A 20% VAT, the UK equivalent of Australia’s GST, is set to be added to cheap online purchases in Britain, after complaints from high street retailers that they are “losing” business to online retailers.I am assured that Gerry Harvey, has had no say in the decision, which was handed down in last night’s UK budget.
VAT free Internet purchases of games, music and PC items could be over within 12 months in the UK as British Chancellor George Osborne outlined a clampdown on this ballooning tax loophole in his new budget.
According to the UK Coalition Government, The tax dodge cost the Treasury $200 million in lost VAT in 2010 where VAT is 20%, not the 10% being proposed by Gerry Harvey and Myer boss, Bernie Brookes, who have been lobbying the Government for an immediate change to GST regulations to include a 10% GST on any purchases under $1,000 on overseas internet purchases.
Currently goods that are purchased and imported from outside the EU are entitled to a Low Value Consignment Relief (LVCR) exemption.
The Guardian newspaper said that with the arrival of the internet, retailers have been able to make this importing process so easy for consumers that many remain unaware that the discount prices offered online are available only because of elaborate warehouse and shipping operations offshore, largely in the Channel Islands.
Campaigners against the loophole have claimed it has precipitated the failure of hundreds of high street businesses as smaller firms have been unable to compete with VAT-free internet prices.
Research reveals that UK shoppers spent $600M buying more than 45m CDs, DVDs and Blu-ray discs from online sites in the 12 weeks to last Christmas. That represents 40% of all DVDs bought over that period, 50% of Blu-ray discs and 45% of CDs. The vast majority of these purchases are believed to have been made without VAT and the goods shipped from the Channel Islands.