Legal battle to be launched against LVCR
A letter which raises fresh questions about the future of Low Value Consignment Relief.
The States of Guernsey and Jersey this week announced they were launching legal battles to stop the tax exemption being scrapped by the UK government.
At the moment goods worth less than £15 posted from the islands to the UK are sent VAT-free... that is due to come to an end in April.
The letter is sent from the Taxation and Customs Union at the European Commission and appears to cast doubt over the success of any legal challenges. It's written to Richard Allen, the man representing UK retailers who claim the Channel Islands fulfilment industry is harming their businesses.
Taken at face value, it contains blunt language which would appear to raise doubts over the point of any legal challenge by Guernsey or Jersey.
In it, the head of the Taxation and Customs Union unit points out that the UK government are aware of the problems LVCR cause UK retailers and are committed to ending them. But it then goes on to say that if the UK government doesn't sort the problem, the Commission itself could launch a formal infringement procedure against the UK.
Guernsey's Policy Council was approached to comment on the contents of the letter but they said it would be inappropriate to make any statement now that they've begun their legal action against the UK government.
A Jersey government spokesman did though say the decision to take legal action wasn't taken lightly, and that it was worth pointing out the action is about ending up with a level playing field, rather than a plan which discriminates specifically against the Channel Islands.
But not everybody's convinced.
Deputy Barry Brehaut, chairman of Guernsey's Scrutiny Committee, said, "Well we need to do something over Low Value Consignment Relief and I understand people needing to adopt a position. I'm concerned that we could spend £65,000 only to conclude that we can't take it any fuirther. But that further involves challenging the European Commission which could get expensive and I don't think we should do that."
It's early days for the legal challenges which aim to protect Channel Islands jobs. If all goes to plan for the governments of Guernsey and Jersey the outcome could be known by February.
Jersey's legal challenge of the British government's decision to axe Low Value Consignment Relief will cost £360,000 which is six times more than Guernsey had budgeted for its challenge.
Both islands have been weighing up their options since the decision to withdraw the relief for the Channel Islands alone was made by the UK Treasurer George Osborne.
Under the existing regulation goods under the value of £15 are exempt from VAT, currently running at 20% in the UK.
That price advantage led to a string of so-called fulfillment companies operating in the Channel Islands with a total workforce of up to 3,000 people.
In his Autumn statement Mr. Osborne described the relief as a loophole and said he was removing it to protect High Street retailers.
The bill for Jersey's legal challenge will be shared between government and fulfilment businesses.