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.
A Guardian investigation has found that hundreds of high-value gifts including Apple watches, iPads, Fitbits and Panasonic cameras are being sold on Amazon’s UK website without VAT being charged.
In recent months, record numbers of small overseas sellers have imported goods into Britain in advance of the Christmas rush, arranging for Amazon to dispatch the stock from its UK warehouses. Many of these VAT-free sellers give virtual office or residential addresses in China, Hong Kong and the US. Little is known about them by HM Revenue and Customs.
Last month, eBay said it would report a number of sellers on its site to HMRC after the Guardian showed it evidence of Chinese traders giving invalid VAT numbers as well as sharing, or cloning, numbers belonging to other businesses.
A Treasury spokesman told the House of Lords that HMRC had set up a taskforce to investigate VAT evasion by overseas internet sellers. Urgent meetings with senior figures at Amazon and eBay took place last month.
During a short debate on Monday evening this week, Conservative peer Lord Lucas claimed Amazon and eBay had been “collaborating with hundreds of overseas retailers to defraud the taxman of millions of pounds every day”. The allegation is vehemently denied by both.
Both firms have insisted responsibility for charging the correct VAT lies with sellers using their site. Amazon and eBay have said they help sellers understand their tax obligations, but have no duty to police compliance. Both said they cannot be held liable in cases of evasion.
But Treasury spokesperson Lord Ashton said HMRC was now “looking at all possible options”, including “whether online platforms should be made liable for VAT”.
In Brussels, senior sources said the current VAT rules belong to a pre-internet era and were now open to widespread abuse. One said: “Transport costs are going down, logistics are quite easy, the postal market is open to everybody – all these factors [have created] a huge increase in trade. And it’s very difficult to control … The system is so complicated, it’s open to abuse.”
The number of small packages imported into Europe has more than quadrupled in 13 years, up from 26m in 2000 to 115m in 2013.
Prices available on Amazon.co.uk are sometimes dramatically cheaper than those offered by high street retailers that charge VAT. In other instances, small overseas sellers offer prices that match those available in stores, keeping the missing VAT.
An iPad Air, sold by Apple and Argos for £319 (including VAT of £53.17), is offered on Amazon by a Chinese seller for £282. The Guardian contacted the seller asking if it could provide a VAT receipt. The seller responded: “We are sorry that we are not VAT registered.”
A Fitbit wristband, sold by John Lewis for £93.95, is offered by another overseas company for £92.89. Asked if it could provide a VAT receipt, the selling firm, which gives as its address a 6-bedroom residential house in upstate New York, said in an email: “I apolgize [sic] but we do not supply VAT invoices.”
The iPad and Fitbit wristband were among 24 popular items in a £1,818.20 sample order placed on Amazon as part of the Guardian’s investigation. The order total included VAT of £0.00.
As well as high-value items, the list included lower-priced everyday products such as a bike light, corkscrew, memory card and a mobile phone case.
The items were being sold by 23 different sellers that appeared to conduct little or no business activity in the UK. Nine gave addresses in Hong Kong, eight in China, and six in the US. All had arranged for Amazon to hold their stock in the UK, pack and send parcels and deal with payment and returns queries.
Most retail businesses with stock in the UK dispatching goods to British customers are required to register for VAT with HMRC. Ordinarily, companies have an incentive to charge VAT on sales and pass the tax on to HMRC. Businesses can then claim back from HMRC the VAT paid on goods bought in the course of trading. VAT on most goods is charged at 20% in the UK.
All businesses, whether incorporated in Britain or elsewhere, that supply goods from locations in the UK – which include Amazon warehouses – are required to register with HMRC for VAT if they have annual UK sales of more than £82,000 a year.
British traders said HMRC can quickly identify UK businesses that must register for VAT because they have each company’s corporate tax return. HMRC has no information on the UK sales of overseas Amazon traders.
Angry British traders point to signs they say suggest that many overseas VAT-free sellers are taking sales well in excess of £82,000 but are not registered with HMRC. The signs include having many hundreds of customer reviews posted on Amazon each month, or achieving “bestseller” status in popular goods categories.
Amazon declined to answer several questions regarding potential VAT abuse by overseas sellers using its website and warehouses. In a statement, it 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. Naturally, we cooperate with HMRC as we are required to by law.”
eBay said it too helps sellers with VAT compliance. “We are committed to working with HMRC to ensure our sellers are complying with their legal obligations,” it said.
Pressure group Retailers Against VAT Abuse said: “Amazon should not be able to abdicate responsibility for handling and profiting from fraudulent VAT transactions in the same way that members of the public cannot abdicate responsibility for handling stolen goods.”
This article was written by Simon Bowers, for theguardian.com on Tuesday 22nd December 2015 19.15 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010