NAO To Launch Probe Into Channel Island E-Commerce Tax Breaks

by Robin Pilgrim, LawAndTax-News.com, London

25 July 2005

The Forum of Private Business (FPB) revealed last week that it has lodged complaints against the music superstore HMV and the Guernsey Government with the UK's Treasury, National Audit Office, and HM Revenue and Customs, after it emerged that the retail giant is setting up a website on the Island to sell CDs and DVDs VAT-free.

The FPB announced that HMV's move to Guernsey had "set alarm bells ringing" coming just weeks after the Jersey Government announced that no more major retailers would be granted licenses to sell goods VAT-free from their island.

The Jersey Government crackdown was in response to criticism that independent retailers in Britain are being undercut by retail giants - like Asda, Tesco, Woolworths, Boots and Amazon - which are selling goods from the Island.

The FPB's Chief Executive Nick Goulding argued that:

"The Government is being ripped off and is losing tens of millions of pounds in lost revenue. And, crucially, smaller businesses, like high street shops, are being squeezed until the pips squeak. They simply cannot compete on price. Independent record shops and online retailers are telling us they cannot buy CDs and DVDs from their distributor at the price they are being sold from the Channel Islands. This is patently anti-competitive. Why the hell should retail giants gain a competitive advantage over smaller businesses by manipulating the tax system? There must be a level playing field."

The National Audit Office has reportedly pledged to investigate the amount of tax being lost by the Government through the Channel Islands as part of a study that it is undertaking on e-commerce.

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