What's the deal with tax on imported goods?
Over the coming weeks, there will be much talk of people jetting off to US discount malls and coming home with armfuls of Timberland, Hilfiger and endless tales of the bargains that they found in the Thanksgiving sales. These bargains will be made ever sweeter because of the widespread tax evasion that is at the core of the US shopping experience.
Last year, over one-quarter of a million Irish people went to the United States in search of cheaper clothes, spending on average between €2,000 and €3,500 each. However, according to the Comptroller and Auditor General, only four passengers were stopped at customs and were found to be carrying goods in excess of the maximum value of €175 allowed.
The Revenue insists that the law is being upheld and denies people are being waved through the green channel at Dublin airport with suitcases bursting at the seams with newly acquired designer clobber. A spokesman for the Revenue told Pricewatch last week that internal studies have been carried out over recent years that don't "seem to indicate" that there were a lot of people spending in excess of their allowance.
He also pointed out that customs staff had other concerns and said significant quantities of illicit substances and around two million cigarettes a month were being seized.
The spokesman added that in the coming weeks passengers heading to the US would be given a leaflet outlining their tax liabilities and warned that customs officers would keep a closer eye on returning passengers' suitcases. Although, before you cancel your shopping trip, it should be pointed out that much the same thing was said last year.
While customs officers seem happy to turn a blind eye at Dublin airport, the vast majority of online shoppers are treated more harshly and have to cough up all the VAT and duty owed. And it doesn't seem to matter if the items are low-cost clothes for new-born babies or high-end cameras for their parents.
Online shoppers have to pay import charges on goods bought online from outside the EU, while these purchases are also liable to VAT - at the same rate as applies in Ireland for similar goods.
There will also be in the region of €2 million collected in VAT and duty from An Post's two main parcel centres in Athlone and Portlaoise this year, while private delivery firms such as FedEx, UPS and DHL will also collect significant sums on behalf of the Government.
The delivery firms are acting as the taxman and have turned it into a handy little earner for themselves, charging customers non-negotiable administration fees for paying this tax.
Justin Mason contacted Pricewatchafter being hit with just such a charge. In August, he and his wife, who were expecting a baby, received a package from friends in the US containing amongst other things, some hats, socks and a little hoodie for their baby.
"It was shipped via FedEx, got here in good time and was very cute," he says. The couple were delighted, until a couple of weeks later, when they received an invoice from FedEx looking for €34.47, made up of €2.49 duty, €19.88 VAT and €10 in "administration fees", plus an additional €2.10 VAT on the "administration fee".
"This strikes me as pretty unfair, maybe there's duty payable, but I've never had to pay VAT on a gift I've received before? On top of that, being charged one-third of the price as an administrative fee? Ouch!"
The couple disputed the fee and were told if they didn't pay, the invoice would be sent to a debt collection agency and non-payment would affect their credit rating. A couple of weeks later, another gift arrived from the US, followed by another invoice looking for €7.84 in duty, plus the €10 administration fee and €2.10 VAT on that fee. Mason disputed the charge and was eventually told it would be waived as it had a value of less than $50 (€34.70) and was clearly labelled as a gift. There is tax relief called Small Parcel Standard Relief on goods purchased from outside the EU, which is €22 for bought goods and €45 for gifts, so the tax should never have been applied by FedEx.
Peter Mooney is another reader who faced a delivery company's charges. He bought a Nikon D80 on eBay for €858 plus €55 shipping. "When it arrived, UPS wanted another €202.86 - €186.52 VAT and €13.50 plus VAT of €2.84 for administering the VAT payment," he says. "Now before the package left the States, I told UPS and the shipper that I wanted to pay the VAT myself and I was told on the phone that this was fine, although later I was told that this was a mistake. If I paid the VAT myself, it would cost me a 55 cent stamp," he continues.
The Revenue says if the invoice value of the goods being delivered is less than €600, then the delivery agents are authorised to collect any tax due. However, if the value is more than €600, a Single Administrative Document (SAD) must be completed which the recipient can do. This is what Mooney wanted to do.
It is not just the money but the manner in which these firms do business that leaves something to be desired, Mooney says. "When UPS arrived looking for the €202.86, they would only take cash, no cheques or credit cards," he says. He didn't have the cash on him, so the delivery man took the package away and getting the camera delivered became a real chore.
We contacted FedEx and UPS, highlighting our readers' concerns. A spokesman for FedEx said the administration charge has always been in place in Ireland and was applied "to ensure customers receive their packages quickly".
He said that if it did not pay the VAT and duty, "packages would not be cleared through customs until the customer has paid them, thus adding severe delays to the delivery process".
A UPS spokeswoman said the administration charge was "an industry standard". She added that, contrary to our reader's experience, UPS drivers "will always prefer to take payments in the form of a cheque, rather than cash to minimise the amount carried by drivers".
