Stopping VAT abuse alone could save our school sport


3:45 pm - November 22nd 2010

by Richard Murphy    


      Share on Tumblr

Michael Gove is planning, for all practical purposes,to end sport in UK schools. As the Observer noted: yesterday

A battle is raging at the heart of government over a decision by the education secretary, Michael Gove, to slash £162m of sports funding in English schools as the country prepares for the 2012 Olympics and bids for the 2018 World Cup.

So for the sake of £162 million all but the richest children in the UK are to be denied access to competitive sport. But let’s ignore the political incompetence in Gove’s plan and instead ponder the alternatives he might have considered.

Take for example the blog I have just posted about the VAT abuse that the Channel Islands of Jersey and Guernsey promote. When this loss to the UK from this abuse was last estimated it amounted to £110 million a year.

Those with any degree of familiarity with this issue think this a massive underestimate. As the Observer noted too:

Two years ago the Treasury said lost VAT receipts from this trade were costing the taxpayer £110m a year and rising, though industry insiders suspect the figure is much larger. With VAT set to rise from 17.5% to 20% in the new year, the Channel Islands tax dodge is expected to balloon further.

In the three months to Christmas last year, one in three CDs were bought over the internet, according to market research firm Kantar. Almost all were bought for £18 or less.

Given this abusive market now extends to most computer memory sales, many car parts and a great many other products I am sure the loss far exceeds that outdated estimate. I have little doubt that the loss with regard to DVD sales alone exceeds the £162 million that is needed to maintain sport in UK schools.

Over recent years we have seen so many supermarket campaigns supposedly supporting schools. Now those who really want to maintain a core part of our curriculum know who to complain to – those  very same supermarkets. If they stopped their VAT avoidance through the Channel Islands the funds to pay for school sport would be available.

If people want to take action to preserve sport in school they know who to complain to. They’re named in the Observer. Start with Tesco,  Asda and Sainsbury. Start letter writing, ask to speak to the manager, or whatever you think appropriate. But please do it now.

    Share on Tumblr   submit to reddit  


About the author
Richard is an occasional contributor. He is a chartered accountant and founder of the Tax Justice Network. He blogs at Tax Research UK
· Other posts by


Story Filed Under: Blog ,Conservative Party ,Economy ,Sport ,Westminster

Sorry, the comment form is closed at this time.


Reader comments


Customers have a choice of paying the VAT or not, by shopping at a retailer that pays it, or not.

That the retailers who charge less get more customers demonstrates that the consumer has voted for the lower tax option.

Rather than trying to argue in opposition to the voters who have demonstrated that they want lower taxes, why not come up with ideas that would actually appeal to the voter?

Otherwise you spend all your time coming up with policies that the voter has already said they wont support.

I’m sorry, but this is nonsense. Gove is ending the ring-fencing of this sum; it will be for schools to decide how much money they allocate to sport, not central government.

You may or may not agree with this policy, but to describe it as “ending sport in schools” is just hysterical gibberish.

Why do you think that sport is more important than other subjects? Free the Headmasters and Governors to set their own school’s curriculum and then let the parents choose…

wow RM article with nothing to vehemently disagree with.

Ian Visits, I’m not sure how you progressed from observing that people like to buy things where they are cheapest to concluding that HMRC ought not close tax loopholes.

I stand corrected by Andy H

Could it be that VAT is too high and is charged on too many things?

“It will be for schools to decide how much money they allocate to sport, not central government.”

In practice, it will have the effect of ending sport in schools with budget difficulties – which happen to be the schools that most need it. Wealthy schools already have playing fields, equipment and other facilities. Poor schools had their fields sold a while back (now I can’t remember who did that) and so already pay a premium for hire of fields etc. When budgets start hitting the purchase of textbooks etc, it will be luxuries like sport that go. Nobody judges school performance on sporting achievments.

6

You can make that argument, but then you’d have to show how you were going to replace the VAT amounts “lost” if you reduced the rate or range of items it was imposed on.

I agree that tax loopholes ought to be closed wherever they can be, but it is worth noting that the amount involved here (whilst a “big” number) is dwarfed by the amounts lost to HMRC by UK companies taking the simple expedient of moving their putative HQ and tax address to countries like Irelnad and Switzerland with lower corporate tax rates.

Alliance Boots for example went from paying around £100-120 million a year in UK corporate tax, to £14 million in 2010 ( a rate of just under 3%) …. and that’s just one company!

Worrying about the loss of competetive sport? Am I really reading a left-wing blog – there goes another stereotype.

Do we ever compare spending on sports in maintained schools in Britain with what happens in other west European countries, such as France, our near neighbour?

