Small business 'victory' in Jersey tax dispute

Step towards closing the loophole, SMBs say

By Startups.co.uk • Get more from this author

Posted in IT Channel, 28th February 2006 10:54 GMT

Owner-managers have claimed a victory over retail industry big guns in an argument about the exploitation of Jersey’s tax loophole.

Goods worth less than £18 sold on Jersey are exempt from VAT, a fact that has tempted the likes of Tesco, HMV and Amazon to use the island as a sales base, distributing knockdown CDs, books and DVDs to UK customers.

UK optician and eyewear retailer Dollond & Aitchison set itself up on Jersey to sell contact lenses, but last week the European Court of Justice ruled that the company must factor in the cost of eye tests in a lens package, pushing their value over the £18 cut-off.

Small independent stores located on the mainland, who say they can’t compete with the VAT-less prices, welcomed the ruling, saying it represented a step towards closing the loophole – despite being won on a technicality exclusive to opticians.

"Independent retailers are being crippled by this practice; they simply can’t compete on price," Forum of Private Business chief executive(FPB) Nick Goulding said. "The FPB believes this is an abuse of the tax system and it is time the government took decisive action to stop it. It should not be forgotten the government is losing £80m in unclaimed VAT."

Nick Hornby, author of High Fidelity, a story set around a small, independent record shop, has leant his backing to the campaign, saying the type of outlet featured in his book is becoming extinct.

Big stores combine economies of scale and a lower tax take to offer newly released CDs from £8 and DVDs from £12.

Mike Dillon, owner of the Record Factory in Glasgow, said no private shop could compete on those terms: "I could actually buy stock from a supermarket cheaper than from a wholesaler, and that's got to be wrong," he said.

"I'm really concerned about this, and I believe that, at the current rate, the business that I established back in 1972 has, at best, five years left. We must be able to compete on a level playing field."