Daily Management Review

Amazon and eBay could Face Crackdown over VAT Fraud done by Overseas Sellers using the Websites


The British tax officials are mulling possibilities of forcing Amazon and eBay to cough up the bills for the ballooning VAT fraud associated with an army of small overseas sellers who are rapidly coming to dominate sales of many popular items on Britain’s leading shopping websites.
Hundreds of high-value gifts including Apple watches, iPads, Fitbits and Panasonic cameras are being sold on Amazon’s UK website without VAT being charged, reported the Guardian investigation.
While arranging for Amazon to dispatch the stock from its UK warehouses, a record numbers of small overseas sellers have imported goods into Britain in advance of the Christmas rush in recent months.
Virtual office or residential addresses in China, Hong Kong and the US are given by many of these VAT-free sellers. Little is known about them by the Revenue & Customs department in Britain.
In recent times, there have been media reports with proof that many of the Chinese traders were giving invalid VAT numbers as well as sharing, or cloning, numbers belonging to other businesses. Following this revelation, eBay had said last month that it would report a number of sellers on its site to the HMRC.
A taskforce to investigate VAT evasion by overseas internet sellers had been set up by the HMRC, informed a Treasury spokesman to the House of Lords. Last month there were urgent meeting with senior officials at Amazon and eBay.
Amazon and eBay had been “collaborating with hundreds of overseas retailers to defraud the taxman of millions of pounds every day”, claimed Lord Lucas during a short debate on Monday evening this week. The allegation is vehemently denied by both.
The responsibility for charging the correct VAT lies with sellers using their sites, the two firms have insisted. Both Amazon and eBay have said that while they have no duty to police compliance, the firms claimed to have helped sellers understand their tax obligations. Both said they cannot be held liable in cases of evasion.
HMRC was now “looking at all possible options”, including “whether online platforms should be made liable for VAT”, said Treasury spokesperson Lord Ashton.
The current VAT rules belong to a pre-internet era and were now open to widespread abuse, said one of the senior sources in Brussels adding: “Transport costs are going down, logistics are quite easy, the postal market is open to everybody – all these factors [have created] a huge increase in trade. And it’s very difficult to control … The system is so complicated, it’s open to abuse.”
The number of small packages imported into Europe has more than quadrupled in 13 years, up from 26m in 2000 to 115m in 2013.
Many experts blame the omission of Vat to one of the major reasons that make the prices available on Amazon.co.uk sometimes dramatically cheaper than those offered by high street retailers. The Retailers charge VAT. On other occasions it has also been noticed that small overseas sellers offer prices that match, or are close to, those available in stores, keeping the missing VAT.