It seems worth reproducing the following exchange from Hansard this week in full:
Jonathan Edwards: To ask the Chancellor of the Exchequer what assessment he has made of the potential effects of the provision of low value consignment relief on entertainment products sold by mail order from the Channel Islands on independent high street entertainment stores. [70987]
Mr Gauke: We have not performed an assessment but we are aware of the impact on high street stores, and the Exchequer. The Treasury is currently considering further measures to stem the impact of LVCR.
Jonathan Edwards: To ask the Chancellor of the Exchequer whether he plans to remove low value consignment relief for(a) music and (b) other entertainment products sold by mail order from the Channel Islands. [70989]
Mr Gauke: The Government have not finalised their plans for changes to the low value consignment relief for goods imported from the Channel Islands at this time but is reviewing options.
VAT: Entertainments
Jonathan Edwards: To ask the Chancellor of the Exchequer what discussions he has had with (a) the European Commission,(b) multiple retailers and (c) independent stores on the effects of low value consignment relief on (i) music and (ii) the general entertainment industry. [70988]
Mr Gauke: The Government have been in contact with the European Commission to discuss their options to restrict the low value consignment relief and has received representations from a number of trade sectors affected by LVCR. Ministers are now reviewing what options are open to the Government to make further changes to LVCR.
VAT: Imports
Jonathan Edwards: To ask the Chancellor of the Exchequer what estimate he has made of the revenue foregone by the Exchequer due to the provision of low value consignment relief in each of the last five years. [70990]
12 Sep 2011 : Column 1045W
Mr Gauke: The estimate of the revenue foregone by the Exchequer due to the provision of low value consignment relief in each of the last five calendar years is as follows:
Loss of VAT (£ million) 2006 90 2007 100 2008 130 2009 140 2010 130 For consistency and ease of comparison, the figures in the table assume a constant standard rate of VAT of 17.5%. The actual cost for 2009 is slightly different from these figures reflecting the temporary cut in the standard rate of VAT.
The position is clear, massive, organised abuse is going on.
I'll tell you - although Gauke is not doing so - that the EU has said the UK has carte-blanche to act to stop this abuse altogether - so the only question now is when will they do so?
The Isle of Man's VAT abuse has been stopped. Now this one needs to be closed too.
Yes I know it has consequences for Jersey and Guernsey. But that's something they will have to come to terms with. Promoting tax abuse is not the basis for an economy, and they should have realised that by now. The message has been spelled out loud and clear.
So, when are we going to get an announcement? That's the only question left.
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Put simply, that will depend on the balance of power and influence between those who support this abuse, and those who don’t, Richard. On past evidence I’d say that those who support and gain from this have the upper hand, and probably still do given the Tories clear bias to all things that are finacially “dodgy”. So, expect much more foot dragging – even from here on in – and a fairly neutered response when it comes. What in Camerons’ terms would be called ‘disappointing’.
Is there some particluar reason that this low value consignment relief exists? In other words, why was it put into place in the first place? To lose over £500m in VAT revenues over the past 5 years is ridiculous.
I understand it was originally put in place to help flower growers in the channel isle export their produce to the mainland.
Exactly right
As I have previously commented, few people in Jersey care for the fulfillment industry. With the exception of Play, the main providers are not locally owned so pay no tax in Jersey and suck in unskilled, low paid labour.
On the other hand, now CDs and DVDs are almost a thing of the past, the bigger issue is whether and if so how you tax online streamed content.
The LVCR applies to any international import, not just CI. The reason was not for importing fresh flowers, it was to avoid the need for processing millions of very time consuming small amounts of VAT which would not be cost effective. The Channel Islands benefit little from this loophole. As Roger says, teh issue is how you tax online steamed content.
Sure it is universal – it was extended to CI though and can be removed as well
Zaphod is correct. This has nothing to do with the historical flower growing industry in Jersey, which is long over due to not being able to compete with Holland, for example.
Those shipments of cut flowers would not have been low value. A container full of flowers is worth far more than £17.00.
Although, Flying Flowers had been dispatching bouquets from Jersey, which came within the LVCR. They were doing so, for many years, without issues, long before the current fulfillment came in to existence. I don’t think they were viewed as abusing the LVCR, because they were selling their own flowers, grown in Jersey.
You are wrong Dan
This was about mail order flowers
Don’t confuse past with present
Once again Richard Murphy has his facts wrong. I was Chief executive of Flying Flowers. The relief introduced for the flower growers was for postal packs not to have to go through offices of exchange and so be held up by customs .The boxes were preinspected by jersey customs and then went in the regular post. We still had to put VAT stamps on the boxes(the system in use at the time)Years after this the EU LVCR exemption was introduced for all items posted from third countries into the EU. The two are completely unconnected. I’m fed up with people perpetrating this complete myth and hope i’m finally enabling people to deal with facts.
Evidence is required to support this
Evidence at the time re this relief and the Channel Islands in particular was that it was related to the flower industry
Prof Prem Sikka researched contemporaneous sources on the issue some time back
How long before you get around to moderating my comment re Richard Murph’y incorrect statement ?
You posted your comment on Sunday lunchtime and expect me to be sitting waiting for it?
Get a life.
