Amazon, eBay ‘Liable’ If Ignore VAT Fraud

As the Christmas shopping season approaches, pressure is growing for a crackdown on VAT fraud carried out via online marketplaces such as Amazon and eBay, with some suggesting the online companies could be held liable for abuse of the VAT system.

Sellers evading VAT use such marketplaces to undercut legitimate UK businesses, costing the British economy billions of pounds in lost VAT each year, according to campaign groups.

Liability

Amazon and eBay said they fulfil their obligations under British tax law and are not responsible for enforcing VAT compliance by their sellers.

However, Durham University tax law professor Rita de la Feria told the BBC that online marketplaces can be held jointly liable for unpaid VAT, along with the offending traders, if they are aware or should have been aware that fraud is being committed.

To avoid liability, marketplaces must demonstrate that they acted quickly to stop illegality when made aware of it, for instance through automatic systems that verify VAT numbers, UK Trading Standards told the BBC.

Trading Standards estimated that up to £2bn of VAT is lost each year to online marketplace fraud, the BBC said.

Amazon and eBay said they are fulfilling their legal obligations, with Amazon telling The Guardian in a report over the weekend that sellers on its site aren’t required to post their business details or VAT numbers. An unnamed EU official source disagreed, telling the newspaper that the information should be provided up-front.

Legal obligations

“Marketplace sellers are independent businesses responsible for complying with their own VAT obligations,” Amazon said in a statement.

“eBay reminds all its users of their need to comply with their legal obligations,” eBay said. “If eBay sellers are found to be breaching UK VAT compliance rules, we will cooperate with HMRC in all cases where HMRC provides evidence of underpayment of taxes.”

VAT can be legitimately avoided if a seller is based outside the EU, is selling merchandise of low value – 22 euros for most member states, or £15 in the UK – and is imported in in small packages already addressed to the buyer.

Campaign groups report, however, that some sellers, from countries including China, don’t declare VAT even while maintaining warehouses in British port cities to ensure faster delivery, or under-declare the value of small packages.

‘Systematic abuse’

Such groups have reported Chinese sellers on eBay providing invalid VAT numbers or sharing numbers amongst multiple businesses.

“The systematic abuse of the VAT system results in damaging price distortions that drive legitimate UK businesses to the wall, and workers out of their jobs,” stated Richard Allen of Ravas, a tax fairness campaign group representing small British traders.

Ravas said it has collected evidence of suspected VAT abuses and passed the information to British and EU government officials.

Last month a group of British businesses who sell via Amazon and eBay launched a petition urging the government to take action to stop online VAT fraud by tightening the tax regulations that apply to such websites.

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