The following press release was issued by Labour Front Bench Treasury spokesperson Rob Marris MP, working in association with long term anti-VAT fraud campaigner Richard Allen, who sent it to me:
In a reply to Rob Marris MP, the government has admitted that not a single prosecution been made in relation to online VAT fraud in the last five years. Treasury minister David Gauke MP termed it a “relatively new type of fraud” — despite internet shopping having been common for more than 10 years.
Internet retail sales are now about £57 billion per year, making up about one sixth of all UK retail sales — a figure which has gone up by two thirds since 2010, and one which continues to grow rapidly.
Many of the VAT frauds involve consignments of small but relatively valuable electrical items such as tablet computers and mobile phones. The number of small consignments arriving into the European Union from outside has gone up from 30 million in 1999 to 115 million in 2013.
The “tax gap” is the difference between the tax which is due to be paid and the tax which is in fact paid. HMRC estimates that 10.4% of the tax gap is caused by VAT fraud — that's £3.4 billion uncollected every year. Online sales probably make up a significant proportion of this, but the government doesn't even know …
Labour's Shadow Treasury Minister Rob Marris MP said, “I am surprised and disappointed that there have yet to be any prosecutions for this kind of VAT fraud, despite solid evidence of its growing prevalence. Honest retailers and small businesses are being undercut by these fraudsters. I am pleased that, after sustained pressure, the government has at last announced some measures — for example the new requirement for a non-EU based business to have a UK-established tax representative, but I am concerned that these long-overdue measures do not go far enough. What's the government been doing for the last 6 years whilst this problem has been growing like stink?”
Richard Allen, of Retailers against VAT Abuse Schemes, commented, “HMRC have had the information they have needed to act since 2010. This is not a difficult or complex issue given the blatant non-payment of VAT and the close involvement of major online retail platforms. The evidence is overwhelming and the legal precedent exist for third party liability. It requires nothing other than enforcement and prosecution.
He added, “Whilst the due diligence for fulfilment operators and obligatory UK tax representation for non-UK sellers is welcome, the proposed third liability notice does not make anyone liable for any lost VAT. It is a lame duck. If anything this weakens any moral incentive they might have to prevent fraud in the first place because they only have to act if HMRC tell them to. True third party liability should introduce a clear legal and pecuniary incentive not to facilitate VAT evasion in the same way that the offence of handling stolen goods is a very clear incentive not to handle them."
Rob Marris confirmed that Labour will be pressing the government to tighten its proposals, saying. “To protect UK small businesses who play by the rules, the government must do a lot more, to enact strong measures to stamp out VAT fraud in online sales.”
I find that fact, coupled with the fact that the new laws that it is suggested will tackle this are both wholly inadequate and not-EU compliant, quite astonishing.
And then people ask me why there is a tax gap.
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As noted previously, Richard, the underlying reason is that the ethos of this government (and yes, previous ones too) is that this is an acceptable feature of a much grander and more important project – the maintenance and advancement of neoliberalism to its ultimate endpoint – neofeaudalism.
On which point, and related, this is another excellent ‘long read’ in the Guardian. Particularly relevant now as the initial fuss over the Panama Papers gets submerged (deliberately) under an increasing pile of Brexit related shite.
http://www.theguardian.com/business/2016/apr/19/offshore-central-london-curious-case-29-harley-street
An excellent read
What a pile of stinking poop in the middle of London this article very well describes, all dressed up as squeaky clean companies by no doubt very dubious lawyers, accountants, bankers and entrepreneurial chancers.
But what is more worrying, is that it really is no surprise to anyone who has had any involvement in business as you come across this type of thing (and the people who promote it) on a regular basis at all ends of the business spectrum.
Let’s not forget that the “illegal criminals” are only slightly the other side of the red line from the “legal criminals” who do this day in and day out in the City of London firms and across all other global financial centres.
The thinking of all these people is essentially the same (how do we exploit the system to our advantage), it’s just some get caught and some don’t!
Yes the Channel Islands LVCR trade relied on a single lie….”I don’t control the Jersey Company…I’m just a shareholder” The reality is a UK beneficiary controlled it via off the record telephone conversations. How do I know that ? I was offered this arrangement buy a well known Jersey Trust when I posed as a potential customer.
The main problem is the fact that HMRC see stopping VAT fraud as a ‘potential revenue stream’ involving budgetary decisions related to enforcement not an obligation that protects the single market. Member States are generally obsessed with “what do we get out of it” rather than the bigger picture which is a major fault. Would HMRC be any better if we were not in the EU and had some kind of purchase tax that was being evaded ? I doubt it….they would take the same cost benefit view rather than look at the competition implications. You only have to look at the Australian LVCR issue (an eye watering AUD$1000 import exemption threshold) to see how long a Government can ignore market distortion caused by indirect taxation abuses. The Australian have finally woken up to the problem but whether it will be dealt with effectively is another matter.
It is quite unforgivable for Osborne to inflict austerity on the British people when so many markedly fraudulent Tax Evasion and dodging is manifestly obvious and has been since before 2010. The money the Exchequer needs is available if the right legislation and the will to pursue it is in place. But a government willing to promulgate the virtues of austerity predicated on looking the other way on real reforms to balance the books is in itself a “fraud”.
HMRC have known about this problem for years but is just too lazy to actually do anything , you only have to go on ebay and type in phone case and you will see hundreds of chinese sellers and uk sellers with no vat number or go on amazon and see chinese FBA sellers with no vat number
i asked a UK registered seller for a vat invoice the other day for a genuine purchase on ebay , company trading for 3 years 2000 feedback a month and average item selling for £15 /£20 , must have turnover of £300,000 per year but is not vat registered when i requested a vat invoice ?
how can a small/medium size company like this be trading for 3 years and HMRC do not pick this up
HMRC just ignore the problem