As the BBC reports in Guernsey this morning:
A reduction in VAT relief on parcels sent to the UK from outside the EU [introduced today] is unlikely to be the last change, according to the UK Treasury.
The tax is not paid on goods below the Low Value Consignment Relief (LVCR) threshold, which changed from £18 to £15 on 1 November 2011.
The Channel Islands are among locations that have been seen as bases for the exploitation of the "VAT loophole".
A Treasury spokesperson said further changes were being investigated.
The spokesperson said: "We are exploring options to further limit the relief so it can be longer be inappropriately exploited."
An email in my inbox says expect an announcement soon, possibly today.
And I know that at least one fulfilment company is now laying off staff in the Channel Islands in anticipation of the move.
It's game over for another Channel Ilsands' abuse and another win for tax campaigners.
Now when will the Channel Islands realise it is time to rebuild their economies on the basis of something more solid than tax abuse?
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Not before bloody time. Is the “fulfillment company” amazon.co.uk by any chance?
Time for the governments of Jersey, Guernsey and the Isle of Man to hold up their hands and admit that they have been conning the ordinary decent island inhabitants where there has never been any “freedom of information”.
People, both on the islands and across the world, have suffered long enough and a full investigation into government practices and an audit of their “finance industries” may reveal “evidence” which will finally kick these people out of power.
The PSG senses that long overdue justice is about to be served.
Unfortunately, squeezing the Channel Islands is not really the answer. The last few DVDs I bougnt from what appear to be fulfillment companies ahve been post marked Hong Kong.
That’s not on the same scale as TV advertised retailers selling UK product. CDWow tried selling non UK product from Hong Kong and got into serious trouble with BPI. CI industry is based on circular shipping UK product which is not viable via Hong Kong.
Of course the other side of this is that the people who still purchase CDs and DVDs legally are going to be charged an extra 20% for the privilege of doing so. Given that everyone under the age of 30 laughs at me for buying CDs and DVDs rather than “ripping” them for free, I wonder what the long term effect of the change will be. I suspect we will not see independent music shops flourishing as a result of this, but rather the model of music shifting still further to extortionate live concerts advertised by freely available music.
Independent records shops are flourishing. Vinyl sales went up 55% this year. We all know the hard format is ultimately doomed but serious music consumers are not going to give up for a while yet and that includes teenagers.
Yes if nobody wants ‘old formats’ why are artists still issuing albums on vinyl ? Noel Gallagher being an example (album just out) The same old cliches trotted out to support tax avoidance.
And vinyl has increased in price recently yet demand has also increased. People don’t just buy things because they are cheap!
Not sure there is much vinyl being shipped from the Channel Islands?
Well society has certainly come a long way when the younger generation laughs at those who respect the law – and artists legal rights.
Not too many “independent music shops” will flourish in the future.
iTunes and music/film-in-the-sky is seeing to that.
It’s called progress. Of sorts. But it is ALL legal and artists rights ARE protected.
“Not sure there is much vinyl being shipped from the Channel Islands?” Yes and there’s a reason for that. Too bulky and a pain to pack properly to avoid damage. If you’d been in a record store recently (and clearly nobody on here has) vinyl is booming. This conversation is a bit like the person who says “I only drink cheap wine…can’t see what the fuss is about”
The reality of the situation is, of course, that this is all pretty much impossible. According to Richard’s posts on VAT abuse over the last few months, the amount lost in VAT ranges from £130M in 2010, to Richards figure of £200M which seems to come from nowhere. Now, these parcels from the CI’s need to be less than £18 to be eligible for relief. As you may be aware, many, if not most are less than this (birthday cards, etc.) For the sake of argument, being extremely conservative, lets say that every consignment is exactly £18. The amount of VAT on that last year would have been £3.15. So, to lose £130M in VAT, 113,068 LVCR parcels would have to be sent every day 365 days a year. at £1 per package, that would raise over £41M on it’s own.
Sorry Richard, This simply does not happen. Your figures don’t stack up. However, if Jersey goes broke, as you say it will, and the UK has to step in with hunreds of millions of pounds to bail her out, will you stand up and be counted for your creative accountancy?
That should say £1 per package postage – also very conservative.
£200 million is a sensible extrapolation of last HMT data
And is 113,000 parcels a day plausible? I’m sure so – we had 10 in this house from Jersey in one day this week – printer cartridges – I did not realise the latter would come from Jersey or I would not have done it
Far from overstating I am sure I understate
And there’s also some evidence I’m now hearing that container loads of supposedly CU franked mail don’t even get unloaded in CI before moving on to UK
It’s you who is way out of line with the estimates
As for Jersey going bust – that will happen anyway – and yes, we will bail it out – that’s reality and I’ve never denied it. The UK gov’t knows it too
But Richard, that is very conservative. If we take your £200M figure as the VAT loss, then that would be nearly 175,000 parcels a day at £18. Cards and many other items are half the £18 or less. So in reality we would be talking around half a million consignments a day. But then, they don’t work on Sundays, so the rest of the week has to take up the slack, so also taking into account bank holidays, around 300,000 consignments per working day across Jersey and Guernsey to meet the £200M VAT (approx. 91 million consignments a year). According to the 2007 Jersey Post Annual Report, they processed 86 million items (the same as the previous year). That includes all items received and sent. 36 million were for local delivery. Turnover was £53M of which £41M was for postal services. The population of Jersey fluctuates between 80,000 and 100,000 a year. Like it or not, that generates a lot of post. Add to that the many businesses that Jersey has and you have a heck of a lot of post (both ways).
