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RAVAS calls for decisive action on mail-order VAT dodge

By | Published on Tuesday 22 March 2011

Houses Of Parliament

Retailers Against VAT Avoidance Schemes, a recently formed pressure group that brings together those who oppose the much previously reported Channel Islands VAT dodge, have called on the government to “take genuine action rather than tokenistic half-measures” ahead of tomorrow’s Budget speech by the weird boy Osborne.

As previously reported, when Tory Lord Ralph Lucas recently raised the VAT dodge issue in parliament a ministerial spokesman for the Treasury, James Sassoon, promised a statement would be made on it in tomorrow’s Budget. Campaigners hope that this might finally bring an end to the situation whereby mail-order websites based on the Channel Islands selling products for under £18 can do so without paying VAT, giving them an automatic 20% advantage over mainland based retailers.

As also previously reported, this loophole exists because of the Channel Islands’ slightly unusual status, inside the European customs zone but not part of the European Union. All the big music sellers utilise the loophole, including Tesco, Asda, Sainsburys,, Amazon and HMV. But the option is not open to smaller retailers who can’t afford an offshore base, which, campaigners argue, has led to numerous independent music stores, who might otherwise have been able to respond to the new threat of the internet by entering the mail-order domain themselves, going out of business.

Past promises by both the British and Channel Island governments to tackle this VAT dodge, which also costs the treasury millions a year in unpaid taxes, have never come to much, even though, campaigners say, the UK is obliged under European tax law to ensure the existence of European tax relief measures such as the Channel Islands VAT dodge do not distort the market.

Speaking ahead of tomorrow’s Budget, RAVAS spokesman Richard Allen told CMU: “We have seen before what happens when the authorities act simply in order to be seen to be doing something. In 2007, the Jersey government, at the request of [UK tax officials], introduced a license scheme, supposedly in order to restrict the trade. But it had no effect on the volume of goods being sold and all it did was concentrate the trade in the hands of those who could get licenses. Now, 96% of CDs bought online in the UK come from the Channel Islands. The license scheme did nothing”.

Allen adds that the government should also look carefully at any firms which claim moves to close the VAT loophole should not affect them because they are “genuine Channel Islands companies”, rather than UK businesses basing themselves there simply to gain the VAT loophole advantage.

Allen adds: “Offshore consultants advertise their services openly. They can set you up with a Jersey company that has nominee local directors. People close to this whole scam have told us how these nominee directors get told to say they are attending board meetings when they are actually playing golf. The whole management is in the UK and the only reason this ‘genuine Jersey company’ is set up in the first place is to avoid VAT”.

Allen adds that many of these “genuine Channel Islands companies” also have UK bases where any product not eligible for the VAT relief (ie those that cost more than £18) are mailed out because, of course, when there is no tax advantage it doesn’t make sense logistically to be shipping goods to British customers from off-shore facilities.

In a statement RAVAS concluded: “We will not be satisfied until HM Treasury takes definitive action and introduces a measure to prevent [VAT relief] being used by any company, in any way, to gain a distortive price advantage over VAT-paying competitors in the UK”.

It remains to be seen what Georgie actually says tomorrow afternoon.