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Petition Calls For End To VAT On IT Repairs

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Manufacturers are killing the repair business to drive new sales, according to a petition calling for a tax incentive to kickstart a new green repair industry

A petition has been launched that will urge the government to abolish value-added tax (VAT) on IT repairs, as a way to encourage users to get most value out of their IT, and reduce the country’s carbon footprint.

Launched by repair company Comtek, the petition will call for the government to abolish VAT on the repair of all ICT products.  Making repairs cheaper would reduce the amount of e-waste companies produce, because they would be able to repair kit rather than junking it.

Zero VAT – an incentive for social change

Askar Sheibani

A zero-VAT incentive on repairs would encourage businesses to reduce the country’s carbon footprint, but any increase in repairs would face big opposition from manufacturers, said Askar Sheibani, CEO of Comtek: “There are loads of products whose life could be extended several times,” he told eWEEK Europe, “but it is a clash between the customer and the manufacturer, who wants to sell and manufacture as much as possible.”

Making new equipment uses an enormous amount of energy, said Sheibani, with one chip taking more energy to make than all the energy used by a laptop for three years, but vendors are ensuring that serviceable equipment goes into landfill because they want to sell more equipment. “This information has not been in the public domain,” he said. “It has been prevented from being publicised.”

The government’s green technology measures so far have focused on supporting new “eco-friendly” technologies, such as electric cars and new hardware which uses less electricity, he said, and have missed the opportunity for maintenance and repair, “either because of ministers’ lack of knowledge of ICT hardware, or because of the vendors’ lobbying.”

Jonathon Porritt and Catalina McGregor

The proposal has backing from public sector leaders: “Removing the VAT on repairs to used ICT equipment would be a tremendous benefit to the refurbishment community and could potentially tip the scales in the right direction,” said Catalina McGregor, UN ITU Green iCT Liaison Officer to the OECD and EC. Environmentalist Jonathon Porritt has also pointed out the importance of measuring total lifecycle costs, not just energy used by the consumer: “Buyers should focus on total cost of pollution (TCP) and not on total cost of ownership (TCO), which can often be a very naive energy calculation in view of the total lifecycle CO2 footprint from mining, transport, manufacture, transport again, packaging, fuels etc,” he said at a recent Green IT event.

“Refurbishment affects a significant range of UK green collar jobs,” added Ms McGregor “We often forget that an entire community of SMEs some of whom are empowering the disabled workforce focus wholly on re-use and refurbishment skills development and transformation. The United Nations Agency ITU are currently working on a complex iCT CO2 measurement model and this will be the foundation profile for our sector moving forward. This should be available in 2011.”

Repairs could prevent dirty dumping

Comtek makes a viable business out of repair, said Sheibani, because it concentrates on expensive enterprise and telco equipment from companies like Cisco, where the benefits of continuing use are great, but the size of the repair market could be much bigger. Users are scared to go against Cisco’s advice, he said: “Cisco tells customers this is end of life and their equipment is no longer supported. The customers panic because they don’t realise that there are organisations which can repair the products and provide technical support.”

The problems are more extreme for cheaper electronic goods, which can be made very cheaply in the Far East – sometimes using illegal child labour –  but importing new goods hurts the country’s trade balance, while repairing them here would produce a new industry and increase skills in the UK, he said: “In the long run, the Treasury is going to make money out of it, from regular taxation. Repairing products would reduce imports – and create sustainable jobs that require training. The social implication is enormous!”

The measure would also benefit the low end, he said where laptops and phones are often discarded because of the difficulty of finding someone to make simple repairs to them. Repairing equipment would remove it from the waste stream, where it can be illegally exported to developing countries and broken down using toxic chemicals.

The petition is intended to appear during the budget period, and will be continued for six months over the election and beyond. It will shortly be live on the Ten Downing Street site.

  1. Many PC’s are discarded in favour of newer ones simply because they are infected with spyware/malware/trojans/etc. or are compromised ‘zombies’ on botnets. These machines do not need physically repairing, they need the users files backing up, wiping and reinstalling along with adequate security software and user training. None of this required additional hardware (beyond say a backup drive) and hence probably wouldn’t count as a repair by HMRC even if your petition was successful.

    You need to extend the definition of repair to include these types of system recovery or repair. The chances are that many in the IT industry will label unrelated work as a ‘repairs’ to avoid charging VAT.

  2. I should also add that many users of Apple Mac’s tend to use the machines for many more years than Windows machines simply because they tend not to slow down over the years with the ‘cruft’ that XP and related OSes do.

    I have passed on a 5 year old laptop to a family member who has been using it every day for over a year. Most people I know with PC laptops get rid of them after 2 to 3 years.

    I’ve seen offices full of Mac’s that are over 5 years old, you can tell by the case design, running on G4 chips that predate the Intel switchover, that are still very productive. Whilst I have clients who buy the latest and greatest Sony Vaio laptops every year and still complain that they slow down (because they are laden with crapware).

  3. I disagree with the blanket statement that repairing equipment is actually a ‘Greener’ alternative to purchasing new.

    It all depends on the equipment being repaired.

    Let’s look at data for an office PC. According to an IVF 2007 report, about 80% of the energy and carbon impact is from the use phase, and only 20% is from the manufacturing and disposal. (The report in question is succinctly entitled ‘European Commission DG TREN Preparatory studies for Eco-design Requirements of EUPs. Lot 3: Personal Computers (desktops and laptops) and Computer Monitors. Final Report (Task 1-8)’.)

    Or, look at Carnegie Mellon’s EIO-LCA database, which covers all sectors of the economy, and look at the sector ‘Electronic computer manufacturing.’ It takes about 11 GJ of primary enegy and 1 metric ton of CO2 to make and dispose of a $2,500 server, but by my calculation that server will use about 120 GJ of primary energy to make the necessary electricity, which will emit 7 metric tons of carbon at US CO2/MWh rates. So, the use phase is over 90% of the energy and over 85% of the carbon.

    These numbers aren’t for servers specifically, but they’re probably reasonable, and they show the use phase is much more important.

    BUT, you should only get rid of your old servers if the new server’s actual efficiency improvement is enough to make up for having to build a new one.

    Here’s a scenario:

    (a) A server you already have took 20 units of energy to make (which you’ve already ‘paid’), and it will take 80 units of energy to run for another 5 years.

    (b) A new, more efficient server server that does the same amount of IT work would require 20 new units of energy to make, and it would take 59 units of energy to run over the next 5 years.

    So, buying a new server which is 1-59/80 = 26% more efficient would require a total of 79 units of energy, while continuing to run your old server would be just slightly worse, at 80 units of energy. But if the new server was only 25% more efficient, you’d need 64+20 = 84 units of energy to manufacture and run it, which is worse than just keeping the old server.

    So, my recommendation is that the UK government and others not create a blanket policy of keeping all old servers as long as possible. Instead they should do a quick ‘back of the envelope’ calculation to determine if the efficiency benefits of a new model are big enough to beat the energy/carbon penalty of building something new. What they’ll probably find is that it’s well worth replacing very old, very inefficient equipment, but that it’s not worth replacing relatively recent equipment whose efficiency is just a step or two behind today’s models.

    So as you can see from the above, it is far too simplistic to say that repairing and re-using old technology is ‘Greener’ than manufacturing new.

  4. I would also like to add that a lot of ICT equipment is bought cheaply because it is faulty, repaired and then sold on for a massive profit … surely with such huge profits made in this way the full VAT should be charged for the repair? I think zero VAT on repairs would be abused by many IT companies (VAT advoidance).