EC gets tough on Royal Mail's VAT exemption!!!

[NEWS]

Could this finish us!!!!

Royal Mail, reeling from a series of strikes by postal workers over pay and working practices, suffered a fresh blow on Tuesday when the European commission stepped up its threat to take the government to court over its decision to exempt all the former monopoly operator's services from VAT.

Laszlo Kovacs, EU tax and customs commissioner, formally requested the government to amend UK legislation allowing Royal Mail to charge zero VAT on high-value bulk mail and commercial deliveries for which rivals must pay the standard rate of 17.5%.


The zero rate applied to stamps for normal deliveries to more than 20m British homes under the "universal service obligation" (USO) — guaranteeing one delivery a day, six days a week, to every address in the UK for the same price — would be unaffected.

The commission's move is the second stage in the infringement procedure and could lead it to take Britain to the European court of justice, Europe's highest court. UK laws on exemption for all Royal Mail's services are deemed incompatible with the sixth VAT directive.


Mr Kovacs said the exemption should be "applied in a way that minimises distortions of competition between former monopolies and market entrants to ensure that all operators enjoy the freedom to provide postal services across Europe."


The government showed little sign of giving way to Brussels on the issue. "We are satisfied that our position is consistent with the EU VAT rules in this area, which require VAT exemption for services provided by the 'public postal services'," a Treasury spokesman said.


Royal Mail said it remained opposed to the imposition of VAT on its postal charges. "While the issue of VAT is a matter for the UK government, we have said that an increase in prices as a result of the imposition of VAT is the last thing we want for any of our customers, particularly charities and small businesses."


A spokesperson for TNT Post, one of Royal Mail's rivals, said: "This action supports our view that the VAT distortion needs to be removed."


Mr Kovacs's latest move comes in advance of measures to enforce full-scale liberalisation of the EU postal market by 2011 at the latest. The commission, which is also taking action against Germany and Sweden, argues that in competitive postal markets — fully open in Britain since 2006 — different tax liabilities distort competition and "can only be justified as regards the strict discharge of the USO".

http://business.guardian.co.uk:80/story ... 20,00.html

[F0zziebear]

If they get rid of the VAt exemption then competition will really take off and E2E service will come into full effect. Trust me on this one

[blackadder]

another nail in royal mails coffin

[TrueBlueTerrier]

I saw this reported on another site (no not that one or the other) and we may be OK. As far as I understand it we are exempt VAT as we are the USO provider and that may the saving grace. However, if we do loose the exemption does that mean that anyone setting up a delivery network in competition with RM has to sign a USO agreement, just to keep a level playing field and engender proper competition.

[POSTMAN]

Yes you're right TBT but look at this bollox!!!

UE commissioner says that newer arrivals in the market are providing this services and still paying VAT.

http://www.accountancyage.com:80/accoun ... -exemption