S Tel: Tesco and Boots under fire over VAT loophole

[sufaud]

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

 

[D]

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.

If it's entirely legal then it's not costing the treasury anything.

D.

 

[Ronald Raygun]

If it's entirely legal then it's not costing the treasury anything.

Eh?

The practice of selling them via Jersey instead of from within the UK
means less tax is paid. Therefore it loses them that tax.

It doesn't need to be illegal for the loss to arise.

On the other hand, it could be argued, I suppose, that if they weren't
so much cheaper as a result of the tax break, there would be less
demand, i.e. if they were only available from the UK direct, no-one
would buy them, and so the taxman would *also* "lose out".

 

[GSV Three Minds in a Can]

Bitstring <BE224A31.492D3%[email protected]>, from the wonderful person

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.

Since customs already ignores most inbound parcels with a similar value,
you can buy the same CD from USA or Canada and also pay no tax - that's
how Caiman, for instance, make a living. Don't see any reason why
Channel Islands (or IoM for than matter) should get a worse deal than
USA/Canada?