Sainsbury’s has become the latest retailer to avoid paying VAT by dispatching CD and DVD orders to the UK mainland from the Channel Islands.
As reported in today’s Observer, J Sainsbury, along with US retail giant Best Buy are the latest to set up complex circuitous shipping arrangements for goods offered on their websites for less than £18 in order to avoid VAT.
Websites operated by HMV, Tesco and Asda already structure almost all their online CD and DVD transactions as personal imports from the Channel Islands.
This practice is having a disastrous impact on the British music industry with many small music retailers closing down in recent years as they are increasingly unable to compete with discounts. The effect has been that music retail has become more and more concentrated in the hands of a few large operators. It’s also led to reduced income for record labels, publishers and recording artists.
The Musicians’ Union recently wrote to the European Commission in support of a complaint made to the Taxation Directorate by Richard Allen of Delerium Records. The record label owner had complained that the UK government has breached tax regulations and fostered an uncompetitive environment for UK retailers. The complaint focussed on the issue that the government has failed to stop the abuse of the directive that gives member states the right to allow low value imports to be exempt from VAT on entering the UK.
Not only is this proving costly for the music industry but the UK economy as a whole has faced a loss of VAT receipts worth at least £110m a year. The failure of the government to act against this practice is just yet another example of its failure to back up its words on cracking down on tax dodging with action.
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