Tuesday, April 13, 2010

Tesco: at it again

The Guardian reports that despite promises from Channel Island authorities that they will crack down on UK retailers using a VAT loophole (technically a derogation on de minimis sales of goods posted from the Channel Islands into the EU markets), Tesco has sneakily switched their operation from Jersey to Guernsey to continue this nice little earner, which cost UK taxpayers an estimated £110 million in 2008.

We blogged on the background to this nasty little scam in August 2009. Shortly afterwards the the specialist CD shop in the small market town where this blogger lives has closed down, citing online sales via the offshore 'fulfilment' industry as a principal reason for loss of business. The outcome, and this applies to towns and cities the length of Britain, is a loss of competition and a spiral of decline of consumer choice. This is inevitable when markets are skewed by bad tax policies and anti-competitive factors such as tax havens.

The current exemption from VAT applies to goods valued at less than £18 imported from outside the EU. The grounds for offering such an exemption are weak, but the evidence of systemic abuse via the Channel Islands demonstrates the need to close the loophole once and for all. It undermines the integrity of the internal market, it reduces consumer choice, it causes significant revenue loss to UK tax payers, and it undermines ethical business. All three major political parties in the UK espouse free market economics: why then don't they take decisive action against activities that run totally counter to their doctrine of choice?


Blogger Physiocrat said...

Tesco has morphed into what is essentially a monster property (land) empire, so the way to get them to pay their due is to shift taxes on to land values. They can't shift all their shops to the Channel Islands. Usual story.

1:29 pm  

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