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CDs & DVDs dearer as Govt Closes Loophole 2006-02-28

Posted by clype in Money.
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Firms that distribute cut-price CDs and DVDs for major chain stores from Jersey to avoid ‘Value Added Tax’ (‘VAT’) are to have their licences stopped in a year’s time.

Several chain stores including ‘Tesco’ and ‘Asda’ have moved Internet mail-order operations to the island to avoid VAT.

Under EU law, retailers that operate outside the EU can sell products valued at less than 18 GBP to customers in member states without charging ‘VAT’.

But Jersey’s government says negative publicity hits the island’s reputation. Economic Development Minister Mr.Philip Ozouf said businesses based in Jersey, that buy stock in Jersey and store it there before selling it, will still be able to operate.

  • Companies like play.com, which is based in Jersey, are thought to be unaffected.

But UK-based operations will have to apply for licences and they will be time limited to ‘gradually reduce and eventually discontinue their activities’. During a UK parliamentary debate in 2006-02 it was stated that the UK Treasury is losing 80 million GBP/year from retailers operating ‘offshore’ and that could soon reach 200 million GBP/year. Mr.Ozouf said:

 

‘We welcome and we want to see a continuing online retailing business which is properly established in Jersey.

‘What we don’t want to see is a UK business serving its UK customers by simply using Jersey as a post-box.

‘It is not economically beneficial to Jersey to any great extent and also undermines its business reputation.’

However chief executive for ‘The Forum of Private Business’, Mr.Nick Goulding, which led objections to the loophole, called Jersey’s move a ‘smokescreen’. And he warned retailers would switch to other low-tax bases such as Guernsey to sell CDs and DVDs into the UK market.He said:

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‘To a certain extent we have been here before.

‘Jersey put out a similar statement in November and they didn’t follow through with it, so there’s a lot of rehashing here.

‘If the UK companies are pushed out, others will step into that space and we shall see a continuation of the problems, so we are concerned that the UK Government plugs it at this end.’

He said buyers could be affected, but the long-term affect would be adverse on consumers. He said:

‘It’s a question of whether you want a sustainable market space with local stores and knowledgeable staff that you can talk to. Consumers value that.

‘This kind of unfair competition means you are much less likely to have that.

‘We are not objecting to competition from the Internet, but consumers will recognise that if only one side has to pay tax, that just isn’t fair.’

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