Online tax cheats

Online retail giants such as Amazon and eBay are turning a blind eye to massive tax fraud happening under their watch – to the tune of more than £1bn a year.

Foreign retailers selling their wares through Amazon or eBay are said to be evading between £1bn and £1.5bn a year in VAT – and putting smaller UK retailers out of business in the process, equating to an additional £6bn to £9bn in lost sales revenue.

The public accounts committee (PAC) yesterday (September 14) heard evidence of the fraud, which happens when retailers based outside the EU import goods into the UK to sell to UK customers.

The products are held in the UK – for example at an Amazon warehouse – and are then dispatched to customers. Many of these foreign retailers do not pay VAT by not declaring the value of their goods, using false VAT numbers, or failing to register for VAT at all.

While companies such as Amazon or eBay are ultimately not responsible for the mass VAT fraud happening under their watch – HMRC is – the committee last night slammed Amazon and eBay for not taking steps they could easily take to stop it.

In fact, the US tech giants benefit from the system by the commission they make from these foreign retailers.

‘Evading of tax’

“The by-product of both Amazon and eBay and other online marketplaces is that you are profiting from the evading of tax by these overseas sellers,” said Labour MP Caroline Flint.

“We are talking about billions of pounds of VAT being lost to HMRC and therefore being lost to the UK, and the putting out of business legitimate firms that are playing by the rules.”

The committee heard from Richard Allen of Retailers Against VAT Abuse Schemes, whose own business was shut down because of VAT-evading foreign retailers using online marketplaces.

“Once we started being seriously affected by this, we lasted maybe two years,” Allen said. “By that point, it was unsustainable – we simply had to close.”

In the process, he had to lay off 10 staff.

“Twenty per cent is a large sum,” he explained. “If competitors are avoiding the 20 per cent you can’t compete.

“It’s a bit like a landlord allowing customers to use their pub to sell stolen goods so they can sell more beer,” he added. “We’ve seen UK retailers going out of business after their sales have been decimated by foreign companies undercutting them through VAT fraud. One firm saw their sales fall from £90,000 to £20,000 in just a month.”

Allen presented an item to the committee that he bought through Amazon from a retailer in China which itself has admitted that it does not pay VAT.

The item was even gift-wrapped by Amazon.

Representatives from Amazon and eBay, Steve Dishman, Amazon’s vice-president for taxes and Joe Billante, chief financial officer for the European arm of eBay, said they do take action and have plans to do more.

“I do not want these sellers on our platform,” Billante said. “If anyone is not compliant and we are notified, we take action.”

And Dishman noted that Amazon recognises that there is “a proportion of bad actors.”

“We would like all bad actors off our platform,” he said.

Not doing enough

But campaigning website VATFraud.org argues that neither the companies nor HMRC are doing enough, despite there being laws and structures in place enabling them to do so.

The site found that thousands of non-compliant foreign retailers continue to trade three years after they were reported to the HMRC.

The revelation that more than a billion each year is lost in tax revenue from foreign retailers using online marketplaces comes just as Amazon has faced criticism for tax avoidance in its own right.

In 2016, Amazon paid only £15m in tax through Luxembourg on its European revenue of £19.5bn. And Amazon UK Services, Amazon’s UK warehouse and logistics operation, halved its tax bill from £15.8m to £7.4m between 2015 and 2016.

Unite assistant general secretary Steve Turner slammed companies such as Amazon and eBay for not doing their part to stop tax fraud.

“Of course they aren’t going to take serious steps to tackle VAT fraud – they benefit from this system themselves,” he said. “We cannot trust them to do the right thing when they also take whatever steps they can to pay as little tax as possible.

“It is astounding that each year more than billion pounds is lost to VAT fraud from foreign online retailers alone – that’s enough to fund 26,000 nurses for a year. In an age of austerity, this is unacceptable.”

“Taxpayers and small businesses deserve better – we call on the government to take decisive action and force online marketplaces such as Amazon to collect VAT on all of their sellers’ behalf. The only way the likes of Amazon and eBay will do the right thing is if they’re forced to.”

Turner also called for greater investment in HMRC, which itself has borne the brunt of austerity.

“Over the last 10 years, HMRC staffing levels has nearly halved,” he said. “They need to be properly resourced to do their jobs – something that Labour has specifically pledged in its manifesto.”