TAX officials must be “far tougher” on VAT-dodgers trading through online marketplaces, it has been claimed. Meg Hillier, chairwoman of the House of Commons Public Accounts Committee (PAC), spoke out as the panel of MPs released report which found Amazon, eBay and similar platforms are profiting from fraud committed by rogue sellers.
According to the report, authorities have been “too cautious” in cracking down on international traders who keep goods in UK warehouses but fail to charge the required VAT. Under current tax laws, the levy must be applied to items present in Britain at the time of sale.
However, the committee says may traders based outwith the European Union flout this rule, allowing them to undercut domestic retailers by as much as 20 per cent, damaging sales and forcing some into either cutbacks or closures.
The committee claims the loss to taxpayers could be far higher than the “out-of-date and flawed” HM Customs and Excise estimate of £1-£1.5 billion.
Commenting on the report, which is published as retailers prepare for crucial Christmas trading, Hillier said: “Online VAT fraud is hugely damaging yet, as online sales continue to grow, the response of HMRC and the marketplaces where fraudsters operate has been dismal.
“HMRC needs to be far tougher in protecting the interests of British businesses and taxpayers. As a priority, it must inject more urgency into enforcement action.”
As many as 3000 “fulfilment houses” around the UK are used to store items by online operators.
Both Amazon and eBay told the committee that they took action to remove “bad actors” from their sites.
However, the critical report said it is “bewildering that these big companies have taken such little action to date”, adding: “Amazon and eBay, amongst other online marketplaces, continue to profit from fraudulent activities taking place on their sites”.
The cross-party committee called for “much more urgency” from HM Revenue and Customs on the issue, stating that it “has not named and shamed non-compliant traders and so far has not prosecuted a single seller for committing online VAT fraud”.
It called on officials to establish a co-operation agreement with online marketplaces by March, including a requirement to ensure that a valid VAT number is showing for any non-EU trader selling goods to UK consumers, where the items are in the UK. Urging HMRC to “push for new powers”, Hillier said: “Online marketplaces tell us they are committed to removing ‘bad actors’, yet that sentiment rings hollow when those same marketplaces continue to profit from the actions of rogue traders.
“They can and should do more to drive them out and we will expect online marketplaces to co-operate fully with HMRC in tackling non-compliance.”
An eBay spokesman said: “We want a fair marketplace for all our buyers and sellers. That’s why we have been working together with HMRC – and going above and beyond their requirements – to continue to ensure that our site is the best possible place to do business.”
Last week, Starbucks chairman Howard Shultz said even his multi-national was not immune to threats from the dominance of the shift to online shopping, calling “the Amazon effect” a “seismic change in consumer behaviour”.
Why are you making commenting on The National only available to subscribers?
We know there are thousands of National readers who want to debate, argue and go back and forth in the comments section of our stories. We’ve got the most informed readers in Scotland, asking each other the big questions about the future of our country.
Unfortunately, though, these important debates are being spoiled by a vocal minority of trolls who aren’t really interested in the issues, try to derail the conversations, register under fake names, and post vile abuse.
So that’s why we’ve decided to make the ability to comment only available to our paying subscribers. That way, all the trolls who post abuse on our website will have to pay if they want to join the debate – and risk a permanent ban from the account that they subscribe with.
The conversation will go back to what it should be about – people who care passionately about the issues, but disagree constructively on what we should do about them. Let’s get that debate started!
Callum Baird, Editor of The National
Comments: Our rules
We want our comments to be a lively and valuable part of our community - a place where readers can debate and engage with the most important local issues. The ability to comment on our stories is a privilege, not a right, however, and that privilege may be withdrawn if it is abused or misused.
Please report any comments that break our rules.
Read the rules here