Sunday, April 16, 2006

Apple to exploit Guernsey loophole

Telegraph UK tells us that Apple, the US computer giant, is planning to set up business on Guernsey to exploit a tax loophole that will allow it to sell VAT-free music to British consumers.

Over the past two years Tesco, Asda, Britannia, HMV, Amazon and Woolworths have all set up delivery operations in the Channel Islands to exploit a law which allows retailers outside the European Union to sell goods worth less than £17 to UK consumers free from VAT.

These fulfilment businesses have allowed retailers to sell CDs and DVDs by mail order usually for between £3 and £5 cheaper than high street shops.

Apple confirmed that it is looking at setting up a similar operation on Guernsey. This would allow it to lower the prices of music downloads from 79p, perhaps to as little as 67p.

However, the Government is becoming increasingly concerned by the amount of tax being avoided by these operations. Treasury officials believe the practice will soon cost the Government up to £200m a year.

Nick Goulding, the chief executive of the Forum for Private Business, said: "This is more evidence of the urgent need for Gordon Brown to end this cynical tax dodge."

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