The Telegraph - whose owners do, of course, live in the Channel Islands, has lead the counter-attack today in defending the Channel Islands' VAT abuse.
As they report:
Some of Britain's biggest retailers are preparing to fight back against Government plans to scrap a niche tax allowance that enables online retailers to avoid paying VAT.
Designed to reduce red tape for both HMRC and traders, the relief is now used by big companies that sell items from DVDs, CDs, spectacles and books over the internet using bases in the Channel Islands.
One retailer with big online sales said that clamping down on the so-called low-value consignment relief (LVCR) would be "an attack on business innovation."
Tax experts also warned that changes to the relief, which the Government has hinted may be included in the Budget, would hit small businesses hardest and cost more to implement than it could raise in extra taxes.
So who were the apologists?
A Sainsbury's spokesperson said: "Sainsbury's entertainment website is a perfectly legitimate and increasingly popular shopping option for our customers, who appreciate the convenience, choice and value offered online. The vast majority of our entertainment sales are in-store; our online site, like many others, has adopted the industry model, to deliver the best possible price for consumers."
A spokesman for Tesco said: "'Any savings from the existing arrangements are passed on to our customers. With regard to LVCR we support a level playing field for all retailers."
Which is precisely what we have not got.
And that online price costs our government hundreds of millions year - money we can ill afford in terms of poloist public services, lost jobs and lost innovation in small business.
So those are weasel words. Just as these are misguided:
Mike Warbuton, tax partner at Grant Thornton, told the Daily Telegraph: "The LVCR plays an important role in reducing red tape for small traders. Before any changes are made, the Government must be clear that extra tax raised by closing the loop-hole will be greater than the costs that such action would incur."
No, not true. We don't treat crime that way. We don't need to treat tax avoidance that way. And we do need to protect our High Streets.
But let's also be aware that the moment the limit is reduced or a collection fee is imposed on Channel Islands' VAT then tat abuse will end overnight. Instantly. Sure some consumers will pay more. So be it. That's the price worth paying for ending tax abuse. And the price worht paying to stop the destruction of smaller business by people like Tescos and Sainsbury - who threaten us all with their monopoly power.
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:
A “Competition Commissions” report found that Asda, Morrison, Sainsbury and Tesco (notb M&S or Lidl) persistently engaged in below-cost selling of some frequently purchased products and that this contributed to the majority of their products not being exposed to competitive pressure and thereby distorting competition.
The Commission found that whilst some consumers could benefit from buying goods below cost, particularly low-income consumers, this practice damaged smaller reference stores and non-reference grocery outlets. This would in turn impact adversely on all consumers, in particular the elderly and less mobile who tend to rely more on such stores.
The Commission concluded that the practice of persistent below-cost selling operates against the public interest. But then we all know that (some of) the big supermarkets put profit before people.
Richard I am not sure whether it is the capitalist system you object to or tax avoidance. Surely setting up an operation in Jersy is tax planning and not tax abuse or tax planning. Is the issue not that Sainsbury and tescos use the relief but the goverment allow the Channel Islands to be a Tax Haven. Alan
Since when has fiddling your tax using foreign non-criminalised VAT evasion structures equaled inventing and selling new things?
These organizations are quite prepared to argue that black is white when it suits them. How would they react if the government legalized acts of theft that occurred in highly complex and opaque circumstances? Would they say that theft that bore such characteristics should remain legal because prohibiting it would make shopping dearer for shoppers?
Isn’t it the HUT who fulfill on behalf of these companies?
If Mike Warbuton knew anything about the channel islands market he would know that it is small traders who suffer the most.
But,as always, if I was a duck who worked for a similar firm, I would also have a similar quack,quack
@Alan Kennedy
I believe private business has a massive contribution to make to any economy
But not by abusing tax law
Or by undertaking activity intended to create monopoly
Or by undermining the common good
It’s not mee who undermines capitalism or free enterprise – big business does – a tendency Adam Smith noted well over 200 years ago and which continues today
Which side are you on?
