Cyberspace - the final tax frontier?

A Jersey-based firm of tax advisers and lawyers is aiming to extend the island’s tax haven status into cyberspace.

International Fiscal Services works in tandem with internet services company Micronet to provide electronic commerce companies with Jersey domain names. Micronet director Andrew Duncan said the service was not about tax evasion. ‘Sales and purchases take place in Jersey and are subject to Jersey corporation tax and VAT,’ he explained. ‘We’re not simply Web hosting, we’re offering the ability for companies to relocate.’

But Ernst & Young tax partner Malcolm Penney said the service offered ‘a superficial attraction’. Profits from online sales through Micronet would be repatriated in the parent companies’ tax jurisdictions. UK buyers would be ‘reverse charged’ for VAT on electronic services and data sold.

Although the era of true Star Trek-like technology (above) is some way off, satellite-based Web servers are closer, but Penney acknowledged that tax authorities were well aware of the problems created by the growth of cyberspace.