of your depth
But maybe you’re just someone who promotes tax avoidance instead. Justifying that to oneself does require a mindset I do not seek to understand and that may explain the difference in interpretation
Okay – apology accepted.
I do promote, as you put it, legitimate VAT avoidance. I am of the opinion that most taxation is unnecessary – it depends on where you stand within the political spectrum – should the State look after us from cradle to grave (which equals high taxation) or should people be left to their own devices (which equals low taxation)? I lean towards the latter viewpoint. Therefore depriving the State of income it would like to collect but is unable to do because the legislation was badly drafted is okay in my book. You will see that I suggested a way of plugging this particular loophole – a solution that is far fairer than your one – and one that puts all sellers in the same boat. After all, there is no reason why businesses established in third countries should find it harder to trade within the EU than EU based businesses – unless those third countries throw up barriers to EU businesses.
I do not need to justify anything to myself because I genuinely believe in a libertarian, open market and object to the micromanagement that so many Guardianistas seem to think is the right approach.
I think it is worth adding that provided something is not prohibited, there is nothing wrong with exploiting it – as I said, it’s to do with obtaining a commercial advantage and is little different from cutting other costs. I NEVER advise someone to break the law but am more than happy to exploit loopholes in badly written laws. And if this prevents the state from wasting our taxes on politically correct nonsense, then that is a bonus. And if you consider this to be ‘abuse’ then it shows we are poles apart.
@Julian Marsh
We are indeed poles apart
I look forward to a General Anti-Avoidance Principle
I hope it will blow what you do out of the water
And I will be delighted that it will allow tax complaint people in the Uk to pay less tax – and require your clients to pay more
For that is what you are really doing. Your excuses are little more than a cover
Sorry about this – but I have just read this: “. It is not questioning the fundamental tenets on which this blog is based.
This last point is important. Those who wish to argue that tax havens / secrecy jurisdictions are good things may do so, but not here. Likewise those promoting neoliberal economics may do so, but not here: propagating the delusion that an economy can be accurately modeled using counterfactual propositions about its nature is not something I wish to partake in, and will not allow.”
I was not aware that you have a political agenda and must admit, with hindsight, to being surprised that you allowed my (‘neoliberal’ although I prefer ‘libertarian’ as a description) comments to be published since they clearly run contrary to this statement.
My final word on this is that all taxation is institutional theft… That is actually my starting point.
Don’t think I’m out of my depth here at all – just not in the right place. It would probably be quite fun to argue these points over a pint or two but I suspect that this forum is not the right place.
@Julian Marsh
You managed to be polite
But you are also hopelessly wrong
Greed never was and never can be the basis for morality
And without morality these is no society
Let’s leave it there
I am minded of Margaret Thatcher questioning whether society exists.
I came here via Linked In and was, as I said, unaware of your agenda.
Anyway, it’s the weekend now – I have spent all week dealing with VAT issues – time for a break.
@ Richard
Having read this thread – one on which I fully support you – I am amazed that you let through Julian’s comments but I think you were right to do so because the argument can be seen in sharp relief. In the past on other threads where I don’t share your views and have been deleted for saying so along with many others, I think you harm your own case more than your opponents by showing only your side of the debate. You are clearly confident in your assertions so why not engage, prove you are right if you are, and in so doing draw in and maybe convince more fence sitters.
@woolley
If people argue their case I’ll by and large let them on
But there are a nihilistic bunch of libertarians on the web – led it seems by Tim Worstall – whose sole aim is to be abusive, negative and disruptive
I’m sure like 17 year olds getting drunk on Saturday night they think it clever
Those of greater insight realise that their abuse is a cover for a lack of any real argument, a purely destructive temperament and an inability to engage with the realities of life
They add nothing to debate here, but do waste time
And they seek to abuse others who engage here, which I find wholy unacceptable
Decency requires they be kept off this blog
I am happy to argue, of course
But gate crasher’s whose sole aim is to destroy the party need to be kept out
It’s something the Guardian would be wise to take heed of. Comment may be Free, but abuse is not comment: it remains abuse and unacceptable
It does not matter by the way if they try being polite here alone – their comments on their own blogs where they crow like those same seventeen year olds about the trouble they have caused – means they will; remain banned here
I see little point in being abusive – here or anywhere else. It is usually counterproductive and in my opinion, resorting to abuse means one looses the moral high ground (and thereby the argument). I also admit that I was unaware of the nature of this blog when I added my twopennorth. Just goes to show that one should read the “About this blog” first. Had I done so, I would probably have muttered some deprecating comment to myself and left you alone. In other words, I thought that I was entering into a debate with people with whom I disagree. As someone or other said some 2000 years ago, “Cum omnes unum cogitat, nemo cogitant” -” when everyone thinks the same way, no-one thinks” for those who didn’t pay attention in Latin classes.
I would add here that I can understand why some people have reservations about LCVR – I did some work recently for a retailer who is affected by it and had lengthy discussions about it – which led to my proposal at the beginning of this topic (banning zero-rating and pan-European registration). I actually put this to HMRC who were singularly disinterested in pursuing it.
