VAT loophole is hitting local shops hard in the run-up to Christmas - Alliance

2.49.59pm GMT Fri 17th Nov 2006

Alliance Finance Spokesperson, Alan Lawther

Alliance Party Finance Spokesperson, Cllr Alan Lawther, has slammed a VAT loophole which is harming local business in the run-up to Christmas. Northern Ireland shops selling CDs and DVDs are being hit hard because businesses in the Channel Islands and Isle of Man have lower VAT rates, so they can charge less for these products.

The Antrim Councillor said: "It is disgraceful that small businesses are losing out because of the unfair tax treatment they suffer compared to businesses in the Channel Islands and the Isle of Man. These jurisdictions have lower VAT rates, so their businesses can sell products like CDs and DVDs at lower prices than local businesses.

"They sell to customers here and post the CDs or DVDs to people in Northern Ireland. Provided each package they send to a customer is worth less than ?25, it will not be intercepted by customs.

"In some cases, companies based in these tax havens will divide larger orders into smaller amounts to keep below the ?25 threshold. The extra postage is easily off-set as they are making a sizable profit due to the low rate of VAT on these items.

"I would urge government to find a solution to this problem especially in the run-up to Christmas, when DVD and CD sales are so important to local shops.

"We know too well how a different tax regime in a neighbouring country can affect businesses, for example petrol stations close to the border lose trade to the Republic of Ireland because of fuel tax differences.

"We are currently campaigning to see lower corporation tax to strengthen the local economy, and this VAT loophole must also be addressed as a matter of urgency."

ENDS