LONDON — A British business lobby group has called on the national Treasury to intervene over the plans of retailer HMV’s plans to shift its Internet fulfilment facilities to Guernsey, a recognized tax-haven.
The Cheshire, England-based Forum for Private Business (FBP) said the week of July 18 it was “reporting” HMV and the Guernsey government to the Treasury, National Audit Office, and HM Revenue and Customs.
It says it took those measures because HMV and other traditional retailers were costing the government “tens of millions” of pounds in lost revenue by selling VAT-free product from the Channel Islands.
Under European law, retailers that operate outside the European Union can sell products valued at less than £18 ($31) to customers in member states without charging VAT. In recent months, many of HMV’s rivals such as Amazon, Lastminute.com and Woolworths have set up operations in the Channel Islands to exploit the loophole.
The FPB, led by its CEO Nick Goulding, slammed the exodus as “deeply cynical exploitation” of the Channel Islands’ tax status. “The government is being ripped off and is losing tens of millions of pounds in lost revenue. And, crucially, smaller businesses, like high street shops, are being squeezed until the pips squeak,” he added.
HMV says it “categorically refutes” the FPB’s claims that the decision to relocate was based solely on shifting VAT-free product. “Ours is a completely, 100% dedicated and committed approach. It’s not a paper exercise,” says an HMV spokesman. Moreover, the market-leading retailer plans to open a store on the island next spring.
HMV recently unveiled plans to shift from its current British fulfilment base in Manchester before year’s end as a result of growth in its Internet business. According to an HMV spokesman, the facility will create 50 jobs and an investment of about £1 million ($1.7 million) will be ploughed into it.
HMV’s U.K. & Ireland division recently opened its 200th store. The retailer’s managing director for Europe Steve Knott says there are “at least another 100 [domestic] markets that HMV is not in that it should be in; maybe another 50 on top of that.”
The Treasury estimates that roughly £80 million ($139 million) of revenue is lost each year to tax avoidance from companies relocating to the Channel Islands.