The removal of Low Value Consignment Relief in 2012 was a major blow to firms in Jersey’s fulfilment industry, which shipped items such as DVDs and CDs bought online to the UK.
The loss of the relief led to a number of companies scaling down their operations or leaving the Island.
LVCR was created by the EU to speed up the transit of goods between member states by exempting cheap items from sales taxes.
But eight years ago, the UK specifically barred the Channel Islands from the scheme, claiming that they were using it as a loophole to sell low-price goods and undercut UK retailers.
In a recent written question tabled to the House of Lords, Liberal Democrat peer Lord Strasburger asked what impact the move had had on the UK Treasury.
He asked: ‘What was the cost to the Exchequer of misuse of Low Value Consignment Relief over the entire period that misuse took place, and what was the number of retailers who did pay VAT and went out of business as a result of the misuse of LVCR by others?’
In response, Lord Agnew of Oulton, a minister in the Treasury, said that the UK had recovered hundreds of millions of pounds in tax following the decision.
‘The government does not have an estimate of the cost to the Exchequer of the misuse of Low Value Consignment Relief,’ he said. ‘There is also no estimate of the number of compliant retailers that went out of business because of the misuse of LVCR by others.
‘The figure of £90 million additional yield for 2012/13 resulting from the removal of LVCR given in the previous answer is an indication of the extent of the misuse in the Channel Islands. The total yield for this measure over the period 2012/13 to 2016/17 was £500 million.’