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Amazon and eBay to be held liable for VAT fraud by sellers

mars 18, 2016

Amazon and eBay are to be held liable, in some cases, for VAT fraud committed by a growing army of overseas sellers using their websites – and costing Britain hundreds of millions of pounds a year in lost tax receipts.

The chancellor is giving tax inspectors new powers to warn high-risk overseas sellers active in the UK through eBay and Amazon. If, after those warnings, sellers do not correctly collect VAT within 30 days, eBay and Amazon can be held liable for the missing tax.

The Treasury estimates this measure will recoup £875m in lost VAT receipts over the next four years – though it is not expected to halt tax fraud altogether. The total cost to the taxpayer of this abuse was officially estimated at £1bn to £1.5bn a year.

The chancellor’s crackdown comes four months after a Guardian investigationexposed widespread VAT fraud by sellers using the two websites. 

Last Christmas alone, the Guardian estimated that last Christmas alone that Treasury coffers lost tens of millions of pounds to VAT evasion as a growing number of non-EU sellers, including hundreds from China, dominated sales of popular gifts on Amazon and eBay.

In Wednesday’s budget speech, George Osborne acknowledged there had been a big rise in overseas suppliers storing goods in Britain and selling them online without paying VAT. “That unfairly undercuts British businesses both on the internet and on the high street,” he said.

Responding to the move, eBay said it “welcome rules that ensure a fair marketplace”, but insisted it already took prompt action when alerted by HMRC to problem sellers not complying with VAT rules. It acknowledged there had been problems with Chinese sellers, but said: “We have contacted hundreds of Chinese sellers to notify and educate them on the need to comply with the law.” 

In a statement, Amazon said: “We are currently reviewing the government’s proposals, and we will naturally comply with any legislation.”

Alongside new powers to hold Amazon and eBay liable for evasion, the chancellor set out plans for a new “fit and proper” test for warehouse operators dealing with goods shipped to the UK for sale online. Warehouses will be required to be registered by 2018. They will have to be able to show they have made checks to ensure they are not facilitating VAT fraud for online sellers based overseas.

For months, VAT campaigners have been calling for the government to hold Amazon and eBay liable for VAT fraud on their websites. While the chancellor has gone some way towards meeting their demands, they were nevertheless disappointed that Amazon and eBay’s potential liability will be restricted to only those cases flagged by HMRC.

Campaigners said it was a mistake for the chancellor to task under-resourced UK tax inspectors with hunting down VAT evaders. Amazon and eBay are awash with hundreds of small pop-up sellers, based overseas, who are unlikely to be deterred if the new measures allow HMRC to catch only a small number of offenders.

“We welcome these changes but are concerned that HMRC doesn’t have the resources to chase hundreds of overseas traders,” said Richard Allen of campaign group Retailers Against VAT Abuse Schemes (Ravas). “We want measures that will force Amazon and eBay to effectively police VAT compliance themselves.”

In December, the Guardian was able to place a sample Amazon order for 24 popular items and was charged £1,818.20. The order tally included VAT of £0.00.