Royal Mail’s tax exemption threatened

The generous VAT breaks which save Royal Mail hundreds of millions of pounds
could be scrapped following a warning EU tax commissioner Laszlo Kovacs.

The FT reports that Kovacs had claimed the VAT breaks enjoyed by
Royal Mail and Deutsche Post in Germany contravened internal market rules.

Kovacs has stepped up legal action against the VAT breaks in an effort to
flush out the imbalances. It is estimated that the UK government could raise
£200m by imposing VAT on
Royal Mail
. Germany could raise €330m (£221m) if it scraps
its exemptions.

Political sensitivities have delayed changes to VAT postal regimes. Operators
such as Royal Mail enjoy VAT breaks because they guarantee delivery of mail to
remote, uneconomic areas.

Kovacs, however, says that newer arrivals in the market are providing this
services and still paying VAT.

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