Jersey’s fulfilment industry
Jersey and Guernsey occupy a unique constitutional position. Crown dependents of the UK, they are pretty much autonomous governments, who operate outside of the EU. Neither jurisdiction charges VAT.
In the old, pre-internet days, (15 years ago!), exports to the EU below the value of £18 were deemed VAT-exempt, because the cost of collection would be too high. This is an administrative relief known as Low Value Consignment Relief or LVCR. Jersey and Guernsey, always quick to exploit a loophole, rapidly grew a fulfilment industry capable of shipping millions of items a day to the UK, EU and the world.
All this has carried on without a major furore until Nick Goulding of the Forum of Private Business (FPB) started kicking up a fuss on behalf his members. In particular, he was incensed by UK ecommerce operators (namely Amazon and Tesco) moving part of their operations to Jersey.
Inevitably, the Labour Government made rumblings in its last budget stating that they were aware of the abuse of the Low Value Consignment Relief by companies who had set up in the Channel Islands and that they would introduce legislation to stop the avoidance of VAT if companies continued this behaviour. The 2006 budget also stated that £85 million per year was currently being lost in unpaid VAT as a result of this trade. This amount is expected to rise to £200m soon.
Which brings me to the point of today’s post. Yesterday’s report from Jersey scrutiny panel accuses Philip Ozouf (Economic Development Minister) of prematurely shutting down the fulfilment industry. Deputy Geoff Southern, with a characteristic disregard for the facts says that Ozouf ‘buckled under pressure’, and of having taken ‘a step too far’.
Southern’s grasp of the situtation is lamentable. Ozouf’s manoevuring appears to have appeased the British government, and has opened the way for Jersey businesses to benefit from this loophole. In fact, we have seen a commensurate increase in LCVR business since the Ozouf statement. Scrutiny is a good concept, as long as it is intelligent and constructive. This level of scrutiny is intellectually bankrupt and a waste of taxpayer’s money.
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