LVCR is issue of the day, says our man in Brussels
Saturday 9th April 2011, 2:29PM BST.
ENSURING that Europe fully understands Guernsey’s position on issues such as tax and VAT relief for low value goods is a top priority for the island, Guernsey’s ‘man in Brussels’ has said.
At the end of his first week on the job, director of European affairs for the new Channel Islands’ Brussels Office Steve Williams, pictured, yesterday spoke about some of the challenges he will help the islands tackle in the months ahead.
‘First of all, LVCR is a big issue at the moment and it’s one that featured in my initial phone calls with the islands,’ he said.
Chancellor George Osborne announced in last month’s UK Budget that VAT relief would be cut to £15 – meaning only products under this value can be shipped to the UK from Guernsey VAT free. He warned that the UK was committed to tackling the ‘exploitation’ of the relief, saying that HM Treasury would consult with the European Commission on its options for limiting the scope of the relief.
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I guess he had to say something to justify Trot-sky’s oh-so essential european folly, even if it is just by stating the bl@@din’ obvious…
I await his next incredible incite with bated breath, what’ll it be next, I ask myself?! Will it be something about tax…maybe the finance industry….?!
There was silly me, thinking it was all such a total and utter waste of money we don’t have, only to see this and realise it really is worth the squillions that office is costing us. WHEW.
…!
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Does anyone remember a states debate on this Brussels office?
I remember the External relations group applying for £200,000 to promote external relations, then it became our half share with jersey to form a Brussels office.
Now the latest figure quoted by radio Guernsey is £800,000 and rising.
To achieve what, very little I suspect,as as a pinprick like Guernsey will hardly register within the European bureaucracy, but at great cost to the hard pressed Guernsey taxpayer.
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Certainly will be a waste of money… Good luck lobbying on this one. What’s the request going to be “We don’t want to be part of the EU (so S** off PS. Please let us use this import relief so we can carry on retailing with a 20% advantage inside the EU undercutting all EU retailers – Thanks!”.
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No **** Sherlock!
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You guys are so negative. Finally we might have a voice in the EU, and what else did you expect from one of his first interviews. Sounds like he has great experience and just what our forgotten islands need.
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The problem for the UK is that they see this as a one-way leverage. The reality is that the more the UK and EU turns the screws on the Channel Islands, the more that they damage the Channel Island economy – and there is only one consequence if the UK and EU combine to remove the economic incentives of the finance and retail economies in the Channel Islands – Either the Channel Islands will have to declare full independence – in other words give up all links to the UK such as visa-free travel etc when it will become as successful as Singapore and will cease to try to accommodate EU regulations – or the economy will collapse and the Channel islands will join the EU and receive enormous grants because it will be one of the places in Europe with the weakest economies. This latter option would cost the UK a great deal more than the £130M that LVCR costs it. The other issue is how the EU deals with enforcement within the rules. The EU will almost certainly insist (as it is required to do by law) that the UK does not discriminate against the Channel Islands – so the UK will be faced with having to open Millions of small packets form China, Hong Kong, Taiwan etc which also have not paid VAT – the cost of
As for the cost of the Brussels office – it all depends on the figures being assessed, – I work with 3 lobbying companies with offices in Brussels – all with between 3 and 5 staff members and their costs are between £600,000 and £950,000 (when office, staff, travel, vehicle, security and entertainment costs are taken into account) – and anyone who has worked there knows that having a local presence is invaluable …… as long as it has the skilled diplomats within it (and not doing so can have an adverse effect).
As for asking for one sum and then it costing another – that’s our fault for not speaking up – the costs of the Brussels offices should have been capped unless a vote of the entire States agreed by majority to raise the budget – then you can’t get “creeping-spending”
Remember this when it comes to GST and other things – GST will inevitably creep up from its initial 2% or whatever – right up to 17 or 20% just as UK VAT started at 5% and shot up – unless someone inserts into the legislation that GST can only be raised on a referendum of the people carrying more than 50% of votes. You have been warned.
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Here’s a fact you can’t argue over /fudge/avoid :
http://www.telegraph.co.uk/finance/personalfinance/offshorefinance/8450357/EU-expects-more-changes-to-Channel-Islands-VAT-loophole.html
Game over folks
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horseman – I don’t think that anyone doubts that further changes will be made.
