Now, David Bowe MEP is pressing for a change to the law, having taken up the case of the video games and DVD retailer.
The MEP, who has raised the issue in the European Parliament with the ommissioner responsible for the internal market and taxation, Frits Bolkestein, said it was "nonsensical that the effect of the rules is that EU-based companies are placed at a potentially serious disadvantage because, whilst they have to pay the VAT applicable in their own countries, the rules allow their competitors to sell free of any tax burden."
Gameplay, which employs over 30 people, approached Mr Bowe over the rules which allow companies from outside the EU to supply goods direct to customers within Europe free of VAT provided they cost less than £18.
The company told him they were faced with rivals based in the Channel Islands able to take advantage of the loophole and undercut their prices which had to include the UK VAT rate of 17.5%.
David Bowe said:
"I can certainly understand the frustration of Gameplay and I suspect that there are many other companies who are similarly affected because they trade in relatively low-value products. The Commissioner himself suggested, for example, it could also be affecting the market in products such as books, CDs, contact lenses-and even flowers.
"I am pleased that the Commission has agreed with Member States to carry out detailed surveys on the issue and report back within the next few months. I will certainly be keeping up the pressure for action-and I also intend to raise the issue with our own Government since I understand that in some EU countries, for example Belgium, VAT has to be applied on imported goods whatever their value."
