Tax officials have launched a crackdown on VAT evasion by overseas online retailers amid claims that Amazon and eBay have been “collaborating” with them to defraud the exchequer of large sums.
By Vanessa Houlder and George Parker
Tax officials have launched a crackdown on VAT evasion by overseas online retailers amid claims that Amazon and eBay have been “collaborating” with them to defraud the exchequer of large sums.
The Treasury said HM Revenue & Customs was gathering intelligence on the scam, adding that it was devoting 25 per cent of its customs and international trade effort to tackling import fraud. UK retailers say they are being undercut by foreign - particularly Chinese - companies, which sell products through online retailers such as eBay and Amazon but fail to charge VAT.
Neven Juretic, director of Maikai, which sells cases for phones and tablets, estimates that 70 per cent of the market for his products is held by Chinese sellers that are not paying sales tax to the exchequer.
“Three Christmases ago I noticed a lot of competitors selling at ‘too good to be true’ prices,” he said. “Most of my competitors were holding stock in the UK but not charging VAT.”
Lord Lucas, a Conservative peer, told the House of Lords this week: “As HMRC knows, for some long while Amazon and eBay have been collaborating with hundreds of overseas retailers to defraud the taxman of millions of pounds every day.”
Lord Ashton, a Treasury spokesman in the House of Lords, said HMRC had set up a task force to investigate such evasion by overseas online retailers. Replying to accusations that the tax authorities had been slow to react, he said a meeting with top online retailers took place last month. Amazon and eBay were at the meeting.
Rita de la Feria, professor of law at Durham university, said ecommerce platforms that hosted traders that evaded their VAT responsibilities were potentially liable for the unpaid VAT if they did not attempt to root them out.
The Treasury played down suggestions that ecommerce platforms might be made liable for the non-payment of VAT by overseas companies. Chris Heaton-Harris, a Tory MP who has raised the issue with HMRC, said it seemed to be “an obvious loophole that needs to be closed rapidly”.
Tackling such evasion is complicated by the difficulties of prosecuting foreign companies, the exemption for small businesses and the relief for low value goods being brought into the country.
The ecommerce platforms say they are working with HMRC but are unable to police the tax rules. They reject categorically the idea that they have “collaborated” in any way with overseas companies that did not pay VAT.
Amazon.co.uk said: “Marketplace sellers are independent businesses responsible for complying with their own VAT obligations. We do offer tools and information to assist sellers with their compliance, but we don’t have the authority to review their tax affairs.”
Ebay said it reminded all users to comply with their legal obligations and said it would co-operate with HMRC.