But the fact remains that the original intention of the LVCR was a good one and that we would hope that the EU/UK do not cut off their own noses by destroying that original intention when dealing with the abuse of the LVCR.
Also, the anger over the abuse of the LVCR should be directed at the UK companies that began and continued the abuse, rather than at the Channel Islands themselves.
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The Channel Islands ARE responsible for this development by letting the UK companies begin and continue the abuse. Do you think Commerce & Employment get no say in it? They have let the local companies down by allowing it to happen and turning a blind eye.
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Simply Read – there is nothing that C&E can do to prevent a legal business being set up here, even if it is bad for the island. The only control that can be exercised is via the housing laws. But if they employ people who do not need a licence, then the States are powerless to stop it.
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But the fact remains that the original intention of the LVCR was a good one and that we would hope that the EU/UK do not cut off their own noses by destroying that original intention when dealing with the abuse of the LVCR.
Utter rot. the original intention of LVCR was to reduce tax collection costs not provide a method for VAT free retail in the UK for non EU companies. Its lost the UK billions in tax over the years , way more than any advantage. If this industry didn’t exist (and goods were not being circular shipped) then amount of tax involved would be tiny.
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“Also, the anger over the abuse of the LVCR should be directed at the UK companies that began and continued the abuse, rather than at the Channel Islands themselves ”
More rubbish. If you let one company abuse it (and all the early abusers were local companies) all the UK companies are forced to join in. How can you possibly exclude them ? On What basis ? How dare they try to remain competitive! What’s wrong here is the idea this is intended for selling VAT free in UK. It isn’t.
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“The Channel Islands ARE responsible for this development by letting the UK companies begin and continue the abuse ”
What ? UK companies began the abuse! This was all started by greedy locals….. Uk business came later after they noticed they couldn’t compete
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@ Horseman.
“Its lost the UK billions in tax over the years”
Sources please.
Maybe if the UK music industry wasn’t so content to rip off the UK consumer there wouldn’t be such a problem?
Also, it’s the UK consumer who is avoiding tax here. Why don’t you have a go at them?
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Carry on guys with your blameing the little C.I. for the mess your country is in if it makes you feel better.
Farmer John
I wonder just how many greedy UK residents there are that shift there money around to avoid paying tax? maybe its those you should be looking at?.
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“Sources please…” What ? This is pathetic. The sky is blue. Sources please. Is this the argument room ?
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Horseman No3 – You may be right, I don’t know, but I hardly think that JJ Lehto is being “pathetic” when he asks you to provide some evidence to back up your statements.
Oh, and yes this is a forum for comment and therefore debate, so don’t be too surprised when someone disagrees with you.
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Horseman, so you dont have figures to back up your statement?
If you are suggesting billions of vat has been avoided, have you actually worked out how much that comes to in terms of actual sales? Are you suggesting that the fulfillment industry in the ci is shipping billions of actual cd’s?
I think you need to check your figures.
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“abuse”, “greedy locals”…shall we include Specsavers in this bracket? They started here 20 odd years ago in a tiny office and now have shops from here to Australia. Putting small independent opticians out of business the world over, the selfish, abusive, greedy so and so’s. Or is that a business success story that benefits the customer by supplying cheap goods?
I’ve worked in 2 very successful local ecom companies who both started from scratch in back rooms. One has been in business long enough to now have massive purchase power (mostly goods from the Far East before anyone whines about circular shipping) and the other has a very sharp buying/marketing system which gives them a big online profile.
I don’t see either of them shutting down because of changes in LCVR, because their systems WORK. LCVR is only a part of the equation. The other part is zero corporation tax and no VAT charge on Google Adwords (which any online marketer knows is a Massive part of running costs). Guernsey also has downsides, like expensive square footage, slower (monopolised) postal system and staffing issues but hey, that’s just a local grumble that we don’t use to justify our failures.
If we lose fulfilment houses, so what? They don’t pay tax, they employ mostly seasonal non-locals (who also don’t pay tax) and it’s their UK head offices and customers who get all the benefits. Let the UK have ‘em back. But they won’t go, will they? They’ll find another low-tax non-EU place to serve their UK customers from (none of whom seem to care that they’re apparently fleecing the taxman of millions that were earmarked for orphans and sick kittens).
