A tax loophole that lets Channel Islands-based companies sell
inexpensive products on-line to UK consumers free of VAT came under
fire yesterday over the news that large companies such as Tesco
were using the exemption to reflect lower tax bills in their
prices.
European rules allow companies based outside the EU (including
the Channel Islands) to supply goods direct to customers within
Europe free of VAT, provided they cost less than £18.
Accordingly Channel Island firms are able to sell goods at a
considerably lower price than firms based in the UK, which have to
include the UK VAT rate of 17.5% – a fact that, according to the
Telegraph newspaper, has not gone unnoticed by large retailers such
as Tesco and Amazon.
Around 100 retailers, says the Telegraph, have set up bases in
Jersey to sell cheap items such as CDs, contact lenses and
books.
Such sales are legitimate, but the issue was due to be raised at
yesterday's meeting of the Treasury Sub-Committee, where John
Nealey, the Economic Secretary to the Treasury, was due to be
quizzed by MPs, concerned at the loss of tax revenue from these
large corporations.
In 2003, former MEP David Bowe raised similar concerns with the
then EU Commissioner for the internal market and taxation, Fritz
Bolkestein, after complaints by Leeds-based video games retailer
Gameplay.com.
