9 November 2011

The UK government is at last ending from April next year the tax loophole which lets distributors in the Channel Islands undercut both shops and online suppliers in Britain by shipping goods worth below the threshold of £18 (reduced to £15 this month) to the UK free of VAT.

Entirely legally, companies have imported ‘low value’ goods such as music disks into the Channel Islands and then shipped them out to customers in Britain free of VAT. Last year this loophole cost the British government – you and me – about £130 million in lost tax revenue and perhaps £600 million over the last five years. Closing the loophole will adversely affect the economies of Guernsey and Jersey.

The Channel Islands are also under pressure about their role as tax havens.

Additionally, a report Who is paying for Jersey to be a tax haven? (on the website 2 November 2011) sets out the effect of local tax policies on people and companies there. It is not for progressive stomachs. For example, in 2000 42 percent of tax was personal, in 2011 this had risen to 84 percent, a vast move of tax from companies to people.

I have discussed Guernsey in two previous posts Cornwall and Guernsey and More for Cornwall to ponder on Guernsey. This interest is because of the Biscoe-Howells study about whether Cornwall can learn about autonomous governance from Guernsey. As I said in my first Guernsey post, it might be said that the interest is the government model not the financial model. I’m not sure one can separate them easily in 2011. I think that the economy and finance are central to the success of any constitutional entity in the world whether or not recognised formally in a constitution.

I do not think Guernsey is a model for Cornwall.