A debate in the House of Lords gained cross-party support to close a VAT loophole which costs the UK government £130m each year in lost tax.
The peer behind the motion, Lord Ralph Lucas, branded the industry a "smuggling enterprise".
The Commercial Secretary to the Treasury, Lord Sassoon, said changes to the loophole would be announced in the budget later this month.
More than 1,000 people work in the industry in the Channel Islands.
Many more obs have been lost i the UK High Street.
Treasury minister Lord Sassoon told the Lords: "We are committed to tackling tax avoidance and, in that context, we hope to be in a position to announce possible changes to the operation of LVCR [low-value consignment relief] in the budget".
It looks like Richard Allen's tireless campaign to end this abuse might be achieving its goal.
I sincerely hope so.
It will be another nail in the coffee of the Jersey and Guernsey tax havens.
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Here is a quirky angle on it that annoyed me, but should give most readers a smile:
Yesterday, I bought a camera for my daughter from Amazon. The 3rd party supplier is UK only, so it is coming via my father-in-law in England. To go with it, I also bought an SD card. That supplier will also only deliver to the mainland. However, in the latter case, the supplier is Jersey’s own Indigo Starfish, directly opposite my own place of work. So to dodge the 24p GST, the card has to go via England, too, having already come from there to be sent back just to dodge the UK tax.
Any tax system that incentivises this kind of nonsense is nothing better than an unfunny joke.
of course, the avoiders in this instance… and the people who will fork out the extra £120m… are ordinary uk consumers… not those nasty corporations. still.. a welcome move on the grounds of unfair competition for our high streets.
It about time not only is this about lost VAT its the thousands of UK business that are affected in the UK
I think 130m is way underestimated
Just think of the jobs in the uk it has cost ,people on benefits, lack of spending power. effects on investment and growth.
I understand people want goods at the cheapest price but the number of people who come into my stores to ask advise and the go and buy online is incredible
I’ll be glad if this disgraceful UK law is amended, as the current system is both ludicrous and costly to the UK Exchequer.
Having said that, I think it’s a bit harsh to label all those UK companies and UK residents who are escaping VAT by using a law specifically designed and introduced to allow them to do so, as “smugglers”. It’s not even a loophole, since that would imply it’s a bug when it’s actually a feature.
As for Guernsey finding nails in its coffee (I love it, very evocative image!) that might be true, but to be honest I’m not sure what benefit Guernsey is getting anyway other than some non-finance industry jobs which may or may not be going to local people.
@Jeff
Sorry – the coffee was a Mac spell checker auto-correction
It was meant to be coffin!
I’ve got no strong views either way on this. If the industry closes down it will clearl affect the workers. Alot of them are seasonal and/ or migrant workers who would if unable to find work and will move back to the UK, Europe etc. I doubt the impact on the islands will be that great.
This rule has always been something of a joke, and it would be a positive step if it were to be abolished.
@Jeff That half the story. The UK authority’s negligent application of this relief has yet to come out. HM Treasury has destroyed HMV and forced it’s internet operation offshore.
Waiter there’s a nail in my coffee
The demise of small shops on the UK high streets, must surely be mostly down to the large supermarkets, and large shopping centres.
I would wager that the situation will be much the same, even if VAT is applied to low value imports.
That said, I don’t support the fulfillment industry in Jersey, and will be glad to see the back of it. I noticed one company offering a job paying about £6 p/h for night shifts. Who wants to work nights for peanuts?
It’s about time the Jersey government started creating real skilled jobs in Jersey, that pay real money. Not everyone wants to sit in a bank office, like a battery farm hen!
@Dan Dan…. see this http://www.vatloophole.co.uk/mojo-magazine-tackles-vat-loophole/693/ Supermarkets do not compete with independent record shops, in the same way that they do not compete with independent books shops. Independent books shops still thrive, because there is no VAT on books so nobody has cornered the market from a website in The Channel Islands.
Of course supermarkets compete with independent record shops. The supermarkets cream off the best sellers, and that’s where they money is to be made.
Supermarkets sell music. To say that they don’t compete with other music retailers is obviously not true.
