UK lawmakers say Amazon, eBay not doing enough to combat VAT fraud

A UK parliamentary report has criticised Amazon and eBay for not doing enough to prevent tax fraud on their online market places and recommended the government hold the online giants accountable for tax lost to evaders.

In April the National Audit Office said Britain was losing up to 1 billion pounds a year in value-added-tax (VAT) because of fraud or error by frequently China-based sellers on eBay and Amazon.

The Public Accounts Committee published the results of an investigation into the problem on Wednesday which said the companies had been slow to take even basic actions to tackle fraud, such as requesting VAT registration numbers.

The investigation also said the companies had resisted sharing data with Her Majesty’s Revenue & Customs (HMRC), the UK tax authority.

“These people are profiting from VAT fraud, because they still take their commission,” said member of parliament Meg Hillier, chairwoman of the committee.

The companies say they take the problem seriously. A spokeswoman for eBay said it wants a fair marketplace for all its buyers and sellers. An Amazon spokesman said the company was reviewing the committee’s recommendations.

Hillier said the fraud was costing jobs at UK online retailers who were being undercut by rivals not charging VAT.

HMRC, which estimates total VAT fraud involving all online marketplaces of up to 1.5 billion pounds, had also not pursued the problem with vigour and had failed to use all the powers at its disposal, the report said.

The government last year introduced measures to cut down on online VAT fraud, including the potential for marketplaces to be held liable for unpaid VAT where they had ignored calls to remove illegal sellers.

However, the committee said these measures were not strong enough and indeed potentially totally ineffective.

The committee said VAT was regularly being evaded on goods stored in UK-based “fulfilment centres” or warehouses and dispatched by UK-based companies including Amazon’s UK arm.

In the past the frauds often involved goods dispatches direct from places such as China.