A DECISION to slash the UK VAT export limit to £7 could force businesses to leave the island. The move - discussed during a meeting between Chief Minister Mike Torode and the Lord Chancellor last week - would hit Guernsey-based export companies.
Many firms benefit from the UK tax break, known as the de minimis rule, that allows items costing less than £18 to be sold VAT-free.
MX2 managing director Jon Arch, whose firm specialises in the sale of computer and camera accessories, said a reduction would make staying in Guernsey a difficult scenario.
‘A cut would have a major effect on our business,’ he said.
‘Shipping expenses have gone up by 26% in the last 12 months alone and the benefits of the VAT loophole are partly outweighed by rent, staff and postage costs.
‘We would have to consider relocating to the UK.’
MX2, which formed in Guernsey in 1996, has an annual turnover of £5m. Mr Arch reckoned 80% of his trade involved exporting goods costing between £7 and £18.
Stan Brouard Ltd managing director Rodney Brouard, who exports more than 5m. flowers every year for an average of £15 per box, said a cut would hurt anyone involved with sending goods to the UK.
But he had his doubts that it would be introduced.
‘The amount of extra work customs would have to do to check each packet under £18 would make it far too expensive,’ he said.
‘It’s not just the case in the Channel Islands, but anywhere outside the EU - people are now setting up in Switzerland.’
Mr Brouard said that the recent decision by the States against increasing the number of housing licences meant that fewer people would be setting up in Guernsey purely to take advantage of the tax loophole. In doing so, the UK authorities would consider the issue less problematic.
Commerce and Employment minister Stuart Falla said a cut in the minimum export limit was not something to be encouraged - but that the decision was out of its hands.
‘If that gets adjusted then it may well effect some businesses,’ he said.
‘But if a decision is made, we have to accept it. VAT procedures are not anything we can interfere with directly.’
Article posted on 2nd May, 2007 - 12.00am
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