The VAT abuse promoted by the Channel Islands and undertaken by the likes of Tesco, HMV, ASDA and Sainsburys is costing the UK more than the entire UK school sport budget.
We know school sport is now under threat.
But it should be the VAT abuse that is threatened. And it could be. Note this letter from the FT on Saturday:
From Mr Alan Mackie.
Sir, I recently had occasion to buy a set of CDs from the US. The total value of the order was £38.13. When I received notice of their arrival I was told there was £14.80 to pay for value added tax and handling charges.
I subsequently discovered that while HM Revenue & Customs allows in orders of £18 or less free of tax, anything more is charged the full VAT and, for good measure, the Post Office slaps on an £8 handling fee.
This creates an extraordinary anomaly where an order worth £18.50 ends up attracting a charge of £11.30 (charges it seems are rounded up) and costing nearly two-thirds more than if it had been 50p less.
Alan Mackie,
London SW8, UK
£11.30 in charges on every packet from the Channel Islands would stop this abuse overnight. The VAT would be paid. School sport would be saved.
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Interesting, but it is very doubtful that imposing a $20 levy on every shipment from will raise the amounts you are contemplating. this is because, faced with this additional charge, consumers are likely to either buy fewer CDs, or look for other ways of purchasing the content.
What is most surprising about all this is that there is such a large retail trade in these products. After all, this is all stuff you can find online and download legally for a fee (not to mention illegal downloads). And if you chose to download legally it is very easy to not pay any state tax out foreign VAT (just buy it form a US site with an out-of-state credit card and download it to a non-UK server).
Isn’t it a fact is that the retail trade in physical CDs and DVDs is highly likely to decline or even to disappear in the near future? It seems to me that we are getting very agitated about not much.
@Million Dollar Babe
Wrong
CD sales are rising
If you are talking about businesses such as Asda etc (maybe Tesco’s not sure) for avoiding VAT you should be mentioning the company that fulfills the dvd sales etc on their behalf.
The Hut group.
http://www.guardian.co.uk/business/2010/jun/27/hut-group-expansion-internet-vat-loophole
As well as the fulfillment empire they also sell directly through 3rd part sites such as Amazon posting their goods from the channel islands.
As a 3rd part seller on Amazon this directly affects us and you may well be adding us to the uk based tax and vat payers which are put out of business as a result.
A recent addition is the American companies ie MovieMars which are also moving into this business in a big way.
Lack of action on behalf of the government ensures that these tax revenues are taken out of the country.
I know our income is directly affecting but we pay a substantial amount of VAT as well as tax.
Surely it makes little difference to the buyers of DVDs where it comes from?
A slightly higher price of goods but a purchase from a UK vendor would make a substantial difference.
It would be interesting if you could frame the argument not just in terms of tax revenues lost, but also jobs lost and taken out of the country as a result.
Do you have any evidence to back this up? All the info I can find (such as http://business.timesonline.co.uk/tol/business/industry_sectors/media/article7107883.ece) seems to suggest CD sales are falling and have been for some time.
@Richard Murphy
Everything one reads about the music and motion pictures industries suggests the opposite. The only growing segments seem to be online downloads (hopefully legal).
Alternatively, seeing as we already zero-rate books and printed music (for the cultural value they bring), perhaps we should consider adjusting this policy in line with changes in how culture is consumed, by zero-rating DVDs, CDs and games too?
@Million Dollar Babe
The go read the evidence http://www.vatloophole.co.uk/
@Alex B
Oh, and give up sport
Don’t be stupid, is the kindest comment I can make
I’m not sure that really constitues evidence. The actual CD and DVD will be obsolete very soon.
Would be interesting to hear Richard Allen’s input on this.
@Richard Murphy
Thank you.
Frankly, regardless of what this or other “evidece” shows, physical retail in this type of products can only decline over time. All of it will migrate online.
In the meantime, as per the example you cite in your post, the current LVCR regime seems to bring no value whatsoever to the UK consumer, but rather creates a rent income for “retailers” in the Channel Islands.
So it appears that closing down LVCR would be neutral doe consumers and transfer the rent income onto the UK treasury. I say go for it!.
But because this is only likley to accelerate the online migration process, it is simply silly to pretend that this will generate sustainable tax revenues.
@Richard Murphy
Why shouldn’t we start applying VAT to books and other printed publications, then? Are they “good” culture, and everything else is “bad” culture?
Dear Alan Mackie
Sir, I recently had occasion to buy four memory cards at £5.25 each inc P&P. The total value of the order was £21.00. When I received the delivery, which had been sent from the Channel Islands, there was only one SD card in the envelope. I emailed them to report the shortage. They replied they had split my order (3 and 1) and that I should receive a second envelope. Sending 4 would have taken it over the threshold.
This creates a useful anomaly. I’m thinking of ordering 1000 next time and developing a small, VAT exempt business. I like doing business in England – it’s such a big market and I get all the benefits without having to contribute.
Yours ecstatically
@Million Dollar Babe rubbish downloads have levelled off in UK. Nobody wants them. They have no transferable value.
@Greg All music sales have been falling as they were at very high levels anyhow, but sales online of hard product rising. Richard you published the ERA figures on your site. DVDs up 209% since 2005 CDs 40%.
@John John sing up at vatloophole.co.uk The more who join up to end this stupidity the better
@Greg The latest format fad in US is a vinyl LP with free download of the same. The band I managed who recently sold out the Royal Albert Hall issued a hard back book with four discs selling at a very high price and that sold out in a few days. With respect to this site accountants have been useless at predicting what consumers want in the music industry. Always will be. What’s certain is that nobody sees value in a non transferable non collectable, non physical digital download. What would you rather own…the Mona Lisa or a photo of it…
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