The UK government has promised to end the exploitation of VAT relief on low-value goods like CDs, books and DVDs shipped over from the Channel Islands in the 2011 budget.
The current loophole, known as Low Value Consignment Relief, means that retailers can ship goods worth £18 or less VAT-free from Jersey and Guernsey. The government announced that this thresh-hold will be lowered to £15.
It is working closely with the European Commission to eventually close down the £130m tax loophole altogether.
The tax relief was introduced in the 1970s to protect the Channel Islands’ fresh flower industry. The phenomenal surge in internet shopping has led a range of retailers to flock to the islands and to dodge tax.
The change in VAT duty means that they benefit from a 20 percent pricing advantage over mainland traders.
The practice has come under fire from retail lobby groups who believe it is killing off trade on the UK high street. You only have to look at stores like Virgin and now HMV to see this.
Osbourne said: "We'll tackle the exploitation that's left our high street music stores fighting a losing battle with warehouses in the Channel Islands.”
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The news will come as a blow to popular online retailers like Amazon and Play.com but has been welcomed by high-street stores like Tesco and flagging music store, HMV.
The measures announced in the budget will not take effect until November 2011.
Retail lobby group RAVAS said: “This really isn’t going to have much immediate relief for those retailers suffering the daily reality of a distorted internet retail market.”
Retailers Against VAT Avoidance Schemes have called for urgent and meaningful action to follow these words, arguing that if the government waits too long to act, many stores like HMV, may be forced to close.
The current loophole, known as Low Value Consignment Relief, means that retailers can ship goods worth £18 or less VAT-free from Jersey and Guernsey. The government announced that this thresh-hold will be lowered to £15.
It is working closely with the European Commission to eventually close down the £130m tax loophole altogether.
The tax relief was introduced in the 1970s to protect the Channel Islands’ fresh flower industry. The phenomenal surge in internet shopping has led a range of retailers to flock to the islands and to dodge tax.
The change in VAT duty means that they benefit from a 20 percent pricing advantage over mainland traders.
The practice has come under fire from retail lobby groups who believe it is killing off trade on the UK high street. You only have to look at stores like Virgin and now HMV to see this.
Osbourne said: "We'll tackle the exploitation that's left our high street music stores fighting a losing battle with warehouses in the Channel Islands.”
READ OTHER TOP STORIES IN THE WDM CONTENT NETWORK:
Does Marks and Spencer need a makeover?
Mobile Shopping: Hottest trend of the decade
Homeshop18 launches its next generation e-commerce portal
Americans didn't stop splurging after the holidays
The news will come as a blow to popular online retailers like Amazon and Play.com but has been welcomed by high-street stores like Tesco and flagging music store, HMV.
The measures announced in the budget will not take effect until November 2011.
Retail lobby group RAVAS said: “This really isn’t going to have much immediate relief for those retailers suffering the daily reality of a distorted internet retail market.”
Retailers Against VAT Avoidance Schemes have called for urgent and meaningful action to follow these words, arguing that if the government waits too long to act, many stores like HMV, may be forced to close.
