• GST Review Update

    Creating an unlevel playing field?

    The Treasury Department recently announced that it intends to add GST to all goods imported by Islanders, just four months after the de minimis was reduced from £240 to £135, and at a time when many consumers still face financial challenges due to Covid.

    We put a call out for your views and you did not disappoint. We received scores of submissions expressing your disappointment, and in some cases anger, at the news. Many raised similar concerns, such as the real possibility that UK and global retailers will simply stop delivering to Jersey, creating a lack of competition and, in turn, an unlevel playing field for the consumer.

    At a meeting with representatives of the department, there appeared to be a lack of understanding of who and why so many Islanders shop online, incorrectly assuming that due to the fact that the less well-off spend proportionately more on food and clothes they cannot afford to shop online. Officers from the department were also worryingly confident that ‘most online retailers’ now remove the VAT for Channel Island customers.

    The Council was also disappointed to learn that the Government department does not intend to remind the online retailers it will be contacting that VAT should not be charged in Jersey.

    Officers believe this is not the Government’s responsibility and, instead, consumers should take their business elsewhere if a retailer tries to charge VAT. Not only does this seem unfair, but the Council is also worried Islanders will be, in many cases, paying 5% GST on 20% VAT – a tax on a tax.

    So while the Treasury department wants to be seen to be creating a level playing field for retailers by contacting a multitude of online international retailers and asking them to add 5% for their Jersey customers, it does not want to help Islanders and ask those same retailers to make sure they remove VAT – not a very level playing field at all, in our view. We strongly believe the Government has a duty to represent local consumers too!

    On 17 March 2021, we wrote to the Minister, including your comments (see below without your comments).

    Our letter to the Treasury Minister – 17 March 2021

    Dear Minister, 

    GST Review 

    We welcome the news that a GST review is taking place, and to be given the opportunity to provide feedback from both the Consumer Council and on behalf of the many Islanders who have contacted us.  

    It is important to make clear that the Jersey Consumer Council is not specifically anti-GST, despite the fact it is a regressive tax which hits lower income earners the hardest. We understand that income support systems are in place to counter the impact, such as the ‘Food Cost Bonus’ and personal tax allowances, but do have concerns as to whether everyone who may benefit from this support, is aware that it exists. 

    The timing and delivery of the announcement indicated, in the Council’s view, a lack of empathy for the difficulty many Islanders currently find themselves in, which unsettled and, in some cases, angered consumers, many of whom are suffering financially due to the pandemic and lockdown restrictions imposed. We also feel that your department’s assumption that only middle-and-high-income earners import from the online stores, like Amazon, is completely misguided. Online retail is not only enjoyed, but relied upon by many thousands of Islanders at every income level, due to the availability of goods, the choice and, of course, the price. 

    Looking at the proposals in more detail, we have a number of areas of concern regarding the risks of reducing competition and choice, the creation of an unlevel playing field and the charging of GST on top of VAT.  

    Lack of competition and choice 

    Having seen similar attempts by other jurisdictions, our biggest concern is that retailers could stop selling to Jersey. The market share we offer many of these large retailers is possibly too small to warrant them changing their cost systems and processes.  Equally, small niche retailers, who offer access to specialist goods that are not available in the Island, may view the requirement to adjust their billing systems too onerous a task for the revenue values involved.

    If online retailers pull away from Jersey, choice and competition for consumers in Jersey will be reduced, which will have a significant impact on Island life, both in terms of choice but also cost. Sadly, the High Street as we knew it was already waning pre-Covid and the pandemic has expedited its demise, with many large store locations now empty, thereby reducing consumer choice even further. In our letter to the Chief Minister dated 12 June 2020, we made several suggestions on how to revitalise the town centre. 

    Charging of VAT 

    In keeping with your intention to ‘level the playing field’, the Council would like to urge you to remind each of the online retailers and groups you contact as part of this process that VAT should not be charged to Jersey consumers when importing goods into the Island. We expect this to be undertaken with the same degree of emphasis, persuasion and rigour that you intend using to request that GST is added at source. For the sake of transparency, openness and fairness, we would request for the Jersey Consumer Council to be copied into any correspondence with UK-based or online retailers regarding the introduction of GST at source.

    If VAT is removed from all UK goods arriving in Jersey, the Consumer Council would not be against the addition of GST, as this creates a level playing field. 

    However, if the issue of charging VAT goes unchallenged, then the Government is allowing an unlevel playing field to be created, favouring local retailers. Consumers will be faced with, on many transactions, paying a 5% GST on 20% VAT. Local shoppers must be able to access to the wider selection of goods available online without unfair double-taxation. 

    The Jersey Consumer Council rejects the notion that the charging of VAT by some online retailers to Islanders is a matter for Islanders to take up with the retailers directly. We feel strongly that the Government has a duty to represent Islanders’ interests at all times, and this approach to online retailers is a perfect opportunity to remind retailers that VAT-equivalent prices should not be charged to anyone residing in Jersey.

    And while we accept that the practice of charging VAT to people in Jersey is not illegal, we would like to know – on behalf of consumers – if the Government of Jersey, by failing to robustly challenge online retailers on the issue is endorsing the practice of some retailers charging VAT but failing to declare the proceeds to HMRC?

    We understand that you have unsuccessfully attempted to lobby UK retailers and the British Retail Consortium on this subject in the past and would kindly request if any copies of this correspondence could be shared with the Jersey Consumer Council?

    While in monetary terms we can see that the department is trying to achieve a level playing field, in practical terms the Consumer Council, and consumers, are concerned the inadvertent consequences of asking online retailers to charge GST at source could create quite the opposite. We understand that an estimated £1.2m per year will be raised from this change, and rightfully wish to question the value versus effort and cost of proceeding. In short, is this worth the risk?

    Following your announcement, we sought the views of local consumers and have been given permission to forward the attached for your serious consideration. They come from all sections of the population and highlight the concerns of the potential impact for so many. Other than remove some of the identities of the authors of the submissions, we have kept them in their original format.

    We look forward to hearing from you and are happy to discuss any of the above points in more detail if necessary.

    On behalf of the Jersey Consumer Council,

    Yours sincerely, 

    Carl Walker Chairman, Jersey Consumer Council

    The Treasury Minister has since requested a meeting, which was held on 31 March and we will update you in the near future.

    Categories

    Money VAT and GST