Royal Mail’s perks face scrutiny

Royal Mail could lose a raft of valuable perks such as value added tax exemption, parking privileges for post vans and faster Customs clearance for overseas mail as a result of a review announced yesterday by the postal regulator.

Postcomm published a consultation document examining Royal Mail’s special privileges, asking whether they distorted the market or were needed to provide a universal postal service. The regulator cannot make any changes to Royal Mail’s rights itself, but said if change were needed it would “make recommendations to the appropriate government department or authority”. Postcomm has given interested parties until April 12 to respond.

Royal Mail does not charge VAT on its stamps and business postal services or pay VAT on goods and services it buys, while its private sector rivals have to charge 17.5 per cent VAT. “While this has little effect on businesses that can reclaim VAT, many major mailers – such as providers of financial services and charities – are not able to reclaim VAT. This puts Royal Mail competitors at a disadvantage,” said Postcomm.

The regulator added that this was the most contentious of Royal Mail’s privileges, and one cited by new entrants to the postal market as a factor “materially distorting competition”. Postcomm said its provisional view was that VAT exemption was not necessary for the provision of a universal postal service “and should be reviewed as a priority, with the aim of levelling the playing field”.

The European Commission raised the question of VAT exemption for postal operators earlier this year, and Frits Bolkestein, internal market commissioner, has said that all operators in the EU should have to pay VAT.

Royal Mail said yesterday that “the last thing we want is for our customers to face any price rises due to the introduction of VAT”. The group is confident that the government supports its opposition to VAT.

Royal Mail is also allowed to park its vans anywhere without fear of penalty. The group said this was necessary for postmen and women to empty postboxes quickly and easily.

In defence of its privileges, Royal Mail said parliament reviewed its rights when it passed the 2000 Postal Services Act and agreed some perks were necessary.