Channel Islands to dump UK mail order hosting?

There exists a provision, some people mistakenly refer to as a “loophole”, in EU tax laws that allows goods under £18 to be imported tax-free from outside the EU.

Guernsey and Jersey are outside the EU and have no GST/VAT/sales/goods tax of their own and as such the islands have become prime locations for low-value mail order operations.

In Guernsey MX2, HealthSpan, 7DayShop and a number of flower shops have jumped in. Jersey has seen local business Play, BlahDVD and the like.

The large UK retail stores, keen to take advantage of the situation, arrived in Jersey with Amazon Jersey, Tesco Jersey, Asda and even Woolworth basing their mail order centers there.

But now the islands are “under fire” from the UK government that believes its loosing a large amount of tax, in fact £80 million a year according to them.

To be loosing £80m in tax somebody has to be making sales worth £6.6 billion. If we assume an average price of £10 that’s 660 million items a year. Lets get real here, the industry isn’t that big.

They also mistakenly believe that somebody spending £50 a month on VAT-free goods will now spend an extra 17.5% when in fact they’ll spend the same or less on fewer items. Governments and bodies like the MPAA and the RIAA always assume that you’re cheating them if their income ever drops – I guess they think everybody has an infinite amount of expendable money.

So Jersey has decided to withdraw the UK chains license’s next year and Guernsey has already warned the businesses they won’t be welcome here either.

The rationale is that they are looking after local businesses which is kind of true. If the UK government get irked enough about the situation they’ll change the laws and we’ll all be out of luck. Maybe closing the door to UK retailers will work, or maybe they’ll retaliate and claim they can’t compete with offshore sales and push for the laws to be changed.

I guess Apple is out of luck with their offshore iTunes idea. Well they decided they didn’t want us using their online Apple Store…

I guess what goes around comes around.


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