To sum up, I do not agree with you, Richard. But I fully endorse your right to express your opinions and your right to disagree with others (including me).
Sorry – loses – not looses…
“You managed to be polite. But you are also hopelessly wrong. Greed never was and never can be the basis for morality. And without morality these is no society”
This is an unworthy trivialisation of the position.
Sure, greed is bad. But ‘greed’ comes in many forms and includes people in government and trades unions and feckless welfare scroungers as well as errant high capitalists.
The only thing between us and the Stone Age is human creativity, energy, ambition and determination. You seem to characterise much of those vital forces as ‘greed’, juxtaposing such greed against the inherent righteousness of government and bureaucracy funded by levies on the results of creativity, energy, ambition and determination, and extracted by force by the state.
Having worked for HMG for nearly 30 years, most of it serving in authoritarian/communist and former communist countries wrecked by excessive state power, I utterly disagree with you.
This comment has been deleted. It failed the moderation policy noted here. http://www.taxresearch.org.uk/Blog/comments/. The editor’s decision on this matter is final.
@Charles Crawford
Respectfully, if that is an argument you have a great deal to learn about the art
I made the point that greed (and all those other characteristics you attribute to it) are pointless without morality.
You seem to observe that you have no perception of what morality is because you worked in communist countries fr thirty years – the latter being a point so irrelevant to any current consideration it is hard to see why you mentioned it, except to prove the lack of evidence for your position.
If you can’t do better than that please don’t bother to comment again
I really wasn’t going to comment again but…
I worked as a visiting VAT officer for 15 years, doing my damnedest to maximise HMG’s take with little consideration for morality because, at my grade, such issues were not on the agenda. We acted in accordance with HMC&E’s interpretation of the law – the important word here being “interpretation”.
Nowadays, I work for businesses and advise them to do whatever is (legally) in their best interests – minimising the exposure to tax; minimising compliance costs where possible.
It seems to me, Richard, that if one cannot depend on the word of the law, there is no certainty for either HMRC or the taxpayer. Looking at issues such as whether avoidance is within the spirit of the law (the purposive argument I mentioned earlier) does nothing but cause uncertainty for all involved. Law must also be equitable. Abolish LVCR and you affect non-EU businesses adversely and you affect private individuals adversely. Which is why I made my suggestion towards the beginning of this discussion. It creates a level playing field and provides certainty. Leave LVCR as it is and we have the unfair competition issue that you and others have identified. I mentioned I advised a retailer who was affected by this and my advice was to set up a non-EU subsidiary to take advantage of LVCR.
One of the big problems with fiscal legislation is the distortion it all too often causes…
And I can think of other examples of VAT legislation which are unfair, distortive (and sometimes downright stupid) – exemption being an example when it impacts on the NHS and on Government-funded education supplied by organisations which are not eligible bodies. Here we have Government money (actually, there is no such thing – it is _our_ money) going round in a circle. And grants by government are increased by the amount of irrecoverable tax suffered by the recipients. Is this logical? Or moral?
Much as I agree with you that morality should be factored in to fiscal legislation, I do not see how that can be done without creating the uncertainty mentioned above.
Blimey. A nice way you have with your readers.
How did you manage to skew what I said in so strange a way?
I did not ‘attribute’ positive qualities to greed. I was trying (tersely) to get at two points:
a) that wanting personal success and doing well and being rewarded therefor are not ‘greed’. In fact I would say that striving for excellence and creating new products and processes which benefit others are a high expression of morality.
b) that societies which have tried to collectivise creativity and personal success have been ruinously unsuccessful.
Most people these days, including so-called libertarians, accept that there is a case for collective action through governments. The debate is about the costs and benefits of that sort of collective action, as opposed to the costs and benefits of using less formalised and non-coercive incentives.
The exchanges arising from this posting are all to do with what by any normal standards of comprehension by the population is an obscure provision in VAT. You say that the cost to the taxpayer is £100m per year. If the government tweaks the law a bit to stop this, so be it.
A far greater cost to the taxpayer is EU carousel fraud, under which many billions of pounds are stolen from the public purse in the UK and across the EU. Stopping this is far harder, as the very nature of the way the EU works makes such fraud possible. It is a classic example of the very fact of a well-intentioned government process opening the way to criminality on a startling and system-destabilising scale.
Likewise the fact that the huge cigarette taxes we have in this country incentivise smuggling from Eastern Europe, again costing billions of pounds a year in ‘lost’ revenues.
The deep truth is that any given law creates marginal anomalies, and some laws create anomalies which are far more than marginal. It’s in the nature of law and language itself that this happen.
So there may come a point where it’s best to be much more realistic about how best governments can operate well in partnership with ‘society’, lest official striving to stop every supposed abuse created by officialdom becomes counter-productive if not oppressive.
Richard, the most famous quote on “greed” is Adam Smith’s: “It is not from the benevolence of the butcher the brewer, or the baker that we expect our dinner, but from their regard to their own interest”.
Game theory builds on this. In fact there is a large body of mathematical and
You state: “Greed never was and never can be the basis for morality”. Don’t Smith and game-theory mathematicians show how altruism, greed and ethics co-exist?
