A parliamentary report has revealed that online marketplaces – including Amazon and Ebay – are profiting from online VAT fraud while the HMRC fails to use the full extent of its powers for a crackdown.
The Public Accounts Committee found that online marketplaces allow overseas sellers or businesses o to sell goods while dodging the 20 per cent VAT – a move which is being seen as undermining UK-based traders.
Published today, the cross-party committee’s report said the HMRC was “too cautious” in cracking down on fraudsters, and that the potential amount of tax funds the public is missing out on as a result could be higher than the tax authority’s estimate of £1.5 billion.
Online marketplaces were also accused of double standards, saying they have “taken such little action to date” despite the companies’ commitment to removing fraudsters.
“Amazon and eBay, among other online marketplaces, continue to profit from fraudulent activities taking place on their sites,” the report read.
Under current tax laws, traders based outside the EU selling to UK customers must charge VAT if the items are present in the UK at the time of sale.
Many fail to charge the 20 per cent tax despite the goods being stored in up to 3000 fulfilment warehouses around the the country.
The committee warned this would “only get more complicated” given the uncertainty over customs arrangements when Britain leaves the EU.
The committee also called for “much more urgency” from HMRC, which “has not named and shamed non-compliant traders and so far has not prosecuted a single seller for committing online VAT fraud”.
The HMRC has been ordered to implement a cooperation agreement with online marketplaces by March.
An Ebay spokesman said the company continues to work with HMRC to keep their business standards in line with tax laws while an Amazon spokesman said they were reviewing the committee’s recommendations.
“We offer extensive information, training and tools to assist sellers in their VAT obligations, and we work closely with HMRC on this matter,” the Amazon spokesman said.
Meanwhile, the HMRC said the UK has been a trailblazer in holding online marketplaces to account on overseas VAT evasion.
“We introduced tough new rules last year allowing us to hold online marketplaces liable for unpaid VAT by overseas sellers,” a spokesman said.
“The new reforms will secure an extra £875 million in tax to help pay for vital public services.”