Posted on 02/28/2006 10:53:09 AM PST by nickcarraway
Step towards closing the loophole, SMBs say Owner-managers have claimed a victory over retail industry big guns in an argument about the exploitation of Jersey’s tax loophole.
Goods worth less than £18 sold on Jersey are exempt from VAT, a fact that has tempted the likes of Tesco, HMV and Amazon to use the island as a sales base, distributing knockdown CDs, books and DVDs to UK customers.
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IT gurus seek Your counsel - Jobsite, The best people for the job UK optician and eyewear retailer Dollond & Aitchison set itself up on Jersey to sell contact lenses, but last week the European Court of Justice ruled that the company must factor in the cost of eye tests in a lens package, pushing their value over the £18 cut-off.
Small independent stores located on the mainland, who say they can’t compete with the VAT-less prices, welcomed the ruling, saying it represented a step towards closing the loophole – despite being won on a technicality exclusive to opticians.
"Independent retailers are being crippled by this practice; they simply can’t compete on price," Forum of Private Business chief executive(FPB) Nick Goulding said. "The FPB believes this is an abuse of the tax system and it is time the government took decisive action to stop it. It should not be forgotten the government is losing £80m in unclaimed VAT."
Nick Hornby, author of High Fidelity, a story set around a small, independent record shop, has leant his backing to the campaign, saying the type of outlet featured in his book is becoming extinct.
Big stores combine economies of scale and a lower tax take to offer newly released CDs from £8 and DVDs from £12.
Mike Dillon, owner of the Record Factory in Glasgow, said no private shop could compete on those terms: "I could actually buy stock from a supermarket cheaper than from a wholesaler, and that's got to be wrong," he said.
"I'm really concerned about this, and I believe that, at the current rate, the business that I established back in 1972 has, at best, five years left. We must be able to compete on a level playing field."
Unless these retailers expect courts to rule that eye exams are needed to buy CDs, I don't get why they think this is going to help them.
I don't know if this is true, but the bridesmade from my brother's wedding, who is from New Jersey, told me that New Jersey is the only state in the union that doesn't allow customers to pump their own gas? They still have full service.
True, New Jersey doesn't allow people to pump their own gas. Oregon used to be that way too, but they may or may not have changed.
Did you accidentally post on the wrong thread? :)
It more like they are subject to a 17 percent VAT that their large competitors can escape due to a loophole. But I don't know the situation very well.
It more = It looks more
Big stores combine economies of scale and a lower tax take to offer newly released CDs from £8 and DVDs from £12.
Economy of scale is the key element. Companies selling on the internet routinely dodge sales and VAT taxes. There is nothing to prevent these shops of setting up an office on Jersey to beat the VAT, but they would still lose the economy of scale to the big dogs.
VAT is a percentage of the cost of the item. The economy of scale reduces the cost of the item and the VAT is reduced in direct proportion.
The consumer wins with the big dogs and pays a bunch more to subsidize the little guys who can't compete.
People using scrub boards, hand cranked wringers and clothes lines are really pissed at the unfairness of competitors using fully automatic electric washers and dryers. It's just not fair.
In theory, the untaxed sale from Amazon is still due a "use" tax in place of a "sales" tax. Calfornia and Idaho have a spot on the state income tax form to declare "use" tax on items purchased that were not subjected to sales tax.
Even if the "leveling" effect of the "use" tax is applied, the deeper discounts and free shipping offered by Amazon trumps the best that a Barnes & Noble store can offer if the only issue is price.
That's true, and it would be fairer if they were competing on equal terms. I don't know a good way to "fix" that, though. Simply forcing one state to collect another's sales tax would cause all sorts of problems, and forcing merchants to collect sales tax for whatever state the purchaser is from would be a huge administrative burden.
Exactly, and the marketplace is most efficient when the price of an item is allowed to precisely reflect these factors (each of which influences supply and/or demand a little). The most economically efficient tax is the one that least impacts this equilibrium--that is the most fairly and evenly distributed--so that one buyer or seller or means of distribution is not favored.
If I'm reading this correctly, I think there is actually a good news story about NJ.
That is correct.
It does create a handicap though.
When I moved out of state, the first time I had to get gas, I stood there looking at the pump not knowing how to get it in the car.
I've been doing the self serve approach at gas stations since 1970. The first stations to offer self serve had split the service islands between full serve and self serve. There was enough price difference that nobody was patronizing the full serve anymore. Eventually, most stations went to all self serve.
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