Jersey DVD distributor avoids U.K. sales tax
Amazon.com, the world's biggest Internet retailer, is using a unit based on a British island financial haven to avoid Britain's sales tax on DVDs.
Amazon.com in October set up the wholly owned subsidiary on Jersey, an island in the channel between England and France with a population of 90,000, to exploit the British territory's tax status. Imports from the island that cost less than £18, or $35, are not subject to the British sales tax of 17.5 percent.
"You're going to see a lot more of this," James Roper, the chief executive of Interactive Media in Retail Group, an industry lobby, said in London. "We've been predicting for about eight years that this will fundamentally become an international game, where countries will vie with each other to offer the best tax rates."
Amazon.com is "generally not the cheapest" Web site to buy DVDs, Roper said. Low-price competitors include cd-wow.com, which distributes from Hong Kong, and Jersey-based Play.com.
"We are committed to offering our customers the lowest possible prices," a spokeswoman for Amazon.co.uk, Marie-Louise Fagan, said in an e-mailed statement. "We have launched Amazon Jersey to provide our U.K. customers even lower prices on a selection of DVD titles."
Sales began in October, she said, declining comment on whether there were plans to extend the Jersey unit's role.
Amazon Jersey currently sells only DVDs. Customers wanting to buy a DVD of "Spider-Man 2" from the British site are told it will cost £14.99 from Amazon.co.uk or £12.75 from Amazon Jersey. The British Treasury said in a statement that selling from Jersey to avoid sales tax was legal and the matter was "under review."
"It's not worth the time and effort for them to collect it," said Roger Burrows, head of sales tax at accountants Grant Thornton. "It would have to be a pretty sizable tax loss before they went to tackle it. Just when that's reached is difficult to predict."
Jersey is a British territory, but not part of the United Kingdom or the European Union.
Source: Bloomberg News via International Herald Tribune
