12 September 2006
22 July 2005
The States of Jersey Economic Development Committee (EDC) announces measures for controlling the growth in VAT-free sales of goods through the Island by UK-based companies that use EU legislation on Low Value Consignment Relief* (LVCR). The new policy will maximise the economic benefit to the Island of Jersey-based internet and mail order businesses, but at the same time limit the growth in the activities of UK-based companies that channel sales of CDs and DVDs through Jersey.
Genuine Jersey businesses established in the Island with sound business models that create high value employment will be supported by the States. On the other hand, businesses that simply facilitate UK companies to operate DVD/CD business through the Island will find that opportunities for growth will be limited. Those firms making a less significant contribution to the Island economy but not dealing with UK DVD/CD firms will also be allowed to grow if the Island has the required resources available.
Deputy Gerald Voisin, President of the Economic Development Committee, said: “From today, Jersey has an agreed policy in place that will clear up any uncertainties concerning the sale of VAT-free goods from the Island into the UK. We have acted quickly but thoroughly to put in place a policy that allows the Island to continue to benefit from some valuable business that is an important part of our economy. At the same time, we will restrain the activities of UK firms that use Jersey to simply avoid VAT on sales of DVD/CDs in the UK while returning little benefit to the Jersey economy.
“The majority of firms in the internet/mail order retail business in Jersey will be unaffected by this new policy. They will be allowed to go about their business in the usual way, provided they do not facilitate business for UK companies selling DVD/CDs back in the UK. However, we will continue to monitor the extent to which all business activity in Jersey uses the Island’s limited resources relative to the employment and tax revenue it creates. Where businesses create only limited benefits, EDC will continue to restrict the labour they may use when the market for such labour is tight. Our policies will continue to favour the businesses that make a greater contribution to the Island economy and put their workforce to more productive uses.”
The new policy will be applied through the Regulation of Undertakings and Development Law (RUDL) which requires businesses to apply for a licence to conduct business and employ people in the Island. This means any UK-based firm operating part of its internet/mail order business through Jersey will require a licence from EDC. Jersey-based firms that facilitate such activity will also be controlled through the same set of regulations.
ENDS
For more information, contact:
Deputy Gerald Voisin, Economic Development Committee. Telephone 837107/ 07797 713737
Economic Adviser, Dougie Peedle. Telephone 603465
Notes for editors
The recent increase in internet/mail order sales of DVD/CDs being diverted through the Island by UK companies uses valuable amounts of scarce land and labour. This is not consistent with the Island’s own Economic Growth Plan which requires activities in the Island to create high value jobs for local people and significant tax revenues to help contribute to the cost of public services.
The States of Jersey understands the UK government’s concerns about UK-based companies avoiding VAT by channelling DVD/CD sales through Jersey and the loss of revenue to the UK Exchequer. There is a danger that negative publicity is also having a detrimental effect on the Island’s international reputation, which is based upon integrity and compliance with international standards and cannot be put in jeopardy.
*Sixth VAT Directive Provision
The LVCR is a mechanism adopted by the European Union (EU) to avoid the administrative burden and disproportionate cost of recovering VAT on low-value consignments (not more than 22 Euros) imported from outside the EU. Jersey is not part of the EU for VAT purposes, and therefore goods sent by mail order from Jersey are exempted from VAT.
Article 14 (1) (d) of EU Directive 77/388/EEC (The Sixth VAT Directive) stipulates that Member States shall exempt the final importation of goods qualifying for exemption from customs duties other than as provided for in the Common Customs Tariff. Article 14 (1) (d) has been implemented by Directive 83/181/EEC and in particular by Article 22 thereof, which stipulates that goods of a total value not exceeding 10 Euro shall be exempt on admission. Member States may grant exemption for imported goods of a total value of more than 10 Euro but not exceeding 22 Euro. However, Member States may also exclude goods which have been imported on mail order from this exemption.
gov.je