That’s the ultimate in egomania on your part and so typically right wing Channel Islands
I’ve just checked a few dates, and can provide some of the facts. I became involved with Flying Flowers in 1980 and at that time
Our carnations were going out in the regular post , not through offices of exchange, and were pre inspected by Jersey Customs and Excise.
We purchased VAT stamps from jersey post and physically stuck these to the box to prove we had paid the correct amount of VAT.
As LVCR was not introduced until some 4 years later i think this covers your incorrect statement.
I’m very interested to find out how Prof Sikka got this so wrong as the “fact” that LVCR was introduced to help the horticultural industry has certainly become a popular urban myth.
Respectfully, I think your recall may be the urban myth
I also not the abusive nature of another comment you have posted and this correspondence is closed as a result. If you cannot be civil, and have failed to be so twice now, then you have nothing of worth to say
I haven’t posted any abusive comments , I’ve simply posted comments which do not fit your “facts”
That is not how I interpret your comments on a number of people
So I reiterate my point: this does not seem to be a matter of ou seeking to establish facts at all which is why I deleted comments
Only you and I have the benefit of knowing what I posted so to avoid any problems I will not use any names.
I presume you accept LVCR was introduced in 1983/4.
What evidence do you need to back up my statement earlier that prior to this all flower companies in Jersey were using VAT stamps and bypassing offices of exchange. I’m sure i can readliy obtain whatever you ask for.
I’m happy with that claim
My question is, so what?
That doesn’t mean LVCR wasn’t introduced to the CI for tis reason – an opinion even noted at least at ione time in Tolley’s tax manuals
Let me also restate my other comment which you deleted. I support the fact that tax reliefs should not be abused.
Good
Next I’ll restate my comment re the question asked in parliament. The tax revenue forgone is only part of the issue. If the UK acts unilaterally in changing LVCR those companies which have relocated to CI for fiscal reasons can either relocate and enter their goods via another EU country or stay where they are and do the same. In this situation the UK will actually lose revenue as the VAT on goods above the LVCR is currently collected by Jersey Customs and paid over to the UK.
Also the costs of collection are usually ignored , these will be substantial as legally the Uk must increase the number of packages it inspects if it brings more of them into the VAT net. This was the point of the EU relief in the first place.
I fully accept its being used by businesses for a purpose other than the one for which it was intended.
The change will be across all countries – not just the CI
Or it may just relate to round tripped goods
But your claim a change will have no impact is simply wrong
And you also ignore distance selling regulations elsewhere so the UK does not lose if they relocate
And the UK will not need to look at more packages – there simply won’t be many packages
So again your logic simply ignores EU law and behavioural consequences of the change in law that is likely
Distance selling regulations do not apply to goods posted from third countries they only apply within the EU.
I didn’t say it will have no impact.
The UK will have to look at more packages from ALL third countries.
I agree round tripping should not be allowed but legally stopping this is difficult.
I’m sorry – you still ignore a) real economics of shipping and b) lower LVCR rates elsewhere and c) the fact that margins just won’t cover too mach playing around
The CI scheme works as it is so cheap to do the abuse
I’m sorry – you still ignore a) real economics of shipping and b) lower LVCR rates elsewhere and c) the fact that margins just won’t cover too mach playing around
You misunderstood my comment, many offshore companies inject goods into the EU through countries other than the UK. Once in the EU they are in free circulation. This is entirely different to distance selling which is an intra EU term.
But almost no one has the LVCR limit as high as the UK has – so your logic does not stack
And double billing and shipping is not cheap
For various reasons the Premier Shareholders Group was unable to contribute to the recent discussions re the Isle of Man, Guernsey and Jersey… so rather belatedly the PSG adds:-
Richard’s continuing endeavour to reform powerful institutions in the financial services industry, which are implicitly/essentially associated with offshore secrecy jurisdictions, will continue to face entrenched opposition from our archaic industrial and banking oligarchies.
Attempts to restructure deeply unequal distribution of wealth will be regarded with horror by the established elites and any success will be met by quasi outrage in the hope that they may be shelved or overturned by conservative/reactionary government.
In the experience of the PSG the governments of the three crown dependencies are both corrupt and profoundly defective. Anyone who seriously values the principles of honesty, transparency and integrity would be best advised NOT to bank or invest a single cent within these three jurisdictions.
And never believe a word of their sweet talking, propaganda led, image building crxp.
Germany, Austria,Belguim,Finland and Holland all have LVCR limits of 22 euros and so are over 30% higher than the new UK limit of £15.
Many third country businesses already enter their UK goods via these countries and there is no way of really estimating the value of these transactions and certainly misrecording of the goods value is rife.
I agree there is a problem but simply acting against the CI (legally) does not solve the problem.
But it will help, enormously
And since they’re all in EU you won’t really win reshipping via them as they’ll have to add VAT when shipping on to the UK…
you have to hand it to Tim he and Walter Goldsmith turned what was a locally grown carnation farm called the retreat farm into a mail order company and went from i suppose about 40,000 boxes of flowers grown in Jersey to about 1.3 million boxes flown into Jersey then shipped out by jersey post but i guess if the people in the UK knew that at least 90% were grown in Columbia & Turkey they probably would not have bought the goods in the first place I think they had to change the advertising on the boxes from “jersey flowers” to “flowers from jersey” I wonder why they might be grown outside the EU