Yet more evidence that the Channel Islands’ VAT abuse is having serious impact on UK small business has turned up on this blog:
I think the abuse from companies trading from the channel islands is a much larger problem than the general population realise.
With e-commerce competing with every high street within the UK, ignorance to resolve this problem is drastically effecting the economy on a large scale. Not only are the govt losing millions in tax revenue, but it prevents a barrier for entrepreneurship. New small businesses can’t compete with a 20% difference in price to stores just a click away from the same customer pool. Even the larger businesses with deep pockets have had to set up on the channel islands such as Sainsbury’s to compete, which will only broaden the gap.
Unless this problem is addressed sooner rather than later, small retailers based in mainland UK will close at an alarming rate, or new businesses will seek to open from abroad. Either way the UK will continue to lose tax revenue and as a result increase taxes will occur elsewhere as well as further cuts. I hope that something is done about this sooner rather than later.
Quite so.
Yet more evidence that those opposing this abuse are the true friends of fair trade.
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Hi Richard,
“Not only are the govt losing millions in tax revenue”
Therefore UK consumers are saving millions by avoiding a regressive tax, surely.
“but it prevents a barrier for entrepreneurship”
moonpig.com is now in Oz and the US, sounds like an entrepreneur to me
“New small businesses can’t compete with a 20% difference in price to stores just a click away from the same customer pool.” HMV still has stores in the UK. Sainsbury, Tesco, Game, etc still sell games, CDs and DVDs in store. Will it affect them as well?
@Noel Scoper
Moonpig is in Guernsey
And you suppiort monopoly?
is that your aim?
@Richard Murphy
Moonpig doesn’t seem to have a monopoly on greetings card in the UK by a long way.
@Noel Scoper
no but very soon it will have created barriers to entry
Devotees of tax haven, secrecy jurisdictions (such as Jersey, Isle of Man and Guernsey) often justify their existence by claiming that they exude stimulating economic activity — and when these diminutive places are located next to a much larger economy their presence (in some magical way explained in terms far too complicated for any sane person to understand) reflect an inestimable glow on all commerce around them.
Better explained by the analogy that if rogues come to live in your area, but just outside the jurisdiction of your law enforcement agencies, their activities will some how magically transform your neighbourhood into an economic powerhouse.
Sadly there are some who still subscribe to this lunacy … …
I think this give consumers a choice to pay less for already over inflated products so I am not so bothered about this tax loss and actually disagree with what you are doing. Wellcome to e-commerce.
@Alan
The anti-social are always with us
@Alan The economy has been in rapid decline for quite some time. Tax revenue keeps the country operational and supports many of our vital services such as the NHS, educational institutes, emergency services, business development etc. If tax revenue decreases rapidly, services such as these will have no choice but to diminish in efficiency. Depending on the tax revenue loss from retail or e-commerce streams, what it will mean is that we will be taxed higher elsewhere, international investment will decline and unemployment will increase as costs will increase. It’s a vicious circle of decline and the country will suffer possibly into an unrecoverable rate. Governments are nationally supported, whereas commerce is global. Tax exemptions solutions ultimately make the already wealthy companies, wealthier rapidly and the average citizen loses out. It predominantly favours larger companies. If you look at the channel island prices, the “Already inflated prices” and profit margins are the same for the businesses if not more, it’s the tax that’s missing, which is the lifeline of many great services in the UK. With the exception of a few, it’s the extremely large institutions which are being attracted to the channel islands. Not only do these have economies of scale, but also tax savings. Where there is a 20% difference in price and a 5% profit margin, in a capitalist environment, price will ultimately drive small companies out of the market place. Tax avoidance on this scale is a short term thinking solution which will ultimately cost everyone in the country dearly! I wouldn’t like to think that people suffer long term due to our financial ignorance today.
There are a great many academics on this blog but you know what, anyone who believes that a 20% advantage obtained by the few will not damage UK business and the economy is frankly an idiot. Latest evidence appears to show that the sums of VAT being lost through this VAT abuse are astronomical…watch this space or keep an eye on http://www.vatloophole.co.uk
@Noel Scoper Richard is right. LVCR abuse creates a barrier to market entry. You cannot set up an internet retail operation selling CDs and DVDS or Memory Cards on the UK mainland. The prices have dropped to a profit margin that is within the VAT advantage.You have to set up the company offshore and pay offshore companies to do it. To suggest anything else would show a total ignorance of the market. The Channel Islands are controlling access to e commerce by controlling the VAT advantage which they are effectively selling to retailers. Its like a protection racket. Its unbelievable. If HMRC are reading this WAKE UP !!
@Alan You don’t represent e-commerce. You represent e-piracy.
Is there a good way to get a definitive list of companies that are/are not abusing LVCR so that I can make a positive choice to choose those that aren’t, in much the same way as I make a positive choice to only buy tea and coffee that are fair trade?
@Andrew Rhodes Not that I know of. Check out the Terms and Conditions and normally a Jersey/Guernsey Company is listed Good idea though! Vatloophole.co.uk should do this…