Online Shops Under Scrutiny for VAT Fraud from Overseas Sellers
23 Dec 2015

The UK’s largest online shopping portals, including Amazon and eBay, have come under scrutiny for VAT fraud.

According to an investigation by the Guardian, hundreds of VAT-free sellers imported goods into the UK in anticipation of the Christmas rush, with Amazon dispatching the high-value gifts from its UK warehouses.

Many Chinese sellers are declaring goods shipped to the UK and the EU as low-value packages so they can avoid VAT charges. Last month, sellers on eBay were found to be abusing the system by providing false VAT numbers or using numbers from other businesses.

These overseas retailers can sell high-value items at a reduced price due to fraudulently evading VAT charges. Others are selling products at the same price as UK retailers, allowing them to profit from the missing VAT charges.

Both Amazon and eBay deny any involvement in tax evasion.

HMRC is carrying out an investigation into whether online portals should be liable for VAT fraud committed by the sellers who use their services. The tax authority has established a task force to tackle the case, dedicating 25% of its customs and international trade operational resources.

HMRC is collaborating with the retailers and a meeting has already taken place at a senior level. Meanwhile, Amazon and eBay have released their own statements in reaction to the investigations.

Amazon stated: “Marketplace sellers are independent businesses responsible for complying with their own VAT obligations. We do offer tools and information to assist sellers with their compliance, but we don’t have the authority to review their tax affairs. Naturally, we cooperate with HMRC as we are required to by law.”

eBay remarked: “We are committed to working with HMRC to ensure our sellers are complying with their legal obligations”.

The revelations are merely the latest chapter in a long running series of crimes involving Value Added Tax, the most damaging of which have been so-called missing trader intra-community (MTIC) or ‘carousel’ frauds, by which high value, low volume goods are cycled between EU member states with different VAT rates. Paperwork is falsified to suggest the goods have been sold, and the difference in VAT reclaimed from the government concerned. In fact, the goods have been transferred to a co-conspirator (the ‘missing trader’) who keeps them for another round on the carousel while the gang pocket the fraudulently obtained VAT rebate.

As the online marketplace becomes more common as a business model, questions will continue to be asked regarding the extent to which firms like Amazon and eBay should bear liability for providing services which provide a platform for unscrupulous sellers who choose to evade tax.

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