Recent reports by MPs warn that Amazon and eBay are profiting from sellers who defraud UK taxpayers by failing to charge VAT. According to the reports third-party sellers have lost 1,5 billion pounds on online markets not charging the taxes on the UK sales.
HMRC was criticized by MPs for not being active enough in pursuing the fraudsters. eBay and Amazon insisted they were working with HMRC to solve the problem.
The Public Accounts Committee Chairman Meg Hillier said online VAT fraud was “hugely damaging” for British taxpayers and business. She also criticized the response of HMRC and the marketplaces where fraudsters operate.
One of the reasons the fraud increased is because foreign firms selling to UK customers on Amazon and eBay are keeping some stock in UK warehouses to be able to provide fast delivery.
For any item dispatched from the UK, the sellers have to charge VAT at 20%. But this often does not happen and that affects genuine UK suppliers and reduces the tax revenue, said the committee report.
It is expected the issue to become even more complicated after the Brexit with the uncertainty over trading and customs.
Amazon and eBay claimed they took steps against the frauds on their sites.
The report said it was bewildering how little action, these big companies have taken so far. It claimed that the marketplaces continued to profit from the frauds on their sites by charging the sellers a commission.
The most important conclusions of the report include an agreement between HMRC, the UK’s tax agency, and the online marketplaces by March 2018. The sites need to require all non-EU sellers dispatching goods in the UK to provide a valid VAT number. HMRC has put more of its powers towards the solving of the problem.
Last year HMRC introduced new rules for holding online marketplaces liable for unpaid VAT by oversea sellers. The measures led to a tenfold rise in the number of sellers registering for VAT.
According to the spokesman of HMRC the new reforms will secure additional 875 million pounds in tax, which will be used for public services.
Amazon said it was reviewing the report and planned to participate in the efforts to ensure sellers were VAT compliant.
The eBay spokesman also said the company would apply strictly the HMRC’s requirements to provide a fair marketplace for buyers and sellers.