Tax loophole closure could see UK online game prices rise

By Alex Donaldson
23 March 2011 18:08 GMT

The UK government is to hold a consultation on closing a tax loophole that allows online stores such as Amazon, Play and other major online stores to sell products, including games, at a deep discount by being based in Jersey.

Currently, major retailers including Amazon, Play, The Hut, Tesco Direct and HMV run their online operations from an area of Jersey which is free of VAT, meaning they can knock 20 percent off the high street prices as a starting point.

The loophole only applies to items under £18.

The end result is cheaper games and hardware online, but also means that the government loses out on billions of pounds in tax revenue.

Speaking in parliament as part of today’s budget, Chancellor George Osborne announced that the government will consult on the issue this May with an aim of countering “the continued marketing and use of highly aggressive and artificial tax avoidance schemes”.

If that happens, there’s a significant chance that the prices of games online could rise as retailers struggle to maintain profit margins.

Thanks, MCV.

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