Wednesday, 2 March 2011

The Pocket Money Tax: What a Mean-Spirited Set of Politicians

At the moment anything imported from outside the EU with a value of less than £18 enjoys a VAT exemption. This includes orders from mail order shops on the Channel Islands, like 7day shop who sell photographic and computer bits and who sell CDs and the like.

Lord Ralph Lucas, in the Lords, has branded this as a "smuggling enterprise" and wants it stopped. But his plans don’t stop at the large enterprises, like Amazon, who are moving into the Channel Islands to take advantage of the loophole. The BBC report suggests it will not be just the Chanel Islands trade that's hit but everyone who buys any small item overseas.

If this allowance is scrapped the Channel Islands themselves will be stuffed with a trading disadvantage. After all the VAT on £18 barely compensates for the higher transport and postal charges that a trading firm there faces in dealing with the mainland. Their problem perhaps?

But what if you buy a small item, under £18 from abroad, from a Chinese Ebay shop for example? Currently it is VAT free. If VAT has to be added how will it be done? HMRC will have to assess it, sticker it, the Post office will have to collect it from you at time of delivery with their ‘collection fee’ added, as they do for larger value items.

Basically this ruling, if passed, will have the effect of unwinding years of progress towards the simplification of online overseas trade and co-operation for ordinary people, making small purchases subject to a significant and uncertain price barrier. It’s a trade barrier preventing ordinary people accessing the world market. Probably that’s the point, it’s a control mechanism and a bar to overseas spending.

But who buys such small value orders from these Channel Island shops and Ebay sellers? It’s not businesses; an £18 allowance is not much use to them. Much of this trade is kids buying pocket money items, small toys, batteries, CDs and the like. Are we really so desperate that we need a whole complex expensive procedure to extract charges and VAT from kids’ pocket money purchases?

We know all about HMRC and their attitude to legal imports like alcohol and tobacco, it’s well documented at Nothing-2 Declare . Even when items are bought legally, with taxes paid in the EU, the HMRC make up their own illegally applied allowances and will seize your goods and your car if they happen to decide anything you buy is not for your own use. So are we now to let these same people loose on every parcel from abroad to decide if , in their opinion, with no external scrutiny, it’s been legitimately sent from a private person or from a business so they can levy VAT and charges?

As always our politicians, in the search of a few quid for their pockets, have completely failed to consider the wider aspects, who will end up paying and who will be affected by the consequences of their nasty mean-spirited actions.

(News picked up at Raedwald’ place)

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