Back in 2005 I first approached a Labour Government to complain about the Channel Island VAT Loophole that allowed retailers to avoid tax on goods mailed into the UK from The Channel Islands. The response I was given stated that it "wasn't a loophole", the cost of closing it would be too great, paying VAT was bad for the consumer (yes, really...) and that there was nothing that could be done anyhow. All of this proved to be nonsense when in 2012, to widespread acclaim, I shut the trade down and saved the UK well over £100 million a year in VAT that would otherwise be lost. As has been documented elsewhere closing the abusive trade down saved many UK retailers not least those selling physical music product.
To be fair the advice that ministers were given by civil servants from 2004 to 2009 was wrong but I was somewhat surprised that, initially at least, the starkly obvious unfairness and the damage this tax dodging trade did to UK business and the exchequer seemed almost invisible to those in power. I often used the analogy of the Emperor's New Clothes when it came to failing to spot the obvious, which seems even more fitting with respect to SHEIN. Fast forward to 2024 and Labour refuses to end a tax-based trading advantage that only benefits individuals and businesses outside the UK. Sounds familiar? As I said to both Labour and Conservative Ministers during the period 2005 to 2012, it's not politics, it's just stupid.
If the report in The Financial Times and Retail Gazette is correct, then yet again there appears to be a blind indifference to the obviously negative impact of allowing imports to enter the UK free of duty and VAT. The Whitehall Wonks will no doubt be pointing out to ministers that SHEIN and TEMU will be paying VAT under the 2021 Online Marketplace legislation. This may well be true in terms of sales made on those platforms to UK customers but the £135 exemption is being used to avoid duty that any UK business would have to pay if they imported the same goods wholesale. Furthermore, where goods are imported into the UK before they are sold online, RAVAS has seen evidence of VAT evasion.
Since January of 2021 goods have been imported and artificially low values declared to take advantage of the exemption that also exempts consignments with a value of £135 or less, from VAT. Containers are filled with hundreds of these consignments, supposedly addressed to many individuals, but in truth they are sold from a UK warehouse via eBay, dedicated websites or even on Amazon. Likewise non-UK based websites ignoring an optional obligation to account for VAT (yes, optional) can send goods to UK customers knowing with certainty that anything declared with a value of £135 or less will pass through customs with no VAT or duty collected. It is a complex picture but like the Channel Islands it is complex because of a combination of indifference and ignorance that has allowed a professional sophisticated network of abuse to flourish.
The problem is now at such a scale that Amazon is preparing to offer a service to UK customers where goods are sent directly from China. It appears this is simply because Amazon has realised it has to adapt to remain competitive. I am willing to bet that Amazon would much rather ship goods to its UK customers from a UK warehouse.
Labour needs to question its advice and do what other countries in the world are doing by recognising that they need to defend the domestic economy from an avalanche of goods that contributes absolutely nothing to it whatsoever.
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