Online giants Amazon and eBay were pulled up by the UK Parliament’s Public Accounts Committee who accused the two companies of not being stringent on online vendors thereby permitting them to commit tax fraud.
The committee stated that Her Majesty’s Revenue and Customs (HMRC), which is the tax department in the UK had been scared of using its powers to prosecute online sellers who were violating VAT laws in the UK. The committee stated there were numerous online websites in the UK who were violating these laws and as a result the government was losing nearly $2 billion each year due to tax fraud.
In a statement, Meg Hillier, committee chairwoman said
Online marketplaces tell us they are committed to removing ‘bad actors,’ yet that sentiment rings hollow when those same marketplaces continue to profit from the actions of rogue traders. Online VAT fraud is hugely damaging yet, as online sales continue to grow, the response of HMRC and the marketplaces where fraudsters operate has been dismal.
The number of foreign suppliers who use online marketplaces like Amazon and eBay to sell their products in the UK has grown significantly during the last few years. A number of these suppliers have set up warehouses in the UK which enable them to make delivery the next day. If goods are dispatched from within the UK, sellers have to charge a mandatory VAT of 20 percent.
However the majority of these online sellers do not charge their customers this 20 percent VAT charge and as a result they are able to offer customers a better rate than local suppliers.
This puts local sellers in the UK at a huge disadvantage and also hurts the treasury. The committee has accused online trading platforms of deliberately turning a blind eye to these tax violations as they make profits from each transaction.
Amazon and eBay have responded to the report and stated that they will work closely with the UK authorities to ensure that they full comply with UK tax laws. eBay also stated that it always stressed on maintaining a fair marketplace and had gone over and above to comply with HMRC requirements. Amazon stated that it provides its vendors with online training tools and information to educate them on VAT requirements and removes any vendor who has been found to have violated VAT regulations.