PracticeConsultingLetters – Trouble for the taxman when he tries to cross borders.

Letters - Trouble for the taxman when he tries to cross borders.

At last the myth of VAT is found out. Even though it has existed in the UK since 1973, only now is the cumbersome and badly thought-through retail sales tax exposed for accountants to see (Suspend online VAT, page 1, 17 May).

So why can’t VAT be applied to non-physical products delivered electronically?

Simple, with a sales tax (as in some US states) you are taxed only IF you fall within the aegis, whereas with VAT you are taxed automatically UNLESS you are spared.

So with a sales tax, national sovereignty is preserved and no tax can be collected from across borders or even other states. With VAT it can and it is, but only inside the EU.

Doesn’t anyone remember the outcry at California’s ‘unitary tax’? Then it tried to impose taxes on international business profits everywhere outside, not only the state but the US.

So why does the EU think it can impose its VAT on the US or other countries?

Any attempt to collect VAT, where no physical goods exist, from businesses set up outside the EU, will anyway sooner or later prove futile.

For instance, under the ‘Swedish’ proposals, ‘VAT haven’ companies might appear in places like Gibraltar which is inside the EU but outside its VAT arrangements, or The Isle of Man where the converse is true. There are plenty of other obscure places over Europe where tax opportunities will abound and these can only grow with EU enlargement.

So Hooray for Whitehall for spotting this first! Brussels patently hasn’t had the benefit of King Canute’s discovery.

Tom Caldwell, Surrey.

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