UK Mail Operators likely to see Uniform VAT rates
Postcomm has hinted at the introduction of a uniform VAT rate (possibly 5 pct) that could be applied to all mail services in the UK.
In it’s ‘Forward Work Plan 2008-11’ Postcomm said it recognised the complexity of the UK mail market and was looking at the constraints that have been holding back the development of end-to-end competition in the UK:
Postcomm said that one barrier to entry was the uneven VAT regime. Royal Mail is currently exempt from VAT, whereas other operators have to charge customers VAT at 17.5 pct. Postcomm said it continued to support a level playing field on VAT for all postal operators, with no significant price rises for customers.
More significantly, it believed that a reduced rate of VAT (of say 5 pct) should be applied to all mail services. It said that in light of the European Commission’s ongoing infringement proceedings against the UK, Germany and Sweden on the interpretation of the VAT exemption for postal services, Postcomm has modelled the effect that different VAT exemption scenarios might have on the UK postal services market.
The result of this modelling has shown that the imposition of the full rate of VAT on all mail services (17.5 pct) could result in around a 5 pct decline in Royal Mail volumes, while the imposition of the reduced rate should only result in a 1 pct decline.
Postcomm has hinted at the introduction of a uniform VAT rate (possibly 5 pct) that could be applied to all mail services in the UK.
In it’s ‘Forward Work Plan 2008-11’ Postcomm said it recognised the complexity of the UK mail market and was looking at the constraints that have been holding back the development of end-to-end competition in the UK:
“End-to-end competition is much less developed in the UK licensed mail market to date, representing only 0.2 pct of licensed mail volumes. In 2006/07 alternative operators licensed area end-to-end volumes declined to 34.8m items, representing a 12 pct fall in end-to-end items carried in the licensed area.”
“While a few operators currently offer a limited range of end-to-end services, they tend to be local or niche high-value networks. There are a few operators with stated ambitions to establish national end-to-end networks in the UK but there are few signs of this happening in the short or medium term. Mail delivered by operators other than Royal Mail has actually declined for two years running.”
Postcomm said that one barrier to entry was the uneven VAT regime. Royal Mail is currently exempt from VAT, whereas other operators have to charge customers VAT at 17.5 pct. Postcomm said it continued to support a level playing field on VAT for all postal operators, with no significant price rises for customers.
More significantly, it believed that a reduced rate of VAT (of say 5 pct) should be applied to all mail services. It said that in light of the European Commission’s ongoing infringement proceedings against the UK, Germany and Sweden on the interpretation of the VAT exemption for postal services, Postcomm has modelled the effect that different VAT exemption scenarios might have on the UK postal services market.
The result of this modelling has shown that the imposition of the full rate of VAT on all mail services (17.5 pct) could result in around a 5 pct decline in Royal Mail volumes, while the imposition of the reduced rate should only result in a 1 pct decline.
