Jersey Treasury Minister Phillip Ozouf has commented on the impending further changes to LVCR which are expected to be announced in George Osborne’s pre budget statement on the 6th of December 2011. Stating to the BBC politics show that the Island needs to “ be building businesses which benefit Jersey but are also not harmful to the UK” he made comments starkly at odds with his previous whole hearted support for the expansion of the LVCR based fulfilment industry. During his tenure as Minister for Economic Development between 2005 and 2008 he introduced a policy for this fulfilment industry “to allow online retailing as whole to expand in the Island” creating many new jobs for Island residents on the back of a “kink in the tax system“. Given that the removal of the kink was always inevitable reliance on it would appear to have been unsustainable.
Similarly the LVCR trade has also caused problems in the UK due to the failure of then Chancellor of The Exchequer Gordon Brown to prevent the industrial VAT avoidance that resulted. Despite being made aware of the problem in the late 1990s by UK businesses who complained to the Treasury, the Labour Government continued to turn a blind eye allowing the Channel Islands to self regulate what was essentially a major abuse of an EU import relief. The growth of the abuse of LVCR has destroyed many UK businesses and cost UK jobs.
The change of heart by the Channel Islands and the expected decisive action of George Osborne is welcome, giving all traders the hope that a major distortion in the on-line marketplace will finally be removed, allowing retailers to trade on a level playing field and businesses to be built on firm foundations rather than ones based on tax avoidance.
All we ever wanted was a level playing field.
NOTE : The statement in the Channel Island TV report below that LVCR was introduced to help the Flower Industry is factually incorrect. The pre-paid VAT collection scheme was introduced to help the flower industry in 1973 allowing Channel Island retailers to prepay VAT and avoid customs delays. LVCR was introduced in 1983 and applied to all imports into the UK, not just those from The Channel Islands. Over time the two have become confused.