Several weeks ago I wrote about the VAT abuse that is undoubtedly happening as a result of sales being made through the Amazon and eBay web sites and suggested Amazon and eBay may be liable for the losses arising.
It's good to note that due to the tireless efforts of VA campaigner Richard Allen this issue is getting the attention it deserves. As the Guardian has noted:
Top tax officials are exploring whether Amazon and eBay can be forced to foot the bill for ballooning VAT fraud associated with an army of small overseas sellers who are rapidly coming to dominate sales of many popular items on Britain's leading shopping websites.
I strongly recommend reading the Guardian article. What I would add are three things.
First, it seems that the legal precedent to pursue these companies exists: it would be extraordinary not to pursue it.
Second, this will only happen if pressure is brought to bear on HMRC.
Third, if you do have evidence please share it. I am happy to be a conduit for any such evidence.
The losses on this trading are massive - trading standards officers have told me they think it could be £2 billion a year. This is money that would make a real difference in this country. It's worth looking for the evidence that brings this illegal trade to an end.
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Yesterday we read about the Government having to borrow more than they planned. Could there be a connection between these two items of news? I think we might know the answer.
No connection….this a result of Lord Lucas raining the issue on behalf of the impacted by this abuse.
Amazon said :
“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.”
This is either confused or deliberately disingenuous.
VAT is a tax on the supply of goods not on the company that makes those supplies. Amazon are clearly participating in and facilitating the supply of these goods. They also profit from it because where an item is sold and no VAT is accounted for part of the sale price is in effect evaded VAT that is being retained by the seller. Amazon commission on this so they are in effect taking a cut of evaded VAT.
Amazon claims that it cannot control sellers evading VAT on their platform and does not have the authority to do so. Not only are they obligated to ensure they do not participate in or facilitate VAT fraud but they rule their platform with an iron rod sticking their nose into every transaction. For example they used to remove listings or even accounts if an item was available from a seller on another site cheaper until they were stopped from doing it by the EU. Amazon know where the stock is held and they know where their market place sellers businesses are registered and whether or not VAT would apply to any supply of goods they are involved in. Furthermore Amazon already have to abide by money laundering laws and verify sellers with passport details and bank accounts. Amazon could easily verify the VAT status of sellers particularly where supplies are made within the EU and the evasion is objectively verifiable by merely looking at publicly available information on Amazons website.
Furthermore Amazon had to comply with German tax requests for evaded VAT when a similar scenario occurred in Germany in 2012 so Amazon are fully aware of this problem. They cannot carry on playing the role of Pontious Pilate and wash their hands of the matter. Currently sitting in Amazon warehouses are potentially millions of pounds of VAT evading goods from overseas sellers. Amazon claim they can profit from this with no consequences for them. This cannot and should not be right
Both companies have well secured warehouses. The article notes that non-UK based traders keep products for sale in these warehouses. Perhaps HMRC could thus simply have a customs post outside each warehouse which checks for customs and VAT payments on each item. Whilst this would undoubtedly slow things down it might “adjust” attitudes within ebay/Amazon & force them to take responsibility.
Back in 2012 when I was building a bike I purchased quite a bit of kit from ebay traders. I will dig out the “invoices” (did not always get one) I do beileve that in most cases VAT was not charged (at the time it did not occur to me to look). I’ll pass these on to you Richard. Actually, I’ll look at all my pruchases of new stuff.
Thanks
Also worth noting is the fact that before the (now 10 year old!) program of staff cuts, the Revenue used to inspect bonded warehouses to check that the excise regime was being correctly operated.
Bot of course now we have fewer and fewer staff around to do visits, and when we’re all forced into (those of us who won’t have left that is) the regional centres, we’ll probably do even less, if any. Apparently, everything can be done by sitting in offices in front of a computer.
Excellent point
You’d be surprised by the number of small traders below the VAT threshold! So please be careful not to accuse perfectly honest people trying to launch a real business. It took me more than a year to get to that numbers and now, 18 months later I am well over 1.5m in sales (inclusive of VAT) and gladly pay my VAT!!!! (I know, it’s not my VAT, but the state’s VAT)
But I couldn’t agree more at stopping the fraudsters! (well, I have a vested interest here, as some may say)
What is the legal precedent?
For what?
The crux is the Amazon participation agreement.
It puts all onus on the seller of the goods to pay vat.
The problem is made worse as hmrc seems to agree it is the sellers responsibility.
Imagine this
An Amazon seller uses Amazon fulfillment and set a price for the sale of the goods.
The end buyer chooses the delivery option, over which the seller has no control.
The purchaser is a prime member which means they have access to a plethora of alternative services as well as free delivery.
The original owner of the goods is liable for vat on the full sales price including postage of the item. Although the purchaser has a separate deal with Amazon.
If it was amazon that were responsible for vat on postage it would make things much simpler for hmrc collection.
Amazon agreement was changed in the last few months to make it less ambiguous.
How much input hmrc had into Amazon’s original participation agreement would be interesting to know. This is one of the major aspects behind how it has been able to grow.
Going even further back HM Customs and Excise had Officers stationed in every distillery and brewery whose physical presence ensured the integrity of the revenue, there were also Customs Officers in international mail depots who checked parcels from overseas, as sickoftaxdogers says how can you control goods consignements from a remote office (that is if they bother to try checking them which is unlikely due to the staff cuts)
The cost / revenue benefit was and is obvious
But we don’t do it
Can that be considered deliberate?
“To ask Her Majesty’s Government what action HM Revenue and Customs is taking to reduce VAT evasion by overseas online retailers”
http://myparliament.info/Debates/Lords/2015-12-21/12946#contribution-685759
“Under the Kittel principle, third parties are legally obliged to police VAT fraud, said Feria. Since the principle was first introduced there have now been an “extensive” number of cases across Europe, she said”
http://www.theregister.co.uk/2015/11/02/hmrc_tax_vat_amazon/
A point I have made previously and with which I agree
Ebay make no provision for VAT in their selling policy. It is legal to sell VAT free outside the EU, but there’s no way to set the two different prices on Ebay. One for within the EU and another for outside the EU.
This shows they just aren’t interested in co-operating with any European tax collection.
The EU needs to hit them hard where it hurts!
What I don’t understand is why isn’t there a general duty in law on business’s not to either purchase goods and services that may have been improperly obtained – eg the recent furore over junk phone calls, or to allow their goods and services to be used for illegal or unlawful purposes in so far as they are reasonably able to prevent it – eg in this case Amazon & VAT Fraud