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Business News Legal Retail
RAVAS declares victory and winds down campaign
By CMU Editorial | Published on Friday 18 November 2011
The group of British retailers which led the fight against so called Low Value Consignment Relief for Channel Islands-based mail-order operations, most recently operating under the banner of RAVAS, has announced it is winding down its campaign because it has “accomplished its mission”.
As previously reported, under the tax relief system mail-order companies based on Jersey or Guernsey did not have to charge VAT when selling goods that cost under £18 (or £15 of late) to customers on the UK mainland. The loophole gave said mail-order firms – which in the music space included start ups like Play.com and The Hut, and the mail-order divisions of the major UK retailers – a 20% advantage over their mainland competitors, arguably driving many independent retailers who couldn’t afford an offshore base out of business.
Said independent retailers campaigned for years to have the loophole closed. Their campaign gained momentum in the last eighteen months, partly because the current UK government was more willing to act than its predecessors, but also because RAVAS successfully filed a complaint with the European Commission that argued the tax loophole breached European tax laws which said relief systems – put in place for administrative convenience – shouldn’t distort the market.
As previously reported, the UK government announced last week that it would end LVCR for the Channel Islands next April, meaning mail-order firms based there will have to start charging VAT on purchases. Announcing the completion of the campaign, RAVAS’s Richard Allen told CMU: “When we first initiated the [EC] complaint the odds were not exactly stacked in our favour. Many of the people affected had already gone out of business and so we were not a strong voice. We had no money to put into hiring expensive consultants or lawyers, but we argued our case directly with the conviction that we were in the right”.
He continued: “After four years of communication with the Commission, the submission of large amounts of factual data on the ongoing LVCR trade and a meeting with officials, the EU finally ruled that this practice was an abuse of the relief and a barrier to trade. We understand that the commission has had lengthy discussions with the UK government to put in place legal measures to prevent the abuse. Whilst it took a long time and huge amount of work, the success of RAVAS is living proof not only that the EU complaints system works, but also that anybody can overcome the odds and overturn an injustice if they have a fundamentally sound case and the persistence to argue it thoroughly”.
Earlier this week RAVAS also responded to two issues raised by the fact the changes to LVCR due to take place next April apply only to the Channel Islands, and not other non-EU countries, who also currently benefit from the VAT relief. Some Channel Islanders have argued that this constitutes discrimination against the Channel Islands, adding that they hope to fight the change in the British courts on those grounds. Others, meanwhile, including the UK’s Entertainment Retailers Association, have expressed concerns Channel Islands-based VAT-avoiding etailers will now simply relocate to other countries where LVCR applies.
But RAVAS says that, aside from logistical issues hindering any efforts by mail-order firms to base themselves too far from the UK, the government’s recent pledge on LVCR was to stop it whenever and wherever the relief system is abused. That only applies to the Channel Islands at the moment, but could result in LVCR being cut elsewhere if abuse was shown to be occurring. This, RAVAS says, also blows a hole in the discrimination argument, because the government’s ruling last week applies to any country where there is abuse of a VAT relief system, but that only currently applies to Jersey and Guernsey.
RAVAS told CMU: “People should note the UK Treasury’s statement which clarified that ‘The government is committed to ending exploitation of LVCR regardless of location. If evidence emerges that diversion to other jurisdictions is taking place on a significant scale, we will consider the case for additional action, including by extending the dis-application of LVCR rules to supplies from those jurisdictions'”.
You can read CMU’s interview with RAVAS spokesperson Richard Allen, conducted before the government’s big announcement but providing a lot of background to this story, here.
