EXPLAINED: Happy birthday! The little-known digital decision that’s saving Islanders millions

Channel Islanders save millions in tax thanks to a little-known technical decision that was taken two decades ago.

It’s all thanks to a two or three character code – such as ‘JE’ or ‘GG’ – given out by the International Organization for Standardization (ISO).

Cast your mind back to 2006. Internet shopping was taking off, thanks to large online retailers like Amazon – but local people were becoming frustrated that VAT was being added to their purchases, even though neither Jersey nor Guernsey charged the tax.

This was partly down to the fact that neither island had its own ISO 3166 country code – but were instead lumped under the UK.

That mattered because the code was used by online retailers to work out where their customers were based – and, crucially, which taxes should be applied to their purchases.

Not part of the UK

Enter Jersey’s External Relations Department.

Mike Entwistle, the island’s International Relations Officer at the time, said he – along with the other Crown Dependencies – “contacted the ISO to convince them that Jersey was not part of the UK” as it had its own internet domain and telephone area code – not to mention a separate tax regime and constitution.

The plea worked, and in March 2006 Jersey and Guernsey got their own sets of ISO 3166 codes.

That little change meant Jersey and Guernsey residents could be correctly identified as being outside the UK VAT system, rather than treated as UK customers.

Massive impact

While an obscure piece of international administration on the face of it, the change has potentially saved Islanders millions of pounds over the two decades since by helping retailers distinguish Jersey purchases from UK sales.

Mr Entwistle told Express: “If one calculates the value of this small change to internet purchases over 20 years, it amounts to a massive impact to benefit the Island’s economy.”

And the same system has subsequently become important for the opposite reason – allowing major overseas retailers to recognise when Jersey GST should be charged, since it was introduced in 2008.

So how much did introducing the ISO 3166 codes save both Bailiwicks?

A Government of Jersey spokesperson said the code had “helped overseas retailers recognise the value of sales into Jersey, and opportunities within our market”.

The added: “This was helpful when the Government extended GST-registration requirements to offshore retailers.

“All major offshore retailers now collect Jersey GST automatically, instead of UK VAT.”

Ultimately, we may never know exactly how much that little code was worth, but one thing’s for sure.

Those two little letters, tucked away in online checkout systems around the world, have had a big impact on the economies of both Channel Islands.