My impression from an exchange visit there is that little is spent on promoting sports in the publicly funded schools sector in France, an impression supported by this official brief on the education system there:
http://www.francethisway.com/info/french-education-system.php

With worrying insights such as this following into the systemic failings of our primary schools to impart essential basic skills to 11 year-olds here by the time they move up into secondary schools, I really wonder whether we are getting our priorities in a twist:

“The National Curriculum test results also revealed that in spite of an improvement in English and maths, more than a third of pupils still left primary school without a proper grasp of the basics in reading, writing and maths.”
http://www.ft.com/cms/s/0/ba881948-9f3f-11df-8732-00144feabdc0.html

In Monday’s FT: “Chris Humphries, chief executive of the UK Commission for Employment and Skills, said there were signs of progress on literacy, but numeracy remained a serious problem and too many young people were leaving school with inadequate basic skills.”
http://www.ft.com/cms/s/0/4ec5dd9a-f5a1-11df-99d6-00144feab49a.html#axzz161olkgAA

I’ve long been completely unconvinced by all that steady guff in the popular media on the importance of promoting competitive sports in schools when barely half of 16 year-olds can manage to attain the benchmark of 5 GCSEs A*-C grades, including maths and English, and so many many young people leave school lacking basic skills in numeracy and literacy.

About 20,000 are leaving schools each year without any educational qualifications at all and this report dated August 2009 on the NEETs (not in education, employment or training) under 24 reported record numbers:
http://education.icnetwork.co.uk/national-student-news/2009/08/18/record-numbers-of-18-24-year-olds-not-in-education-or-work-111036-24468899/

“The statistics also show a surge in the numbers of 16-18-year-olds considered Neet. There are now 233,000 Neets in this age group, 13,000 more than the first quarter of 2009, when the figure stood at 220,000. In the second quarter of 2008, 209,000 16-18-year-olds were Neet, 24,000 fewer than the same quarter this year.”

Good for Gove that he is at last ending the ring-fencing of spending on sports in schools and leaving it for schools to decide their own teaching priorities. I’ll be far more impressed with getting increasing numbers of 16 year-olds up the the GCSE benchmark – and my guess is that employers will be more impressed too.

@9

Well I’m no expert, so I am ready to stand corrected. However the whole idea of corporation tax is an interesting one. Why not focus on dividends, bonuses and income to individuals and abolish corporation tax? When discussing this tax I think a lot of people only consider big corporations. It’s worth looking at SMEs and considering the effect it might have. I think they are more likely to pay better wages if they are succesful and are a significant contributor to local economies. They are also diverse and innovative.

The problem with VAT as far as I can see is its inflexibility. I understand it’s governed by a lot of regulations that make it hard to reduce or remove once its been imposed. There is also the problem of whether it’s progressive or not. I doubt it will be under the Tories, it’s just putting more pressure on the less well off.

What about a Tobin tax or some other way of getting something back from the bank bailout from those who made it such a problem, too?

Watchman – you do know how much effort Labour poured into increasing sport at school, don’t you? You should read up on reality once in a while than just swivel-eyed Telegraph editorials… I don’t see why ‘the left’ should be against more sport at school.

Customers have a choice of paying the VAT or not, by shopping at a retailer that pays it, or not.

Erm – but this information isn’t readily available is it? Are you really saying customers know which retailer is paying VAT or not?

Could funds for school textbooks fall any lower!? In 2006 I was still using a maths edition that spoke of “Jimmy” paying a visit to the twin towers…

The loophole should be closed.

On the other hand please don’t pretend that customers would choose to pay VAT if they could avoid it!

In 2006 I was still using a maths edition that spoke of “Jimmy” paying a visit to the twin towers…

The great thing about maths is that it doesn’t go obsolete very quickly. I used my father’s copy of “Calculus and Analytic Geometry” at uni… Still the same edition even.

17. Chaise Guevara

@ 1

“That the retailers who charge less get more customers demonstrates that the consumer has voted for the lower tax option.”

Um, no, it shows that some consumers will pay less if they can get away with it. There’s a world of difference between “I don’t want to pay VAT on this product” and “I’m happy with the government cancelling VAT, losing billions for the economy”. This is a rather obvious distinction and I’m surprised it had to be spelled out, to be honest.

“In 2006 I was still using a maths edition that spoke of “Jimmy”

In the late 90s I had an economics lecturer that used a set of OHP notes to teach his course. Occasionally you’d see the phrase “labour” crossed out and replaced with “conservative”, then crossed out again and replaced with ‘labour’.

I guess he’s been busy in the past few months again.

