How on earth, you might wonder, could he make money on that? How could he pay a top-end retail price in London for an iPhone, and then hope to sell it for more in some other part of the world? It turns out that the answer is simple. Apple don’t release their new models simultaneously around the planet. The Chinese are made to wait: and in the consequent period of iPhone famine they are willing to pay crazy prices for the new model. So that’s the opportunity. Buy ’em dear in London; flog ’em even dearer in China.
It began brilliantly, said this north London businessman, and then the Revenue decided to shaft him. They told him that there was fraud in some parts of the market, so they were going to withhold his VAT. Normally he would have been able to reclaim VAT on the iPhones sold overseas, since goods are traditionally zero-rated for export, and the upshot was he had about £1 million parked with the Revenue and total disaster staring him in the face.
Could I help? he asked; and, as I say, my sword half-leapt from its scabbard. I generally think small and medium-sized businesses are getting a pretty raw deal. Their business rates are too high, they have to comply with more and more regulations (paternity leave being the latest example), and it now transpires that some banks may actually have conspired to close them down in order to lay their hands on their property, so as to replenish the banks’ own balances – and if that is so, then the culprits should be sent to prison.
I believe we should support the mavericks and the risk-takers who come up with new businesses, because it is these SMEs (small and medium-sized enterprises; 800,000 of them in London alone) that are the motor of the economy, accounting for 80 per cent of employment. It is also small businesses that are capable of taking on young people, and giving them opportunity.
And so I was about to go into overdrive, and dial the Revenue to plead this man’s case, when I had a small, niggling thought.
It came to me that I was also leading a campaign to stop the theft of iPhones and other smartphones of all kinds. Now, I had no reason to doubt what this fellow said. His business was wholly legitimate and above board, if what he was saying was true. He was exploiting a variation in iPhone price between Britain and China. But it is also true that people are nicking iPhones on an industrial scale, and indeed the theft of phones – categorised as “theft from the person” – is one of the few types of crime to be increasing.
That is because there is very little reason for the manufacturers or the service providers to do much about it. They don’t make money on the sale of the handsets so much as from the apps they provide and the service charges they exact. It suits them, in a way, to have more and more gizmos in circulation – because the more machines that are being used, the more dosh they rake in; and in that sense it doesn’t really matter how many are stolen.
I am, of course, sure that this man’s business was genuinely exporting machines to China; but there are plenty of less scrupulous people who have tried to claim back VAT for goods that are not really exported. One thinks of all those cows that the Italian farmers pretended to have exported to the Vatican City, in order to claim a VAT refund.
There is one change that could help solve the whole problem: devise a clever kill switch, so that a stolen mobile could be made effectively worthless. I cannot believe this is beyond the wit of the tech companies. Look at what they can do already. Until they provide a real remote auto-paralysis mechanism, we will be forced to suspect that they have no commercial interest in doing so. Theft of smartphones will continue to be rampant, and genuine businesses will be under suspicion.
Technology defeated car theft; technology can defeat smartphone theft – but only if the tech companies so desire.