DVDizzy Forum

Jersey to crack down on cut-price CD traders

Tesco, Asda and Woolworths among firms exploiting tax loophole to sell cheap music in Britain

Miles Brignall
Tuesday June 28, 2005
The Guardian

The Jersey government has announced it is to crack down on UK retailers who have been using a European VAT loophole to sell cheap DVDs, CDs and a range of other products.
Tesco, Asda, Woolworths and the optician D&A are among more than 100 British retailers that have flocked to set up a minimal presence on the island to offer cheaper goods via UK-based websites.

A European tax law introduced in 1983 allows any item bought for less than £18 to be individually imported to the UK from the Channel Islands without the imposition of VAT.

Both Jersey and Guernsey have become a major centre for the supply of low value, price sensitive goods such as films, music, contact lenses, food supplements and computer equipment.
President of the economic development committee of the Jersey government, deputy Gerald Voisin, said yesterday: "We no longer want to support this business and will be taking active steps to halt the trade for companies that do not have a real presence on the island. In an island economy with limited labour and land resources economic policy must focus on generating high value activity and employment opportunities, particularly if it desires a high level of public services. We feel that this type of business - where UK companies simply divert sales through Jersey - is not such an activity and is therefore against the island's economic interests." While there are a few companies, including Play.com, that are based on the island, most of the recent entrants use one of the 10 "fulfilment companies" that have grown up to service the UK trade. These companies receive and store the items on the retailer's behalf. Once an order is placed, they repackage it and send it back to the UK. Asda, the latest firm to set up a Jersey presence, is selling the latest Coldplay album for £8.47, compared with the UK high street price of £12.

The business has grown to the extent that a quarter of the 80m items of post leaving the island is taken up with the booming trade. The trade costs the British government £80m in lost revenues. Left unchecked, that is predicted to rise to £200m. The state-owned Jersey postal service is one of the major players in the fulfilment sector.

Deputy Voisin said yesterday that the Jersey government would use the island's strict employment licensing regime to force companies to comply with its request. He suggested that any company not toeing the line could have its licence revoked. He also said it would be up to each of the fulfilment companies to disengage itself from contracts with UK-based firms.

News of the crackdown was welcomed by the Forum of Private Business which has argued that the loophole is killing independent stores in the UK, and should be ended by the government here.

A spokesman for Tesco Jersey, the company's own separate website, said: "We needed to create a level playing field, something we flagged up to the Treasury when we spoke to them before launch. Clearly we will always operate within the law and we would of course respect any changes made by the authorities."

Executives of the Jersey postal service were yesterday unavailable for comment.

The Guernsey government said that while it would not be clamping down, business would not be transferred from Jersey because the island could not cope.

*Andy* wrote:Uh oh.
Well looks like i best get as many £6.99 dvds from play.com as i can before they all go up to normal price. Oh wait its happening in a year?

2099net wrote:

*Andy* wrote:Uh oh.
Well looks like i best get as many £6.99 dvds from play.com as i can before they all go up to normal price. Oh wait its happening in a year?

PLAY is actually 'safe' as it has a substantial presence on the island and employs a lot or people. Yay PLAY!

ichabod wrote:

Literally that's all I can say!

But doesn't the £18 VAT rule apply to imports from other places, not just the channel islands?


You know there is a simply solution to this! UK mainland based DVD/CD retailers shouldn't be such money grabbing ass holes!

ichabod wrote:But like i say, there's only one reason why this is happening in the first place. Extortionate prices in UK high streets!