Taxation: Low-value Consignment Relief

Lord Davies of Oldham Excerpts

Tuesday 1st March 2011 Lords Chamber

[Lord Sassoon]

My Lords, I fully accept my noble friend’s statement that this is an important area, which is why the Treasury is looking at it. It flows not from any scam but from the fact that the Channel Islands are treated as outside the European Union for these purposes. That goes back to the accession treaty. The previous Government took steps with the Channel Islands authorities to encourage them to introduce a voluntary restraint and caps on the activities of individual firms in this area. The issue relates not only to CDs and DVDs but to a whole range of goods. It is precisely because this is an important area and we want to make sure that the Exchequer is protected that Ministers are looking at what else we might do.

[Lord Davies of Oldham]

My Lords, the Minister’s response to his noble friend’s original Question seemed somewhat complacent in respect of the charge sheet of problems associated with this issue. He implied that things are improving, but the noble Lord, Lord Newby, expressed doubt about whether things are improving. I think that the whole House should be doubtful. With online sales increasing at their current levels and with this trade being very much a matter of online sales, it would be very surprising indeed if it was significantly decreasing. Would it not therefore behove the Minister to indicate that the Government intend to act in this area? If it is not an abuse of taxation—if it is not a scam—then it is certainly very close to being an avoidance of tax which we ought to put an end to.

[Lord Sassoon]

My Lords, I did not want to turn this into a political question; indeed, I attempted to give credit to the previous Government for the actions that they took in conjunction with the Channel Islands authorities. However, the fact is that the VAT loss is estimated to have increased very considerably—by approximately 50 per cent in the past five years—under the previous Government. Members of that Government are now saying that the situation is terrible and we need to take action, but what did they do in the five years in which the amount of revenue lost to the Exchequer increased by 50 per cent? They only talked to the Channel Islands authorities. We have immediately gripped the situation. Ministerial colleagues and HMRC officials are now examining what—in a very difficult and technical area—can be done. If there are things that we believe should be done, they will be announced in the forthcoming Budget.