Sixty of those MP types yesterday signed an 'early day motion' put forward by the All-Party Parliamentary Small Business Group calling on the government to take more action to block the much previously reported VAT loophole that gives large online retailers an unfair advantage over independent traders, especially in the music retail sector.
The loophole comes about because the Channel Island of Jersey is outside the EU, but is geographically and commercially close to the UK. According to EU rules, companies whose mail order operations are based in Jersey can sell products up to £18 without paying VAT. This, of course, includes the majority of CD releases. As a result Amazon, Play.com, Tesco, HMV and others have based their CD and DVD mail order operations on the island, allowing them to undercut independent retailers in mainland UK without affecting their profit margins.
Both the governments in Jersey and the UK have raised concerns over the loophole but those campaigning against it say little has actually been done to close it. Yesterday's early day motion was another attempt to force the UK government to take proactive steps - perhaps by reducing the price of goods that are VAT exempt under the EU system, so that it ceases to be viable to use it for the sale of CDs.
Victoria Carson of the Federation Of Small Businesses, who are running the campaign against the loophole, told reporters: "We estimate that around £80 million of tax revenue is being lost because of this loophole, and that is due to grow to £200 million in the next few years. Since the Chancellor [Of The Exchequer, that'll be Gordon Brown] paid this issue lip-service in his budget speech [last year], there has been little action to help those small independent retailers who are being pushed to the wall by companies exploiting the loophole. Meanwhile, big retailers are making record profits at their expense".
The early day motion in parliament was put forward by MP Andy Love, who is chair of the All-Party Parliamentary Small Business Group. The motion says that the loophole "undermines the credibility of the UK's VAT system" and "the viability of the UK's independent music stores", and "threatens the livelihoods of the several thousand people who work in those stores and creates an environment in which compliance with the taxation laws of this country is seen as an optional exercise".