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Tesco and Boots under fire over VAT loophole
By Robert Watts
Sunday Telegraph
(Filed: 30/01/2005)
A tax exemption used by Tesco, Boots and up to 100 other retailers to avoid
charging VAT on CDs, DVDs and a range of other goods will this week face
furious criticism from MPs.
These retailers and others including Amazon, the leading internet
retailer, and the optician SpecSavers have all set up operations in
Jersey, the Channel Island. Under a 20-year-old European law, retailers
based on the island can sell goods to consumers on the British mainland
worth under £18 without charging the 17.5 per cent VAT.
The practice is entirely legal, but is thought to be costing the Treasury
hundreds of millions of pounds a year in lost tax.
On Wednesday, John Healey, the Government minister responsible for
overseeing the newly merged HM Revenue & Customs, will be questioned by
members of the Treasury Sub-Committee, part of the influential Treasury
Select Committee, about VAT.
Michael Fallon MP, the chairman of the Treasury Sub-Committee, last night
told The Telegraph that he was appalled that Tesco, led by Sir Terry Leahy,
and other retailers are exploiting a regulation that was initially intended
to aid small businesses.
"Tesco cannot be a small business," Fallon said. "The Treasury needs to wake
up: significant tax revenue is being lost. I expect John Healey to be
questioned about this when he appears before the Treasury Sub-Committee."
Norman Lamb, another member of the Sub-Committee, said: "This is a ludicrous
loophole and unfair. It must be closed, and we will put that to Healey on
Wednesday."
The loophole has allowed UK consumers to benefit from lower prices Tesco's
Jersey website charges as little as £8.99, including postage and packing,
for a range of chart CDs and DVDs. Amazon set up a similar operation on the
Channel Island last year, while Boots is profiting from music sold by a
Jersey-based company, on its website.
Meanwhile, small businesses on the mainland see the practice as
anti-competitive.
Last week, the Forum of Private Business, a business lobby group, wrote to
Gordon Brown, the chancellor, calling for the loophole to be closed.
http://money.telegraph.co.uk/money/main.jhtml?xml=/money/2005/01/30/cnvat30.
xml
By Robert Watts
Sunday Telegraph
(Filed: 30/01/2005)
A tax exemption used by Tesco, Boots and up to 100 other retailers to avoid
charging VAT on CDs, DVDs and a range of other goods will this week face
furious criticism from MPs.
These retailers and others including Amazon, the leading internet
retailer, and the optician SpecSavers have all set up operations in
Jersey, the Channel Island. Under a 20-year-old European law, retailers
based on the island can sell goods to consumers on the British mainland
worth under £18 without charging the 17.5 per cent VAT.
The practice is entirely legal, but is thought to be costing the Treasury
hundreds of millions of pounds a year in lost tax.
On Wednesday, John Healey, the Government minister responsible for
overseeing the newly merged HM Revenue & Customs, will be questioned by
members of the Treasury Sub-Committee, part of the influential Treasury
Select Committee, about VAT.
Michael Fallon MP, the chairman of the Treasury Sub-Committee, last night
told The Telegraph that he was appalled that Tesco, led by Sir Terry Leahy,
and other retailers are exploiting a regulation that was initially intended
to aid small businesses.
"Tesco cannot be a small business," Fallon said. "The Treasury needs to wake
up: significant tax revenue is being lost. I expect John Healey to be
questioned about this when he appears before the Treasury Sub-Committee."
Norman Lamb, another member of the Sub-Committee, said: "This is a ludicrous
loophole and unfair. It must be closed, and we will put that to Healey on
Wednesday."
The loophole has allowed UK consumers to benefit from lower prices Tesco's
Jersey website charges as little as £8.99, including postage and packing,
for a range of chart CDs and DVDs. Amazon set up a similar operation on the
Channel Island last year, while Boots is profiting from music sold by a
Jersey-based company, on its website.
Meanwhile, small businesses on the mainland see the practice as
anti-competitive.
Last week, the Forum of Private Business, a business lobby group, wrote to
Gordon Brown, the chancellor, calling for the loophole to be closed.
http://money.telegraph.co.uk/money/main.jhtml?xml=/money/2005/01/30/cnvat30.
xml