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Commerce and Employment is working on proposals after considerable disquiet among UK retailers over the ruling that allows companies in Guernsey to export goods under £18 into the country tax-free.
The plans include the possibility of capping exports of CDs and DVDS, potentially affecting HMV’s fulfilment centre.
But Labour MP Jim Dobbin predicted more would need to be done.
‘We know that both governments are working very hard to resolve the situation. It may well be that we have a basis of a situation coming through,’ he said.
‘I think it’s a start, but it might not be enough. It might be that we wait and see how this affects the situation – if it doesn’t improve it, they are obviously going to have to stray into other areas.’
He added that it was best to come to a compromise.
There is talk that the UK could scrap the concession or modify the price of goods that attract VAT.
‘The Channel Islands need to convince UK businesses that they are not being undermined by the issue of VAT and in some areas, companies might argue that some unfair claims are being made for some of the products.’
UK health food manufacturers have been vociferous on the issue, feeling that while they have to comply with European regulations, some in the Channel Islands do not.
‘There are differences that need to be addressed,’ said Mr Dobbin.
‘I’m on the European Scrutiny Committee in the House of Commons. I see decisions from Europe that affect UK industry but not the Channel Islands, which often leads to problems with employment. You don’t have that problem here because of virtually full employment, but that’s not the case in the UK and some companies argue that the situation is unfair.’
Mr Dobbin is chairman of the All-Party Parliamentary Channel Islands Group, which was formally registered in 2005.
It was visiting the island at the weekend to strengthen links.
Another member is Peter Temple-Morris, who was a Labour MP for 28 years and has been a peer for six.
He said the VAT issue was a good example of where the contact group could help.
‘I think it’s important overall that we reach an accommodation. I don’t like the word, appease,’ he said.
‘In the UK we have a certain responsibility towards the islands, which after all have a very close link with us. We share the same monarch.
‘If there’s concern on one side, then there’s a certain duty on the other to react. Rather than appeasing the UK Treasury, I think it’s a matter of appreciating the concern of manufacturers in the UK.’
He said that Guernsey was now taking stock of its position.
‘This is a very good example of where the group comes in. It gives you a voice in Parliament which you would not otherwise have.’