Passions are running high on Low Value Consignment Relief (LVCR) at Wikipedia.
Do some think they have something to defend?
Is tax abuse defensible?
The editorial perspective that:
1. loophole implies an unnecessary value judgment, and if there is a loophole, it is a loophole in UK VAT legislation and not a CI loophole at all.
2. Article biased by seeming to assume that the UK VAT situation was "normal" and the CI situation an "exception".
3. Article appeared to imply that UK company complaints were justified
is extremely dubious.
First there is a loophole.
Second it is being exploited.
Third it is being exploited from the Channel Islands.
Fourth UK companies are profiting as a result.
Fifth the UK exchequer is losing hundreds of millions as a consequence.
Denying there is a problem in that case is not just pedantry — it is wilful censorship.
And I suspect it is someone in the industry doing that censorship.
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Since VAT is a regressive tax, surely consumers saving money on their CDs and DVDs is a good thing?
And since “UK companies are profiting as a result”, are they pulling money from the Channel Islands to be taxed in the UK?
@Noel Scoper
But the loss of UK jobs in the High Street
The loss of tax revenue from profits shipped to the CI – where most will be untaxed
And the loss of cultural diversity is much more regressive still
What’s the reason for the UK not just taking action to reduce the scope for abuse here? Seems like there are some easy wins – reduce the threshold or remove mail order goods from the relief.
@Richard Murphy
“But the loss of UK jobs in the High Street” – is that happening?
“The loss of tax revenue from profits shipped to the CI – where most will be untaxed” – but since UK companies are profitting as a result, the profit comes back to the UK to be taxed? The only loser is the VAT man, the man in the street saves money and the UK companies still pay the same tax on profits.
“And the loss of cultural diversity is much more regressive still” – I’m not sure how selling CDs, DVDs and greetings cards from outside the UK results in a loss of cultural diversity 🙂 If what you say is true and these are UK companies, the people drawing the cards, making the music and so on are still in the UK. Since the VAT man who is taxing the poor (I guess who spend a larger proportion of their income on CDs, DVDs and books than a rich person), surely the cultural benefit is to the poor?
@Mr Snuffleupagus
It seems like a lack of political will
And the fact that the Big 4 are in all tax havens – including the Channel Islands – may add to the power of the tax avoidance lobby
@Noel Scoper
a) Yes – Richard Allen who comments here has documented the massive decline – and it is not downlaods that are doing it
b) The same CT is not paid – profit is made offshore beyond the UK CT net
c) PAYE in the UK is also lost and NI
d) The loss is to new bands which have frequently relied on local stores to be the hubs of a network that promotes new music
e) Why should the poor spend more on CDs and DVDs? Even proportionately. These are luxury items
I too am very suspicious as to why this blatant abuse has been allowed to continue for so long.
An alternative approach would be to set up a LVCR import Depot in the south of England where packages could be checked individually to ensure that this concession was not being abused. Nothing extravagant you understand, a couple of shipping containers and a portacabin maned by a single ‘LVCR enforcement officer’ armed with a stanley knife and a very large roll of sticky tape.
I think that the appeal of saving a quid or so on your CD/DVD/snake oil would soon loose its attraction when the goods take 4 months to arrive!!
@Nic
Much easier and more cost effective is to cut the LVCR limit and / or to charge a £5 handling fee for checking all LVCR deliveries
Mazing how cheap onshore will then seem
If this is all about price it’s easy to price the market out
@Noel Scoper
“But the loss of UK jobs in the High Street” – is that happening?” Yes it is . I work in Music industry. The figures from ERA (Retail Trade Body) last year show that 85% of music sold o a hard format and since 2005 DVD mail order up 209% CD Mail Order up 40% Total CD sales down 29% DVD sales down 5% yet percentage of shops closed 63%. That’s overwhelming evidence of a growth in online retail, something other than the fall in demand for music affecting shops and damage to UK retail. Anyone in the music industry knows the effect this has had on UK retail. Its common knowledge. Its almost a joke as nobody can believe the powers that be haven’t take action. Its such a basic market distortion. Just read the excellent book Last Shop Standing by Graham Jones.
http://www.lastshopstanding.co.uk/index.html?_ret_=return
What is always forgotten is the fact that many shops ran successful websites and sold online but because of LVCR they have been unable to compete on the internet. Essentially Offshore VAT abuse stopped them from retailing online. As for the comment that you can’t see how the loss of UK retail causes a drop in cultural diversity you clearly prefer X Factor to anything musically challenging.As someone who worked in the music industry for 20 years and developed and discovered a major alternative rock band with a huge cult following I can tell you that without the UK independent retail network they would have got nowhere, as the big players have no interest in anything difficult. Faceless corporate retail websites have no interest in promoting new talent.They just hoover up stuff everyone else has done the hard work on. It is the network of small dedicated retailers that unearth new music that creates the new talent that later becomes commercial hot property. LVCR abuse has devastated UK music retail. Read Graham’s book. My kids can understand the mechanics so why can’t our Government. Its beyond a joke now.
@Nic
Exactly….its hardly rocket science!
There are really no excuses for the Government not tackling this one. The only question is whether you do so by aggressive litigation against the worst offenders, or legislation to kill the schemes (you’d need one line of drafting). Best option is probably both.
@Marc Daniels
You’re a lawyer, I think
Might you suggest what that one line might be?
I think there would be many who would appreciate the suggestion
The legislation already exists. In the case of abusers they can pursue them under Halifax. No question this is an abuse so you just tackle the chain of companies and then re-define the transactions. They have already done this with regards to other VAT relief that have been abused offshore (Gymnasiums and Insurance) As for any goods that don’t qualify for VAT relief (i.e goods being deliberately exported or those which are causing major distortions in competition) then just confiscate them or charge VAT. After a few months the companies involved will have lost all their customers. You probably wouldn’t even have to do it. You just say you are going to do it.
I would be curious to know what change in legisltaion could be made.
@Richard Allen
The largest 2 abusers, Play.com and The Hut, both have full distribution centers on the UK mainland in Leicester and Coventry respectively. Why do they have them in addition to their Jersey and Guernsey warehouses? Answer – to supply all orders over the LVCR unit value of course. Why would you ship product from the UK to the Channel Islands to only come back again if you still have to pay VAT?
@carlton That’s noted, and I know its also not lost on both the EU and HMRC.If anyone is interested check out the updated LVCR page on Wikipedia which now features the correct interpretation of EU law in relation to LVCR and VAT abuse. If I was offshore right now I’d be very worried indeed…
Its a piece of good business for Jersey and supplies a lot of jobs in packaging 24/7. Just check out our contact lense sales through Europe with Bausch & Lomb, Johnson & Johnson etc, DVD sales through Play.com etc, its mega business and should be left untouched because its the consumers that benefit the most from this so they TJN is attacking them.
With their extra cash they just spend it elsehwere.
@J Black
Tell that to the 10 people I laid off when I had to shut my UK mainland business down due to this tax scam.
I’m sure that the drugs trade generates plenty of cash for the economy. It doesn’t make it acceptable.
This is tax avoidance is not a tax scam!!!
Come on people stop twisting these little legal points to as it suits!
@Tarnia Its not tax avoidance its tax abuse which is illegal. See Wikipedia entry
http://en.wikipedia.org/wiki/Value-Added-Tax-free_imports_from_the_Channel_Islands
And if you have a better argument lets see it.
@Tarnia
Read this as well. You might learn something.
http://www.eamonmcnicholas.com/Halifax.html