Treasury wants to end “unfair” VAT charges

Monday 01 February 2021

The Treasury department wants to ensure offshore retailers stop charging Jersey customers VAT and start collecting GST instead.

The comments from Richard Summersgill, Jersey’s Comptroller of Taxes, came as the Treasury announced a review into how GST is charged last week.

The review itself was prompted by the changes the EU and UK are set to introduce in the summer following Brexit.

Since leaving the EU, the UK is no longer subject to EU rules on VAT and all imports into the UK will soon be subject to VAT regardless of their value. 

For goods less than £135, the VAT will be paid when purchasing the product, at the point of sale. For goods over £135, it will be paid when the goods arrive in the UK. 

Pictured: Richard Summersgill, Jersey's Comptroller of Taxes.

Those changes, Mr Summersgill said, provided the Government with an opportunity to address an issue that has been ongoing since Jersey introduced GST in 2007. 

“We have a situation where effectively for a very long time we had an uneven playing field that has been unfair competition in Jersey’s marketplace, so some offshore retailers have continued to charge VAT even though they don’t need to,” he explained. 

“Equally others don’t charge VAT but don’t charge GST. Some offshore retailers have made arrangements to pay GST in Jersey, others have not. 

“It has been longstanding policy of Jersey Government since GST was introduced to correct this when it was possible to do it and what Ministers have actually said over the years is that when the European Union and now the United Kingdom, as it is no longer in the European Union, introduced changes to their systems that Jersey would be a fast follower.”

Pictured: The Government hopes offshore retailers will start charging GST instead of VAT. 

Explaining why the Treasury department had waited to address the issue, the Comptroller said there were concerns that forcing GST to be charged by offshore retailer might have led some of them to stop supplying goods to Jersey.  

“The thinking is that once the European Union and the United Kingdom have changed their processes and the big retailers have adapted their systems to cope with the EU systems, that they would be more willing to do that for Jersey and that they are more likely to keep supplying goods into Jersey,” he said.

“There’s always been a delicate balance between wanting to make sure that the Jersey marketplace was fair and that there was a fair competition but also maintaining consumer choice, we didn’t want the big offshore retailers not to supply goods into Jersey.”

Mr Summersgill said the key change Ministers want to introduce is for offshore retailers to stop charging a retail selling price that includes 20% of VAT, but would instead include 5% GST.

“In an ideal world, we would hope some of the large retailers would do that at the point of sale in the overseas jurisdiction and that they would send that money directly to the Treasury here in Jersey,” he added.

“So, what a Jersey consumer would see is when they go on a website to order goods, they would see that they are being charged GST and that would then enable our colleagues in customs to ensure that goods supplied through these retailers got the fastest possible movement through the import and postal system in Jersey.”

Pictured: Islanders would still be able to pay GST themselves on the parcels they are bringing in.

As the system might not work for all retailers, especially smaller ones, the Treasury department said they would look into “simpler and easier systems” that would allow islanders to account for the GST due on the parcels they are bringing into the island. 

He said an “inevitable conclusion” of those changes would the reduction of the £135 ‘de minimis’ level or even its disappearance. 

“Having said that one of the big issues that we will be looking at is how we deal with gifts,” he added. 

“Where for example a grandmother in Poland is sending a gift to her grandson in Jersey, how we deal with that, whether it should be liable to GST at any level or value or whether there would be a low value gift relief and if there’s a low value gift relief then how quickly can the parcel move through the postal system.”

While the Comptroller admitted Jersey does not have the power to stop UK retailers charging VAT, requiring GST to be accounted for would be the “final lever” that forces them to do so.

Pictured: Mark Cockerham, the Head of Customs and Immigration, assured there wouldn't be any delay in the process if GST was to be taken at the source.

Questioned by Express about whether they are any concerns the system might not be able to cope with the changes, Mr Summersgill expressed confidence there wouldn’t be any issues, as a majority of the goods coming into the island are ‘manifested’ in advance. 

Mark Cockerham, the Head of Customs and Immigration, explained customers are currently able to clear their goods through an online goods system called CAESAR. 

“Certainly, we do have the ability already to fast-track goods through,” he said. “Using the example of registered businesses who import goods, the goods are fast-tracked through and they account for any liabilities at a later stage. 

“If the GST was taken at source as part of the purchase process, as opposed as part of the importation process, we would build something in that allow those goods to skip through, excepting that we would always retain the ability to examine goods if we thought there was an element that wasn’t quite right, for example smuggling activities. 

“Of course, by and large 99% of the trade that comes in the island is legitimate and obviously we wouldn’t want to hold that up.”