The government of Jersey has said it will crack down on a VAT loophole which has allowed a number of British retailers to sell music releases at vastly cheaper rates.
Under European Union law retailers that operate outside the EU can sell products valued at under 22 euros to consumers in member states without charging VAT. The Channel Islands are not part of the EU, but are close enough to the UK, geographically and commercially, to make them a viable base for British distribution or mail order businesses. This has enabled the likes of Tesco, Amazon, Asda and Woolworths to sell major music releases at knock down rates - new release albums retail at just £8.50.
However the Jersey government says they will not grant any more licences to firms looking to trade in this manner. Senator Frank Walker, the president of the island's policy and resources committee, told UK newspaper the Sunday Telegraph: "The publicity we have received regarding this practice has been very unwelcome. It is a real concern - it has been damaging".
The UK's Forum of Private Business praised the move, saying: "It is utterly absurd that retail giants should gain an unfair competitive advantage over small businesses by cynically exploiting the tax system".
However, despite criticism that companies already exploiting the loophole do not employ islanders or pay tax to the Jersey government, the island will not revoke existing licences. On that point Mike Dillon, who owns the Scotland based Record Factory, told reporters: "If the Jersey government is against new companies setting up in Jersey to exploit the loophole, it should be against those already there. All high street shops in the entertainment business are suffering because of this".