/ Shopping, Technology

Tax loophole closed – the end of cheap DVDs?

If you’re used to buying cheap DVDs and CDs online, you’ll have to cough up more as the government closes a Channel Islands tax loophole. It claims to be helping small businesses, but will our wallets suffer?

Since 1973, the Channel Islands has benefited from the snappily titled Low Value Consignment Relief, which exempts companies from paying VAT on items sold for less than £15. It basically meant companies in the Channel Islands could sell products up to 20% (current VAT) cheaper than retailers in the UK.

In recent years this encouraged major retailers to base their online operations and warehouses on the islands – Amazon, Play.com, Tesco and Asda all set sail for sunny days in Jersey. As a result, online shoppers benefited from prices substantially cheaper than on the high street.

VAT avoidance loophole closed

The government has finally found out how much fun we’ve been having – and more importantly how much money it’s been missing out on – and it’s come to turn the music off.

From 1 April next year, the government will sew up the loophole and major retailers are already saying they’ll be forced to increase prices.

The Treasury claims ‘these reforms will ensure that UK companies, especially small and medium sized enterprises, can compete on a level playing field with those larger companies with the resources to set up operations in the Channel Islands’.

It’s a wonderful fairytale. Call me a cynic, but the government is more likely interested in the extra £140 million in revenue it will pocket. I do, however, agree with the sentiment.

I like cheap prices. Much of my DVD shopping over the past decade has been done from the comfort of my bed, but I can see that it’s patently unfair that major retailers who can afford to set up business in Jersey are consistently undercutting high street retailers.

Spare a thought for our high streets

Britain’s high streets are seriously struggling. Back in June a report by Colliers International property consultants estimated that a quarter of our high streets were failing. Just this week we published a Conversation on struggling high street electrical stores on the back of Best Buy UK throwing in the towel. Comet was sold for less than the price of a sandwich a day later.

The small town high street where I grew up in the Midlands is an increasingly depressing line up of banks, pound shops and an impossible collection of card shops – birthdays are apparently big business in Staffordshire.

I don’t have a great deal of sympathy for big high street shops, online retail is sticking the knife into them the way they did to ‘mom and pop’ shops back in the nineties with out-of-town retail. But I think the end of this tax loophole at least gives the remaining small businesses on our high street the opportunity to be competitive.

Ultimately, do I want to pay more for my DVDs? No. Nobody does. But do I want a high street where all you can buy is a pack of 24 batteries for a pound and rolls of wrapping paper? No. Whether we should be paying 20% VAT on purchases is a larger argument, but all businesses should be forced to cough up the same amount. It’s only fair.

MetalSamurai says:
10 November 2011

As the major music labels have all announced that CD production will end next year, it looks like the horse might just get its rear hooves clipped as the barn door shuts.

[BTW you need to fix the HTML for this page. The Accept Conditions tick box is displayed *underneath* the words “why not” and therefore impossible to tick]

Just change the settings in your browser and the page will display properly, or try a different browser. Definitely not a best buy content management system.

Yes, it could be too little too late.

[PS. We don’t see the error on this end, please send us details of the problem and the browser you’re using to our Contact Us email. Thanks.]

I hate people who do this usually but, you mean sew up the loophole, surely?

The problems with failing high street shops may have more to do with high property rents and business taxes. The Channel Islands selling vat free goods on products under £15 did not sink Comet.

This change is more of a scam by this government to collect more stealth taxes from us ,when people buy things from overseas you not only get charged the VAT which may only be a pound or two but you also have to pay a fee to the Royal Mail Group (owned by this goverment) for collecting it, which is a fiver or so . That we should be complaining about.

Gerard Phelan says:
11 November 2011

Is the the same Government that could find itself having to support the newly unemployed on the Channel Islands? Talk of taking from Peter to pay Paul!

“The government has finally found out how much fun we’ve been having”

Well, *I* haven’t been having any fun particularly, because despite their great customer service and fulfillment procedures I’ve been boycotting Amazon over this very issue. So I’ve not profited from Amazon’s tax avoidance, and nor has the state. Fun? What larks!

As public libraries are being closed, how can Amazon have spent so long using this loophole to avoid paying tax, while claiming in publicity blurb that the Kindle means it’s dedicated to improving people’s literacy? The whole principle of taxation is that the functioning of essential local and national state services is more important than the purchasing of cut-price non-essential consumer goods.

Now that the loophole is being closed, and Amazon’s prices have the correct amount of society-improving tax in them, surely my own fun is only just beginning! Because if they pay their taxes properly, I’ll consider actually doing some Christmas shopping with them. That means that this announcement is a victory for society, the state and the consumer (by which I mean this consumer here, and others like me.)

les.d says:
14 November 2011

I dont think it will make too much a difference sainsburys already are stating harry potter pt2 in the supermarket for £9 and thats instore and thats with VAT paid so the step wont help the high street but as you rightly say more vat in the governments coffers.