VIRGIN’S decision to open a distribution centre here has angered Commerce and Employment’s deputy minister. Carla McNulty Bauer is furious that it has followed HMV in its decision to set up to exploit the island’s VAT-free status.

She said that Virgin Megastores’ move had gone ahead ‘without any government support’ and added that she was ‘deeply concerned’ about the impact on local businesses.’

The company has set up Virgin Megastores Online (Guernsey) Ltd to distribute entertainment products to customers in the UK and Ireland ordered via its website.

It is currently recruiting a finance manager to run the operation.

Under the current VAT rules, businesses can export goods to the UK as long as they do not exceed a maximum value of £18. The fear is that Virgin is coming to Guernsey to conduct business solely with the UK and Ireland and will not make any contribution to the island’s economy.

Deputy McNulty Bauer said the first that she knew of it was when she saw the job advert in the Guernsey Press and admitted the department was powerless to stop it.

Because the company has not submitted applications for housing licences or change of use of premises, it has slipped under the radar of Commerce and Employment.

‘As a general rule, we welcome businesses to the island, but this particular company is one that provides more ammunition for those who wish to change the current VAT laws to being more in their favour,’ she said.

‘The effect of them coming to Guernsey to take advantage of VAT exemption will result in bad publicity in the UK and, as a result, we don’t encourage it.’

Virgin Megastores declined to comment and did not disclose the location of the proposed centre.