Treasury ruling on Channel Islands tax break could drive CD and DVD buyers to foreign retailers
Best solution would be zero-rating for VAT on all cultural goods
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10 November2011: The
Entertainment Retailers Association (ERA) says Government proposals
to clamp down on VAT-free imports of CDs and DVDs from the Channel
Islands could simply drive business to foreign retailers based
outside the European Union.
ERA Director General Kim Bayley said, "We have always
supported a level playing field for all retailers and recognise the
concerns of smaller operators who have felt unable to compete with
Channel Islands shipments. But the Government's latest proposals
only partially address the issue."
The Government this week announced that the current exemption
from VAT of goods worth less than £15 imported from the Channel
Islands is to end on April 1.
But, said Bayley, there are already indications of a growing
number of internet orders being fulfilled from countries such as
the US and other territories which the Government's proposals will
do nothing to address.
"It may be difficult in the current economic climate, but we
believe the real solution would be for all cultural goods to be
zero-rated for VAT like books. Failing that, the answer is for the
Government to address the issue in Brussels. In a globalised world
it does not make sense to address an anomaly in the Channel Islands
alone. Much of this business will simply be displaced
elsewhere."
The issue has been divisive for the entertainment retailing
business with some ERA members taking advantage of the facility to
sell VAT-free items worth less than £15 from the Channel Islands,
while independent retailers in particular have strenuously
objected.
Said Bayley, "No one can blame those retailers who have invested in
business operations in the Channel Islands. The law specifically
allowed them to do so. Equally many independents believe the law
has caused them damage. The problem now is that having lured many
companies to the Channel Islands with this tax break, suddenly
withdrawing it like this is bound to have consequences for both the
operations of many Channel Islands based businesses as well as for
Channel Island jobs."
ENDS
For more information contact Steve Redmond on 07770 924720