I am not saying that the LVCR is not harmful. What I am saying is that the figures are extremely overstated. If the UK government was losing £50M a year I would be very surprised
And LVCR hardly existed in 2007
Get real
If the argument lies between allowing Jersey to continue with a number of secretive and nefarious activities just to protect the island’s economy.
Or providing the Jersey people with economic assistance to create an honest and lawful jurisdiction – then of course we must support the latter.
It is amazing that people can support illegality on the grounds that to do otherwise may be harmful.
What kind of world are we developing for our children to live in?
Zaphod, why don’t you speak to some one who has worked at a major internet retailer based in Jersey.
How many £18 jiffy enevelopes do you think can be fitted in 6 plus shipping containers per day? Just think about that for a minute, one retailer, over 6 containers a day stuffed with jiffy bags.
Read this article from last Christmas, http://www.pocket-lint.com/news/36982/mega-monday-over-black-friday 1,200 orders a minute!!!!!!!!!!! That’s 1,728,000 orders in 24 hours from just one retailer.
My friend worked night shifts there a few years back and was gobsmacked at the sheer scale of the operation. He was told by a colleague one night “we will be really busy tomorrow night ‘cos the new Friends DVD is due for release”. He was shown the dozen or so pallets full of just this one DVD that had been pre ordered before release date.
Add to this the contact lenses, ink cartridges, memory cards and even rubbish bags from major UK retailers whose fulfillment is done here and you might get an idea.
Read this, http://news.sky.com/home/business/article/16037309 you’ve got to be selling quite a few cards for a business to sell for £120m don’t you think?
Do you really think the major internet retailers are paying anything like you and me to post their packets? I’d bet they get a huge discount for sending thousands of packets a day so your simple maths on Jersey Posts accounts will not work unless you know the rate of their discount.
In my experience Richard is usually pretty accurate with his financial predictions, after all he successfully predicted the size of Jerseys black hole several years before the politicians admiited it was bigger than they expected.
Very interesting post – and nothing like a horses mouth (excuse the expression – no offence intended) to get down to the nitty grity!
Of course its all about secrecy and on an island with no freedom of information who knows what else is going on? Only those sworn to secrecy!
When this little island’s lid is finally taken-off of the activities of greedy bankers, financial whiz kids. too-clever-by-half-lawyers and the Big Four will be finally revealed — and it won’t be a pretty sight!
Too many metaphors.
Until three months ago my brother worked at one such fulfilment company in Jersey. They employ around 40 people, of which around 30 work on a three shift system. The other three are management, infrastructure, accountancy, administration, IT, etc. Of the 30, 10 per shift, there is always at least one on holiday or sick. They deal in printer cartridge, memory sticks and the like. It is extremely labour intensive (hand picking) and pretty poorly paid work. On a good day they may get 1500 consignments out, but that is pushing it. Yes, stock arrives on pallets, as it does for any business. It is then opened, put in jiffy bags, placed in the stock bins. There are two to three people permanently doing this. Three people collecting orders and selecting items for dispatch, and the others labeling, franking and stacking for sending.
These people work extremely hard for a living. However, they and the majority of the other thousand or so CI residents who work in fulfilment resent the fact that companies like Amazon and Play.com use this loophole. The majority of these big companies do the picking and packing in the UK. Ship the containers to Jersey, and then ship them back on the next boat. There is no real income for Jersey from this. No job creation – those are all UK jobs. However, it is the hard working people of the Channel Islands who will suffer when they lose there jobs.
The point is, blaming the people of the Channel Islands for this when it is big UK companies doing the damage. Jersey and Guernsey did not create LVCR, the EU did. The Channel Islands took advantage of the situation in a very clever move which created employment. However, it took real crooks from the UK to totally screw and abuse the system.
I wonder how many thousand jobs will be lost in the UK if this loophole does get stopped.
Not one job will be lost in the UK
We’ll just pay tax
I don’t think the figures in that Pocket-lint article can be relied on – they were merely Play’s own purported prediction. No doubt they were already planning to sell the company, so no wonder the figures look so impressive!
In any case, they also sell many items from the UK, which are VAT paid. We have no way of knowing details on their figures, it is a private company.
No one can possibly blame people living in the Channel islands for the activities of a greedy few — on both sides of the water. Richard Murphy has always made it quite clear that the social and economic welfare of the islanders are paramount.
But it is clearly wrong that these wonderful islands should be used as a “front” for activities that are undoubtedly immoral and sometimes blatantly illegal. Economic dependency on these activities is a predicament best resolved by local endeavour and financial rehabilitation assistance from the UK government, which is responsible for the predicament/addiction in the first place.
Zaphod, I note your reply and it’s failure to rebutt my evidence which disproved your previous argument.
You then say this “The point is, blaming the people of the Channel Islands for this when it is big UK companies doing the damage. Jersey and Guernsey did not create LVCR, the EU did. ”
Again factually incorrect. The original and possibly still the largest exporter of goods exploiting the LVCR is a Jersey company set up by Jersey people who are now all multi millionaires. It was this companies pioneering exploitation that forced the other big names to move over here to compete with them or face losing more market share.
Agreed, once the big household names joined in on the party it drew more attention to the whole issue creating the situation we are now in but…………………………..
I would still argue, if it wasn’t for the Jersey born pioneers who recently sold their massive business built on the foundations of exploiting LCVR we wouldn’t be in this mess right now.