What is shocking about this is that the lying tories always make a big thing about how they support sport in schools. They always claim they are the pro sport party, and that Labour is anti sport.

They like their own kids getting good sporting facilities in the private sector, but not for the state sector. Thanks again Lie Dems for standing by these morons.

This is why you tax income and not VAT. It is a regressive tax and one that is avoided by the better off.

15

Of course people would prefer not to pay VAT, the issue is surely if they want to see VAT reduced in % terms, or in reach of items covered, they (as I said above @9) have to figure out where the money comes from instead.

Nobody “likes” paying taxes, but nobody likes doing without public services either. It’s one thing doing a booze cruise to France to stock up on some cheap stuff… it’s another to maintain there is some “low tax” xanadu.

the same goes for the discussion about corporate tax evasion and arbitraging to lower tax destinations, or the failure to close loopholes exploited by the rich….. if you aren’t going to do something about it, it is incumbent on you to explain where you are going to make up the shortfall.

@11

Bob I’m glad you appear to be advocating an equal society but why should that be at the expense of competitive school spots? Sport in a lot of deprived inner areas is sometimes the only way for kids to raise themselves out if the spectre of poverty and crime. Would you really deny them this opportunity?

Let’s face it at this stage VAT on music is effectively a tax on Luddites.

Isn’t it lovely how in Ritchie’s World all taxes can be collected in full without any costs at all?

There’s a reason why there is this VAT let out. It’s that HMRC and everyone else with an ounce of sense in them knows that you don’t want to be running the full panoply of HMRC over every damn letter entering the country.

That’s why we have this low value goods exemption. Because if we didn’t then someone, somewhere, would have to be checking each and every single piece of international mail to make sure that it contained nothing more than ink and paper.

How much would a full censorship arrangement like that cost?

And how much would be the revenue raised?

Quite, the adults have looked at these two numbers and decided that the costs would be higher than the revenues. That is, that low value consignment relief *saves* the taxpayer money, not costs it.

Tim W

These are traceable goods sold from a website not random letters entering the country from world wide.

“J Sainsbury and US retail giant Best Buy have launched VAT-dodging CD and DVD websites ahead of the busy Christmas trading rush in the hope of cashing in on the booming popularity of online sales.

The pair are the latest blue-chip retailers to set up complex and circuitous shipping arrangements for goods offered on their websites for less than £18. By dispatching orders from the Channel Islands direct to customers’ homes on the UK mainland, these transactions do not attract VAT under an arcane EU tax relief
directive”

So what are you rambling on about?

“These are traceable goods sold from a website”

Yes, very good. Now, how do you stop them?

If you abolish the low consigment relief then of course the big established companies will stop. But how are you going to catch the small guys why try and pull a fast one?

Yup, you’ve now got to inspect every incoming parcel and envelope, don’t you?

Which is why low value consignment relief exists in the first place: because no one wants to have to inspect every damn letter.

BTW, the way I understand ths law the UK cannot abolish it anyway. They can only lower the limit to £10 or so. EU rules that is.

“Yes, very good. Now, how do you stop them”?

Stopping them is not the objective. Making them pay the VAT is surely?

“Yes, very good. Now, how do you stop them? ”

Random checks and prohibitively expensive punishments for those caught.

Not advocating it, but just giving you the easy answer to your question.

“Stopping them is not the objective. Making them pay the VAT is surely?”

Stopping people sending stuff in VAT free is the objective. And doing so would require……more costs than the tax which is lost.

My point rather.

Hey, perhaps since Ritchie works in this area, he could tell us?

What does HMRC think the cost of stopping all and every import of dutiable goods would be?

@22: “Bob I’m glad you appear to be advocating an equal society but why should that be at the expense of competitive school spots?”

The fact is that @11 I said absolutely nothing about connecting competitive sports with “advocating an equal society”.

Instead, I (a) invited readers to compare the importance attributed to competitive sports in schools in Britain with what happens in other west European countries, and (b) raised the more pressing concerns about thousands of school leavers lacking basic skills which employers value.

Compare sports in schools with this on adult literacy in a report from the House of Commons Public Accounts Committee in 2006:

“Up to 12 million working UK adults have the literacy skills expected of a primary school child, the [HoC] Public Accounts Committee says. . . The report says there are up 12 million people holding down jobs with literacy skills and up to 16 million with numeracy skills at the level expected of children leaving primary school.”
http://news.bbc.co.uk/1/hi/education/4642396.stm

Which is the more important: competitive sports or basic literacy and numeracy skills?

