Online businesses are turning Jersey into a Web hosting heaven as they take advantage of the offshore tax haven.
Ecommerce firms are boosting their sales and profits by operating from the island, which does not charge Vat.
Transactions on the Web are subject to the Vat rates of the country where the purchase was made, which is usually defined as where the server is located.
Sun Microsystems' ecommerce development manager Richard Barrington said the ecommerce boom in Jersey is creating an "interesting opportunity" for vendors.
"There has been a significant increase in the number of servers we've been providing in Jersey," he said.
Barrington said many customers are looking to get a "level playing field" for their electronic commerce sites, and chose Jersey over tax havens such as the Cayman Islands because it has a superior infrastructure that can cope with the Web traffic.
Graeme Ross, head of indirect taxation in electronic commerce group at KPMG, said: "There is a 17.5 per cent incentive not to host in this country."
Ross said tax authorities were "running scared" as international tax barriers break down under the pressure of electronic commerce, worried that they will loose vital tax revenues while businesses face competition from companies able to offer cheaper goods.
The European Union and OECD were trying to find a way of reorganising the tax system, and have given themselves a two year deadline but the task is not easy.
"Business practice on the Internet is still evolving and until that is clear its hard to set rules," Ross said.
Andrew Duncan, co-founder of Jersey based Web hosting company Micronet, said there is an increasing trend towards moving huge electronic commerce websites to Jersey:
Web hosting on Jersey creates the purest form of Internet transaction: "Particularly for small items, the Internet should be a quick and cheap way of buying but things like Vat block that."
Geoffrey Doggart, head of electronic commerce at Datamonitor said that as most things bought over the internet are "invisibles" - such as software, marketing information and other products that can be delivered digitally - hosting on Jersey, "makes a lot of sense. It's a nice idea in the short to medium term."
For further stories see 8 April issue of Computing
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