Yes, I’m sick of reading pious violin-sweeping comments about the UK tax system losing out when we really know it means “my business failed and I’m looking for a fall guy”. As though anyone in the UK outside HMRC cares about a money-grabbing tax system that feeds feckless layabouts (both in Brussels and at home) whilst laying off nurses. I’m not saying ours or any other government is any better, but PLEASE! Does anyone feel so huggy towards the UK taxman when it presents its bill?
Anyone coming on here to claim that WE (the Guernsey population?) drove them out of business is deluding themselves. You sink or swim based on your own success, not by blaming someone else for your failure. Take a look at Google Earth and see how little of Guernsey is dedicated to warehouses (and many of those serve local business). I can’t speak for Jersey and I’m fed up with UK commenters lumping us together as though (ironically) we’re so small that people can’t see that we’re two separate territories, despite our supposed collective domination of online commerce.
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Mrs Meat
Great post.
Horseman No3
TL has it spot on so go blame someone else, maybe the little old lady down the road as i`m sure you can find some angle where you could make all this her fault.
The utter rot is comeing from you :)
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Mrs Meat
Rant rant rant…..20% price advantage.. ….elephant in room….rant rant rant..rant.. froth…froth….bright pink…rant rant…20% Elephant in room… rant rant.
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jjlehto – Indignant …rant rant….ignore obvious .. rant rant… 20% Elephant in room….no effect….obvious…rant rant….etc. Yawn.
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Horseman No 3 – why are you even posting on here? If you want the rules changed, speak to the HMRC.
If the HMRC introduced a rule that said that cars made overseas were exempt from VAT, then overseas cars would become more popular and due to their price advantage. But would you blame the workers who build cars overseas, or the people who set up factories overseas? Of course not. They are simply reacting to the environment created by the HMRC. The same applies to the LVCR.
It is the job of the tax authorities to structure their policies to achieve the result they want. Businesses react to the tax environment. If the tax authority gets it wrong, they only have themselves to blame.
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@ Horseman, so no rebuttal when faced with the exact figures? Not exactly a surprise……..yawn….
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Terry Langlois – nicely put, sir.
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Hey Lehto. Here are some figures for you… Just in case anyone was unclear about the fake flower business.
http://www.telegraph.co.uk/finance/personalfinance/offshorefinance/8464133/Horticultural-companies-face-restrictions-on-tax-loophole.html
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Terry….related ?
“Martyn Langlois, the general manager for Ferryspeed”
http://www.telegraph.co.uk/finance/personalfinance/offshorefinance/8464133/Horticultural-companies-face-restrictions-on-tax-loophole.html
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Still no figures, eh, Mr Horseman? Have you realised you are starting to look a bit daft?
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JJ Lehtomo – Haven’t answered your daft question because a) Figures have been widely publicised in press for at least 6 years (80m in 2005, then year on year increase to £150m now) b) These figures can only be gross underestimates anyhow since you know as well as I that there is no transparency in Guernsey company information. c) Every major company doing it…must be a large sum. Actual music industry figures Music and DVD was £165m in 2009. Easily a billion in a decade. Easily. This is all stuff that would have sold in UK anyhow if it hadn’t been for fact moving offshore saved VAT. Come on now don’t deny what everybody accepts. Just accept the party is over and it was good while it lasted. Lets see some honesty.
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Looks like your ferry tickets may be going up in price once they lose all their other business. No more pointless round tripping eh ?
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Horseman, can you provide a link to those figures as I can find nothing to back up your arguement of such high figures of loss of VAT? You are also making the classic mistake (have you been learning from Richard Murphy?) of not testing your assumptions. Do you really believe that the UK consumer would happily have stumped up an extra billion? And if they had, this wouldn’t be coming from spenditure elsewhere, thus meaning less VAT take on other goods?
The party may well be over…I just hope you’re not expecting VAT take to magically rise. Or your business to suddenly take off! From what i hear, many of the CI retailers will just base themselves in the UK. There seems to be plenty of commercial property at cheap prices!
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JJ, I think you’re wasting your time addressing remarks at Horseman.