Also, I don’t understand why you think book shops are thriving, when Waterstones is not doing so well.
http://www.thebookseller.com/news/hmv-group-makes-waterstones-pledge.html
Another one:
http://www.thebookseller.com/news/five-living-oasis-stores-close.html
And supermarket competing in books:
http://www.thebookseller.com/news/five-living-oasis-stores-close.html
Ultimately, the world is a fast moving place in digital retail, i.e. music, games and books. All of which can be supplied in digital form, and so distributed online, via Amazon, iTunes, Steam, and many others.
That is the main factor that has caused the demise of small shops, and will continue to do so, even if there is no low-value VAT relief.
Also, digital content is almost impossible to sell, as second-hand, which has killed off second-hand sales. VAT has played no part in that.
The shift is towards a system where we get to buy a non-transferable licence which entitles us to playback media. The big names who own the rights to the media, want it that way. They have no interest in supporting small shops/retailers, and have been planning these changes long before CDs were shipped from the Channel Islands.
They don’t want retailers in the game anymore, taking their cut.
Ditching retailers has been proven to be a profitable move, by Apple. For example, most iPads are sold directly by Apple. This has enabled them to undercut the price of all other tablet computers, with a high-spec, high quality part, and to make vast profits.
Rubbish Independent book retailers are surviving unlike independent record shops. And supermarkets do not sell the same music as independent record shops. That just a fact you’ll have to accept mate. What would I know. I only managed a major international act.
Dan. What would I know about music. I only managed and discovered a major international act.
Well if I had known you are famous, I wouldn’t have had the nerve to challenge anything you say! 🙄
Come on! Be sensible, and make a good argument, backed up with verified facts, and I’ll be more than happy to see your point of view.
I’m all for independent record shops. But, times have moved on, the world changes. Top of the Pops isn’t on TV anymore, teenagers don’t go in to town to buy music on a Saturday. Older generations have had enough of having to re-buy their music collection on the latest format. There are a multitude of free and legal music sources, on the net, radio, and on the TV. Not to mention all that P2P illegal music sharing.
VAT is just a small part of a very big picture.
@Dan I think you miss the point. Rather that cribbing information from the internet I have actually sold records at a major label level through retail online and in digital formats as downloads. In the 1920s there was sheet music, two competing formats of flat disc and also edison cylinders plus radio, and jazz was seen as offensive as punk rock. Music consumption has always changed. Tell me something new. Doesn’t justify a 20% tax avoidance arrangement sucking all consumers offshore to two Islands with no logistical advantage whatsoever or your predictable simplistic take on music retail.
@Richard Allen Also I know the people selling this stuff, I know what’s going where, to whom, whos done a deal with who,and so on. That was my point. CD and DVD sales online have been going up at an exponential rate online whilst books haven’t. And in any case, here’s the big issue …. not only CDs and DVD are being sent through this arrangement but many other products, so frankly who gives a toss about CDs and DVDs. I’m sure we’ll all have music beamed into our brains directly in 2030. So what ? Tax avoidance distorting the market for what is being sold now is the issue. Trying to justify it by bringing in irrelevant arguments does not change that fact.
The fact is that this tax relief is a European imperative designed to stop admin for small consignments. It in unlikely that it will be abolished completely, much more likely that it will be altered to the lower limit of £8 per consignment. This will change what products are shipped, but not stop the trade. Any benefit will be lost through extra admin. This is a matter of principle, not revenue.
The reason the £18 threshold is in place is because of the huge amount of admin work that will be required for all of these items under £18 sent into the UK, not just from the Channel Islands but from all over the world.
It isn’t the fault of the companies in the Channel Islands either, it wasn’t their ruling that put this threshold in place to begin with.
It also isn’t the fault of the internet that small businesses and alike are going out of business, it is their own fault.
Unlike the small businesses that have grown to medium / large businesses during this time, they have not adapted and moved with the times.
The internet is a part of every day life now, no VAT alteration is going to change that – businesses will still continue to success and fail.
Customers want the cheapest possible price, if this was in an offline shop, the customer would obviously buy it from them.
This is why companies are business, this is business. No one said it
would be easy.
@Steven Marks Read the http://www.vatloophole.co.uk as there is a comprehensive list of pathetic excuses like these rubbished therein. http://www.vatloophole.co.uk/common-arguments-lvcr/264/ I can’t be bothered to detail them here I read them so many times.