Richard you have not answered my point about tax planning vs tax avoidance. placing a company in a low tax regime is surely tax planning and in the free market economy is very difficult to stop. The only way that would happen would to have a uniform tax rate through the world or robust transfer pricing legislation – but I will leave that in your capable hands as to the best method. I have no particular objection to tax planning but I object strongly to tax avoidance (creating a tax advantage out of nothing). Your question which side am is based on a false premise that I took sides. I for one benefit greatly from the economies of scale the Sainsburys and Tescos provide but would not want them to exploit their monolopy power. As a small business (I am trying my best to build an outsourcing business in order to redistribute wealth around the world. If I can train my staff up to have the same degree of expertise I have they will receive more income and have more opportunity. I am therefore a believer in free enterprise and the mixed economy. Is that the right side?
@Alan Kennedy
I have completely answered your point – on this blog thousands of times
But let’s spell it out simply. A business ships a product from the UK to another place (let’s call it Jersey) and then ships it straight back again unchanged for the sole purpose of avoiding VAT due if shipped to the consume direct in the UK
If that is not an artificial step added into a transaction to achieve a tax saving what is?
This is blatantly tax abuse
A ULK company sells to a UK customer and tax avoids using a location that has made its legislature available for hire with the UK company exploiting a loophole intended to support value added business in the Channel Islands – not artificial steps in transactions
This is tax avoidance. If you can’t see that please open your eyes
And my question was therefore a real one – and it’s you who has not answered
NBy the way – there is only one acceptable answer, in case you had not guessed. But I’ll make it easy
Dear Richard – I must confess to being slightly surprised with the tone of your reply – as I was and am not familiar with the scheme I do not know how was I to know whether it was a tax avoidance scheme or tax planning.
Its not an “artificial” step – its an actual one. An artificial one is surely only one which is purported to happen but doesn’t actually happen, or is dressed up as something else. If the goods are actually being shipped from the UK to the Channel Islands and then re-imported to the UK from the Channel Islands then it may be many things, but one thing that the physical shipment is not is “artificial”. Its not very green either.
@Alan Kennedy
Why surprised?
It’s really not hard to find out about this scheme – on which you chose to comment
Are you saying I should assume all commentators here are talking about things on which they know nothing?
I assumed you had a basis for comment – in which case my reaction is, I think, entirely justified
@Gerald
Oh come on – these goods are dressed up as imports
They’re not – they’re round tripped – so they’re not imported at all – they were exported with the sole intent of being reimported – with the two events therefore cancelling each other out
How artificial is that?
Stop excusing abuse
I was surprised because it was not clear from from your comment whether you welcomed my feedback. Would you like to reassure me? Also from my experience it is easier to pursuade people to your point of view by being courteous – it is the first time I have commented on your blog so how am I to know if you have made a comment 1000s of times before. If you only want people to comment who are experts on tax avoidance then I apologise I do not fit that bill. Would you like to clarify who you want your audience to be.
As regards whether I know about the scheme or not clearly I did not which is why wanted to find out why thought it was tax planning or tax avoidance. If I am asking that question there are no doubt others who also which is presumably why @Gerald made his comment as well.
@Gerald
Sorry – but I don’t agree
Gerald looks like a troll
And I was courteous – I treated your suggestion with the contempt it deserved. I can’t see how an intelligent peson could think that this was not tax abuse
Have you other read the guide to non violent communication by Rosenberg. You would be much more effective in your argument if you did. Saying Gerald looks like a troll is hardly likely to pursuade him or others that your cause is worthy. That certainly fails the courteous test that you as a Chartered Accountant are supposed to adhere to. As regards whether I am intelligent or not – David Cameron was more polite to me than you are – is that a reputation you really want?
Amazing how they come out with stuff like “the operation of LVCR cuts red tape for small businesses”. Well yes. Once they’ve gone bust there’s no red tape at all.
@Alan Kennedy
I suspect now you’re not what you claim to be but are instead a right-wing interloper contravening the moderation policy of this blog
Of course Cameron was nice to you – but since it’s now clear you seem to be professionally qualified your claim of knowing nothing of LVCR also looks very odd
You’ve qualified to join the banned list here
A spokesman for Tesco’s said “With regard to LVCR we support a level playing field for all retailers.”
Hmmm… LVCR surely distorts the level playing field. It seems to me that Tesco’s would be happy to see it go. But they are not, as it were, the groundsman.