According to the Daily Telegraph, Apple is considering setting up business on the Channel Island of Guernsey to benefit from a previously reported tax loop-hole that is used by a number of other online retailers, including Tesco, Asda, Britannia, HMV, Amazon and Woolworths.
The loophole in question is the fact that imports into the UK from outside the EU are not subject to VAT when items cost less than £17 each. Because that covers most music releases, a number of retailers are now running their music operations through Guernsey - the Channel Islands being geographically convenient, but not part of the EU.
The paper says that if Apple were to base itself on the island it could drop its prices in the UK to as low as 67 pence per track. However, the British government have said that they will be keeping a close eye on companies benefiting from the loophole, while the Guernsey government said last year that it was tightening the criteria for allowing companies to open operations on the island.
Commenting on the reports, Nick Goulding of the Forum For Private Business, one of the biggest critics of the loophole, told the paper: "This is more evidence of the urgent need for Gordon Brown to end this cynical tax dodge."