DEPUTY Stuart Falla took to the national airwaves yesterday to defend and explain the island’s investigation into the so-called VAT loophole. The Commerce and Employment minister was on BBC Radio 4 in the morning and on BBC Five Live in the afternoon.

He was quizzed as to why the Office of Utility Regulation’s review into the effects of the VAT de minimis limit was about to take place and why it was targeting only multinationals such as HMV and Virgin and not local companies.

Speaking about Virgin’s proposed move to Guernsey, which would allow it, like HMV, to export goods worth up to £18 to the UK tax free, Deputy Falla, pictured below, said: ‘They are not a local business.

‘We are more worried about those businesses that are indigenous to Guernsey and there are other forms of business in Guernsey that take advantage of this de minimis £18 concession, particularly cut flowers that are exported from Guernsey. Also there are two very strong health supplement and dietary supplement companies.

‘Those who are local companies will be able to continue to exploit this because the intention is to target only CDs and DVDs which, of course, are not manufactured in Guernsey.’

Deputy Falla went on to explain that the loophole – which has angered UK retailers – existed because of a concession given by the UK Government.

‘It’s not a tax that we have invented. It is one that has been there ever since I think VAT was introduced because of the costs of collection, so it’s for the UK Government and other European countries to act as they see fit.’

Deputy Falla said that a variety of pressures – from high street retailers, the UK Government and the States of Jersey – had led his department to task the OUR with a review.

He also expected any rule change to lead to redundancies.

‘I would expect a handful, but we do have full employment in Guernsey, in fact, you could argue, overemployment.’

Since the intended crackdown on the VAT loophole was announced, both HMV and Virgin Megastores have declined to comment on its implications.