The sports thing goes back to the Duke of Wellington who said the Battle of Waterloo (1815) was won on the playing fields of Eton. The sports thing may have mattered at a time when battlefield casualties on both sides clocked up at the rate of over 6,000 an hour (really) but we don’t fight wars like that nowadays. In times of asymmetric wars, the skills which matter are dealing with IEDs, accurate sniping, conducting covert SAS raids, gathering intelligence to prevent terrorism and cyberwarfare. Competitive sports skills aren’t in it.

Btw when asked about who were the troopers in his army, the Duke of Wellington replied, “The mere scum of the earth.”

“richest children”

There are no rich children, there are rich parents.

@30

My mistake. Bob you dont advocate a more equal society just an educated one for
cannon fodder?

By the way you do need to have basic litteracy skills to take a degree on sports science also.

What will this decision do for the health of the nation and what demands will it put on the NHS? Another flawed short termist policy that will eventually come home to roost.

Tim Worstall: How much would a full censorship arrangement like that cost?

And how much would be the revenue raised?

Quite, the adults have looked at these two numbers and decided that the costs would be higher than the revenues. That is, that low value consignment relief *saves* the taxpayer money, not costs it.

Good question, but you haven’t answered them. And you’ve basically said “trust the bureaucrats – they know what they’re doing!” which seems to me quite selective in when you choose to apply that maxim.

Shorter Tim Worstall: Trust the HMRC when they’re letting off companies off taxes, but don’t trust them when it comes to our taxes!

Sunny:

“Shorter Tim Worstall: Trust the HMRC when they’re letting off companies off taxes, but don’t trust them when it comes to our taxes!”

It’s R. Murphy who says low value consignment relief should go. Not HMRC. They’re saying we should keep it. Because of the costs of inspecting everything if we abolish it.

@32: “My mistake. Bob you dont advocate a more equal society just an educated one for cannon fodder?”

Cannon fodder went out with the trenches (thankfully) and I’m inclined to applaud Tony Blair when he said in a keynote speech in Chicago in April 1999:

“If we want a world ruled by law and by international co-operation then we have to support the UN as its central pillar.”
http://www.pbs.org/newshour/bb/international/jan-june99/blair_doctrine4-23.html

I strongly favour academic competition between schools, like seeing which can get more of their 16 year-olds up to the benchmark of 5 GCSEs *A-C grades, íncluding maths and English, and which can get better average A-level grades than Eton – two maintained schools within walking distance of where I sit do.

It’s just that I regard all that stuff about the importance of school sports as bollocks.

Bollocks, well i guess that wins the argument then! Well said sir.

“Which is the more important: competitive sports or basic literacy and numeracy skills?”

That’s a false choice. In any subject, there are diminishing returns when you extend the time spent on it in a given day. So it’s unlikley we gain as much from an extra hour of literacy and numeracy as we do from the first hour. This is particularly the case for children, as they lose concentration more easily. So in any curriculum it is important to have a variety of subjects (using a variety of teaching techniques) in order to maintain interest.

Furthermore you are neglecting the benefits to numeracy and literacy that can be achieved through sport. An obvious example is that kids who become enthusiastic about sport will read sports magazines, the rulebooks and -for some sports – practice arithmatic to keep score. Less obviously are the benefits to education that will occur through better health that regular exercise brings (better concentration, increased attendance etc), and increased displine that many sports promote. Frankly bob, I suggest you spend a few hours on google scholar going through the literature on the social benefits of sport.

The downside has usually been not that sport and P.E have been taught, but in the way it has been taught. The historical stereotype of Nazi PE teachers forcing kids to play sports they didn’t like in the freezing weather whilst wearing kit that many hated goes a long way to explaining that. As does the fact many facilities were old, crumbling and neglected.

But if PE and sports were taken seriously, the benefits to health and education would be immense. It’s just that doing it properly costs money.


Reactions: Twitter, blogs
  1. Liberal Conspiracy

    Stopping VAT abuse alone could save our school sport http://bit.ly/aVPuHU

  2. Liberal Conspiracy

    Stopping VAT abuse alone could save our school sport http://bit.ly/aVPuHU

  3. richardbrennan

    Stopping VAT abuse alone could save our school sport | Liberal Conspiracy http://t.co/bNgxnRD via @libcon

  4. steve...

    RT @libcon: Stopping VAT abuse alone could save our school sport http://bit.ly/aVPuHU

  5. Paula Pearson

    RT @richardbrennan: Stopping VAT abuse alone could save our school sport | Liberal Conspiracy http://t.co/bNgxnRD via @libcon

  6. Caspar 01

    RT @libcon: Stopping VAT abuse alone could save our school sport http://bit.ly/aVPuHU

  7. Twitted by caspar01

    […] This post was Twitted by caspar01 […]





Sorry, the comment form is closed at this time.