Green Shoots

A journey in optimism, ethics and enterprise

Currently browsing Alistair Darling

Channel Islands – tax haven for the masses and no chance of being carbon neutral

There was once a time when only the rich could own sports cars, holiday in St Tropez and save on personal tax by using tax havens. However in our modern age of seemingly believing that everyone has a right to everything, you use credit to own your sports car, Easy Jet will get you to the South of France and most High St online retailers can help you benefit from a tax haven. On the last point even the most financially challenged can benefit from the independent tax arrangements of the Bailiwick of Jersey.

Not convinced? Try buying a CD or DVD online. You’ll undoubtedly find yourself trading with a company based in the Channel Islands. A small piece of tax legislation called low-value consignment relief (LVCR) was designed to save people who are buying low value items across borders in the EU from the differences in intra-EU VAT rates. Generally orders must below £18 to qualify.

So how does it work when you want to buy a DVD? You place the order, the goods are shipped from Jersey or Guernsey and usually delivered by Royal Mail – who run a heavily subsidized postal service to and from the Channel Islands. You the consumer end up saving 15% on the price of the goods and no one really loses out.

Well I don’t believe that’s true and here my reasons why.

First, the whole scheme is a deliberate piece of tax avoidance. There is no reason why the Channel Islands should be at the heart of this trade for any other reason that avoiding tax. The distribution costs of sending good via the Channel Islands are higher. The goods are not manufactured on the islands. Developing schemes to avoid tax is not very ethical is my view.

Second, I believe that as well as avoiding tax, I am convinced that we, the UK tax payer, are actually subsidizing the trade. The Royal Mail runs a flat rate service across the whole of the United Kingdom including the Highlands, Northern Ireland, Isle of Man, the Sciliy Isles and the Channel Islands. If I post a letter from Gateshead to Newcastle first class, it would cost the same to send it to Jersey. The costs to the Royal Mail are hugely different. As citizens in our nation, we have decided that sharing the cost of the mail across the whole country is something we are happy with. Why should Auntie Mabel pay more to send birthday cards around the country? However, subsidizing Tescos to send out DVDs from the Channel Islands just to avoid paying VAT really isn’t a fair use of the system. The nation misses out on the tax revenue and makes a further subsidy to the delivery cost too!

More important than both of these points is the environmental impact of the trade. The DVD you are buying is likely to be making a several hundred mile round trip for no purpose other than to avoid UK VAT. Of course, DVDs being light the impact seems small but the volume of trade is increasing significantly. The following retailers all use Jersey or Guernsey to help you avoid UK tax – Play, HMV, Tesco, Asda, Zavvi, WHSmith, Amazon and Argos. That is a big percentage of online sales and the impacts seem a little more obvious. Hundreds of tonnes of products being shipped needlessly on a roundtrip has a big environmental impact.

On top of the shipping cost there is also lots of needless packaging wasted. Because of the £18 limit, orders for multiple DVDs are split into multiple shipments so as to still qualify for the LVCR. Order 10 DVDs at £15 each and you are likely to get 10 deliveries and 10 Jiffy bags. Even more wasted resources.

Of course the two-faced hypocrisy of the High Street retailers is astonishing. I get made to feel guilty in the extreme at the checkout if I ask for plastic bag because I have forgotten my jute bag. And yet these green-wash retailers are deliberately burning fuel and wasting resources simply to allow their online customers to avoid VAT. I think it is safe to assert that what good Tescos does by putting a wind turbine outside a store, it undoes through its Channel Islands selling.

In March the relative poor islanders of the Maldives took a brave step – they decided to commit themselves to turning their islands carbon neutral. An amazing commitment for a disadvantaged group of people. I would contend that the good folk of the Channel Islands could much more easily afford to go carbon neutral and they could take a good first step by stopping this trade.
So Mr Darling I know you are looking for a little more than £40million a year (my estimate of what the trade costs the UK payer in lost revenue and postal subsidy) but as Tescos are always reminding us “every little helps”.

Share

“No, I want to pay more tax”

This is one of my favourite responses whenever I get called by wealth management companies*. “Hi Mr Redfern, we can help you pay less tax” they say. “ You do want to pay less tax don’t you?” A brilliant sales technique. As soon you say “Yes” you’ll find it very hard to say “no” to their service. So I evolved a response of always saying “No, I want to pay more tax”.

At first it was a bit of a joke – 5 minutes light relief in a busy day. However, the more these people call the more I actually realised that I actually believe it. I really wouldn’t mind paying more tax. I’d be happy to contribute to doubling the UK’s international aid budget. I would happily handover my hard earned cash to wipe out the debt of every African nation. Of course, there are things I’d rather not be paying for. My share of the Trident submarine replacement will be £80,000 over the next few years – I’d be very pleased to forego that “opportunity”. I’m also not sure that my recent acquisition of big chunks of the banking industry was a great deal. Despite all this I would still prefer to have a better health service, free dental care, a reasonable state pension and no children living in poverty.

It did set me thinking though that there is a win-win. I pay more taxes and the government spends my money more efficiently. That way we all get better services – and those of us who can afford it foot the bill. So come on Mr Darling – I don’t think I am alone in thinking that we could solve many of our countries problems with some timely investment in initiatives and projects that deal with poverty, education and taking climate change seriously. However, we need to believe that you will use it wisely – the evidence of the last few months is not good.

*Of course these wealth management companies cannot be any good anyway. They call me and I have no liquid assets of any description. Pretty rubbish at research, so how will they take care of my money?

Share