He & cutthebs are only interested in making Guernsey and Guernsey people the villains in this piece. The fact that HMV have based their online warehouse here is somehow the fault of a) all of us Greedy Guerns and b) our Sleazy Government who should have stopped it. The truth that big UK companies are using us as a turn-around for benefits that remain 99% in the UK itself (for these companies and their customers) is of no interest to those who need a ‘Them’ to blame. The truth that the UK government has just as much as say in these companies’ activities as our own (probably more) is also of no interest.
Instead we have to put up with this sneering and venom as though we’re all shysters fleecing the UK taxman. Ironic when you consider that all but one UK high street store in Guernsey refuses to adjust their prices for VAT. Very few mail order goods sent here will have the VAT removed and the hoops you need to jump through to get a VAT refund from a UK shopping trip are not worth the bother unless you spent over £200 in one store.
I’ve done some research: local ecom store 7dayshop sell a branded memory card at £9 – one of the cheapest UK prices. But if LCVR makes such a big dent in pricing, then how can 7dayshop also sell another branded memory card at £99 which is ALSO one of the cheapest UK prices? Even then they’re not 20% cheaper than any but their most expensive competitors. Ditto local store rip101 who sell surf and skatewear: their £17 branded flipflops are cheap, but so are their branded baseball boots at £33.
Fair enough to rail at the UK companies who are exploiting the LCVR situation, but ripping into Guernsey people is like finding a Delhi website and ripping into random Indians for ‘stealing our jobs’ just because UK companies have chosen to outsource call centre jobs there.
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JJ Lehto : You obviously don’t look very hard
http://www.channel4.com/news/budget-cd-tax-loophole-costing-140m-a-year
The UK Treasury has been giving these figures for years and they have been given in parliament.
See this parliamentary Library briefing – page 11
http://www.parliament.uk/briefingpapers/commons/lib/research/briefings/snbt-04155.pdf
Good enough for you ? £475m in four years…
As for Mrs Meat. Are you really trying to argue 20% isn’t an advantage ? Come on now… this is really desperate stuff. Anyhow it’s all over bar the shouting, which frankly I’m bored of… rant on amateur hour!
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@ Horsey, hardly “billions” though is it? I reckon you’d be pushed to make it a billion, and even then if the consumer was spending an extra 17.5% (and now 20%) on their CD’s it would probably hit expenditure elsewhere, reducing the tax take on other goods.
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Whoops JJ Lehto.
You need to unblinker about Murphy. He’s called it right too many times to be dismissed in such a facile manner.
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Mrs Meat
Surely if the local ecommerce retailer is able to be cheaper than UK suppliers for goods in excess of £18 value, it rather suggests that the local fulfilment industry is not dependent on LVCR.
Or am I missing something ?
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@ Horseman – a 20% advantage is a splendid thing. Who is getting it please? Us living here in Guernsey? No. Goods need to be shipped here; shipping costs, we pay. We do not get to buy things 20% cheaper than the UK. So I fail to see how anyone is shipping things here AND back to the UK and still maintaining a 20% price advantage over their competitors. Obviously there is Some advantage or they wouldn’t be doing it.
My issue is not that companies have been making these circular trips with goods, it’s that we in Guernsey are being held responsible. This is a UK issue created by UK companies, do not blame us. We benefit very little from it, and in fact are now being damaged by it. It is not illegal. Our government has less power to stop it than yours.
I don’t like to hear Guernsey companies (or people) accused of greed when they are just trying to make a living. If Guernsey flower sellers are having trouble selling their locally-grown flowers because of spiraling costs or they have seasonal short-falls in stock, then why shouldn’t they – like their UK competitors – be entitled to import foreign flowers? I cannot repeat it enough: much of the VAT advantage is wiped out in shipping costs. For flowers that will have a shorter shelf-life than those imported solely into the UK.
@ GM – their are two separate issues that are combined in one here: “local retailers” and “local fulfillment industry”. Sometimes they are the same thing where a retailer offers fulfillment on behalf of another based elsewhere, but not all do. These retailers have been selling whilst VAT was at 17.5% and 15% and done OK. Again, VAT gives an advantage but it is a small part: zero corporation tax helps; no VAT on Google Adwords helps an awful lot more when you are spending £10,000+ a month on your marketing campaign.
VAT may now be 20% but costs of everything else have risen dramatically, whilst suppliers (of goods & services) are now often unable to offer credit terms.
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