Even religious ethics integrate greed – eg, the Christian view of poverty is a merely an elaborate investment scheme (“Go, sell everything you have and give to the poor, and you will have treasure in heaven.”).
Your statement on greed puts you at odds with all these ideas – no doubt a defensible position, but admirably radical all the same. Could you elaborate on your view? Which theorists do you regard as closest to your position?
@Charles Crawford
A very good further comment by Julian Marsh.
Part of the problem with any government process (or for that matter business process) is that those designing it want positive and expected consequences. Far too little attention typically is paid to possible negative and unexpected consequences, or to the transaction costs of moving from policy A to policy B.
Because they have the force of law and so are far harder to tweak/correct quickly, government norms can create all sorts of distortions and problems which take on a life of their own and spawn micro-industries of ‘experts’ feeding off the problem. Fretting over sucha tiny problem as LVCR when carousel fraud is so much more dangerous is symptomatic of these distortions.
[…] them, however, has returned the claim that “all tax is institutional theft”. So let’s deal with this, simply, straightforwardly, and I suggest in such way that is beyond […]
I think there is a corollary to the issue of ethical taxation – what the Government spends our money on. The last government seemed very keen on spending our taxes on its pet causes – Big Government, social restructuring and other politically correct causes (and let us not forget the MPs’ expenses scandal). Governments must also be seen to be operating in an ethical way. If they waste our money, then it is, in my book, perfectly legitimate to deprive them of funds (provided it is legal to do so). I am aware that this means I am introducing a political dimension to tax avoidance.
it is also worth noting (as Charles notes above in relation to cigarette smuggling) that high rates of tax encourage the avoision or evadence industry…
@charles
You miss the point entirely
The Wealth of Nations is a footnote to the Theory of Moral Sentiment – we’d call it empathy now. Libertarian thought is, of course, on the autistic spectrum in this regard. And Smith noted that those same people did of course conspire together against the common good whenever they met
As for the Biblical quote – again you utterly miss the point. Jesus was requiring his followers to travel in faith, not poverty. They are quite different.
And game theory is simply indicative of the failure of modern economics to address reality. Which brings us back to autism.
http://www.taxresearch.org.uk/Blog/2010/07/05/tax-can-never-be-theft/
Further comments by those encouraging aggressive tax avoidance or appearing to condone tax evasion will be deleted as they do, in my opinion, constitute an incitement to commit a criminal offence
@Richard Murphy
No one has claimed, based on the comments I can see, that taxation is theft. It appears you have constructed yet another straw man, which you are very good at doing.
All I can see is that someone has promoted the deprivation of funds due to the Crown but with the essential caveat that such means are legal. I cannot see an incitement to commit a criminal offence.
@Peter
Respectfully, I disagree
As disagree with those who claim they know the line between evasion and avoidance when using a veil of secrecy to hide what they do
@Peter
Quote from Julian Marsh: My final word on this is that all taxation is institutional theft…
[…] them, however, has returned the claim that “all tax is institutional theft”. So let’s deal with this, simply, straightforwardly, and I suggest in such way that is beyond […]
I’ve read again Carol and I still can’t find such a quote, can you please direct me (number)?
@Peter
16
Use Ctrl F to search pages
Hi Julian Have you advised businesses to not circular ship goods from the UK to Channel Islands and back again ? You’ll know that’s a listed tax abuse. Have you also advised them to set up arms length companies and pretend they are shareholders ? Just curious.
In 2010 1 in 4 CDs sold in the UK were VAT free mail order from the Channel Islands. On DVDs figure was 1 in 3. Those are facts from the main Retail Trade body. I’ve been in Music Retail 20 years. Well done HMRC . Your failure to stop the abuse of LVCR by lowering the threshold to £7, removing goods from mail order, applying the Halifax Doctrine to abuse, or requesting a derogation has resulted in a huge market distortion that puts the UK in breach of the Sixth VAT Directive. What an utter cock up. I hope you lose your shirt and that the idiots responsible get sacked. Unfortunately they’ll just pick up their huge pensions and tour the SITPRO circuit telling everyone how wonderful they are. Its a disgrace.
Well I’m glad I’m not taking your advice. You clearly haven’t read the legislation on LVCR. Its very well drafted. Pity HMRC haven’t read it either. I don’t see HMRC ‘preventing abuse’. Do you ?
Article 189 of the EC Treaty makes a Directive binding on states as to the result to be achieved from an exemption but leaves the form and method to their choice. The Sixth VAT Directive permits exemptions from VAT on importation but requires states to ensure that their method of implementation prevents any possible evasion, avoidance or abuse” (Sixth VAT Directive (77/388/EEC) Article 14 paragraph 1) It also gives states the option of not granting exemption where this would be liable to have a serious effect on conditions of competition “ (Article 14 Paragraph (d)) This is in line with a fundamental intent of EC law “to promote throughout the Community…development of economic activities (EC Treaty Article 2) The Council Directive allows states to exclude goods from such exemptions which have been imported on mail order (VAT Directive 83/181 EEC Article 22)
@Julian Marsh
There’s always a place for a hyena or wasp in the eco system.