A tax exemption used byTesco, Amazon and others to avoid charging VAT on DVDs will this week facecriticism from MPs.

According to the UK's SundayTelegraph, the retailers have set up operations in Jersey, in the ChannelIslands, where under a 20-year-old law, they can sell goods to consumers on theBritish mainland worth under £18 without charging 17.5% VAT.

While the practice isperfectly legal, it is thought to be costing the UK treasury many of millionsof pounds a year in lost tax.

On Wednesday, John Healey,the Government minister responsible for overseeing the newly merged HM Revenue& Customs, will be questioned by members of the Treasury Sub-Committee,part of the influential Treasury Select Committee, about VAT.

According to TheTelegraph, Michael Fallon MP, the chairman of the Treasury Sub-Committee,said that he was appalled that Tesco and other retailers are exploiting aregulation that was initially intended to aid small businesses.

The loophole has allowed UKconsumers to benefit from lower prices Tesco's Jersey website charges aslittle as £8.99, including postage and packing, for a range of DVDs. Amazon setup a similar operation on the Channel Island last year.