Woolworths' VAT Free Kiosk to Cost Treasury Millions

With sales rapidly falling on the high street retailers are scratching their heads that little bit harder to find ways to win back customers squeezed by higher food and fuel prices.
 
High street giant Woolworths, who prides itself on offering good value for money, is now able to cut prices by 15% - provided, that is, that its customers buy through one of its new VAT-Free kiosks.
 
Woolworths, according to the Guardian 17th July 2008, are currently piloting the idea having already introduced forty VAT-Free kiosks into its UK stores. The scheme effectively wipes out the VAT of 17.5% on everything costing under £18.00 which equates to a saving of 14.89%. Put simply, Woolworth’s VAT Free Zones will save customers £3.13 every time they spend £17.99.
 
The benefit to Woolworth’s retail sales, in these difficult times, could be significant. In a similar operation, handled by another top UK retailer’s (HMV) the loophole is believed to have generated up to £50 million worth of VAT free sales last year. HMV is also thought to be extending its tax-avoidance kiosk to 250 of its high street stores.
 
The system works by allowing customers to order directly from its base in Guernsey. The Channel Island, despite being a British crown dependency, is not currently governed by UK Tax legislation. Well known as a tax haven for the better off, thanks to Woolworths, Guernsey is making everyone, but the UK Treasury, a winner.
 
“If copied by other high-street chains and supermarkets, it could divert hundreds of millions of pounds from the Treasury” says Simon Bowers, Business correspondent of the Guardian.
 
With general retail sales falling by 3.95% in June it will be interesting to see if this clever VAT-Free wheeze has helped Woolworths buck the trend. Woolworths plc will be announcing their latest retail sales numbers on the 29th July.