Friday, April 01, 2011

HMV unlikely to benefit much from budget measure

The Daily Mail suggested that George Osborne might have saved HMV:

HMV has benefited from a much needed Budget boost as Chancellor George Osborne took the first step towards closing a tax loophole that made the price of its CDs and DVDs less competitive.

The government announced plans to reduce the special tax break known as low value consignment relief (LVCR) which allowed retailers outside Europe to sell low value items free from VAT.
And, to be fair, the city did give HMV's shares a little rally straight after the budget.

But is it really good news for HMV?

Osborne's shift in the LVCR moved the place beyond which VAT wouldn't be reclaimed on products shipped from £18 to £15 - in other words, from 'well over the price of most CDs and DVDs' to 'still quite a bit over the price of most CDs and DVDs'.

And, more importantly, if the measure really did make internet purchases less cheap, that'll hit UK based online retailers who ship their stuff from the Channel Islands. Retailers like, erm, HMV.