Group has ‘dossier’ on retailers’ VAT dodges

The Forum of Private Business has submitted a ‘dossier’ to the government on
the sale of goods by major retailers from offshore locations.

The practice, used by retailers including Tesco, Asda, Woolworths, HMV, Boots
and WHSmith, allows the retailers to avoid VAT, since the Channel Islands –
where the dodge is carried out – has exemptions.

The FPB contends that the loophole is driving small retailers to the wall. In
a statement, it said: ‘Small business must be able to compete on a level playing
field. It is totally unacceptable, unfair and anti-competitive that a business
like Tesco which has a turnover of £24bn should gain a competitive advantage
over tax-paying small businesses by avoiding tax.

‘We are calling on Dawn Primarolo [paymaster general] to stop this abuse of
the tax system. Failure to act will result in more businesses, jobs and
livelihoods being lost. Moreover, this is not good for the consumer, as
ultimately there will be far less choice if independent music shops continue to
close. The independent sector plays a key role in discovering and nurturing new
talent; a role the big retailers have no interest in.’

The practice costs the Revenue some £80m a year, but that may become £200m in
the next couple of years, according to Treasury figures.

The FPB has two suggestions that it says will stamp out the tax dodge: to
lower the price level on goods which VAT is exempt from in the Channel Islands,
from 22 euros to about 10 euros (£7); or to ask permission from the European
Union for a dispensation to close the loophole altogether.

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