Yesterday we reported that the Guardian and BBC had picked up on a story many of you have been aware about for some years. Non-EU sellers have been getting a competitive advantage over British SMEs by not fulfilling their UK VAT obligations when selling into the UK.
In our post yesterday we noted comment from both eBay and Amazon and since then there has been more media coverage that may well be of interest.
The story also featured on the BBC Radio 4 PM programme on Monday evening: https://bbc.in/1l3OUZA
(The piece starts at 28 minutes and will only be available in the UK. Apologies to our international readers.)
The Register has published: HMRC ‘reluctant’ to crack down on VAT fraudsters – tax ace. That article rightly queries what more HMRC should be doing.
There’s a snippet here from BBC 5Live published by campaigner Richard Allen on YouTube featuring Professor de la Feria:
https://youtu.be/W8hPnV1L3zI
And this blog by Richard Murphy at Tax Research UK called “Amazon and eBay: who is liable for the VAT evasion?” wonders how stringently the situation has been investigated by Trading Standards: “The interesting question is what can be done about this? First, and most obviously, the question has to be asked as to why such a tiny proportion of trading standards time is dedicated to this task? I gather the sum total of people involved may be just one person.”
One day’s media coverage is useful but it may not lead anywhere. But it does solidify several of the aspects of this problem that need addressing: Who is responsible for enforcing the rules and collecting this tax? How much money is the UK losing out on in lost tax revenues? Who is standing up for UK sellers doing the right thing, paying VAT and facing unfair competition? What more should eBay and Amazon be doing?
We’ll see if this story continues to run and what happens. Tell us your views and solutions.
21 Responses
All sellers are asking for is a level playing field.
I get the impression eBay are uninterested in small/medium UK businesses.
Search any item tell me I’m wrong. How many first pages hits are United States Hong Kong or large sellers
“Who is responsible for enforcing the rules and collecting this tax?”
HMRC. But they’re not going to bother. Why? I think they’re scared of rocking the boat with China. Also, they’ve ALLOWED it to become too big a monster to curtail. If they’d started to put the wheels in motion as soon as the loopholes were starting being abused then it wouldn’t be this big, uncontrollable mess it is now.
“How much money is the UK losing out on in lost tax revenues?”
Already? or how much MORE is going to be lost? It’s billions.
“Who is standing up for UK sellers doing the right thing, paying VAT and facing unfair competition?”
So far, no-one and the people who SHOULD be are just not interested.
“What more should eBay and Amazon be doing?” Providing the HMRC with all relevant data within 30 days of an account being opened/operated and all existing accounts info to be provided as soon as is humanly possible.
If they can make it obvious that selling platforms will be reporting to HMRC then it might put off potential new avoiding sellers. Stop the new flow, then deal with the backlog.
Its not just VAT that these traders are circumnavigating. We know from experience of the traders we go after for IP infringement that many of these traders on online marketplaces will also be selling counterfeit products.
I don’t know why HMRC don’t get EBAY and Amazon to collect all VAT at source from all account that turnover more then say £3000.00 at month then, in the same way they collect seller fees, then issue you with a monthly paid VAT certificate , all non payment of VAT from domestic and International Seller would be collected then you would be submitting to the HMRC for a rebate. This would make on-selling a level playing field for everyone, as you need to submit fraudulent submissions rather then just not submit any VAT or paying less VAT ten you should be.
Here is the EU Judgment that makes Amazon and Ebay potentially liable for VAT fraud
Intalmoda Judgment (click on ‘english’ version)
https://curia.europa.eu/juris/liste.jsf?num=C-131/13
This case was about a right to deduct VAT that was denied by the Dutch Authorities due to the fact it was reliant on fraud elsewhere in the supply chain but it is a general principle that applies to all VAT situations involving fraud irrespective of the VAT right affected by the fraud …
It is a surprisingly low threshold… You only have to show that the party to the abuse knew or should have known about it…
How difficult would it be for HMRC to show in court that Amazon or Ebay should have known that a trader should be VAT registered if they are selling a million quids worth of stuff from a UK warehouse ? I think it wouldn’t even be difficult to show they knew!
Looks very clear to me…
Things are going to get very interesting. I suggest everyone starts logging complaints against Amazon and Ebay for traders involved in VAT fraud and post the replies on this website… That way you can then show they knew (even if the ‘should have known’ test fails…which in my view is unlikely…)
Truth
46 Thirdly, as the Advocate General stated in points 50 to 52 of his Opinion, in so far as any refusal of a right under the Sixth Directive reflects the general principle, mentioned in paragraph 43 of the present judgment, that no one may benefit from the rights stemming from the Union’s legal system for abusive or fraudulent ends, such a refusal is the responsibility, in general, of the national authorities and courts, irrespective of the VAT right affected by the fraud, including therefore the right to a VAT refund.
47 Contrary to what the Commission maintains, that conclusion cannot be called into question by the fact that the latter right is of a special nature in that it constitutes a corrective mechanism designed to ensure the neutrality of VAT in certain cases of intra-Community supplies.
48 In this regard, it is appropriate to note that it follows from the case-law cited in paragraph 44 of the present judgment that the central function of the right of deduction provided for in Article 17(3) of the Sixth Directive, in the VAT mechanism designed to ensure complete neutrality of the tax, does not preclude that right from being refused to a taxable person in the event of participation in fraud (see to that effect, inter alia, judgments in Bonik, EU:C:2012:774, paragraphs 25 to 27 and 37, and Maks Pen, EU:C:2014:69, paragraphs 24 to 26). Similarly, the specific function of the right to a VAT refund, intended to ensure the neutrality of VAT, cannot preclude that right from being refused to a taxable person in such a situation.
49 In the light of the foregoing considerations, it is, in principle, the responsibility of the national authorities and courts to refuse the benefit of the rights laid down by the Sixth Directive when they are claimed fraudulently or abusively, irrespective of whether those rights are rights to a deduction, to an exemption or to a VAT refund in respect of intra-Community supplies, as at issue in the case in the main proceedings.
50 It must further be noted that, according to settled case-law, that is the position not only where tax evasion has been carried out by the taxable person itself but also where a taxable person knew, or should have known, that, by the transaction concerned, it was participating in a transaction involving evasion of VAT carried out by the supplier or by another trader acting upstream or downstream in the supply chain (see to that effect, inter alia, judgments in Kittel and Recolta Recycling, EU:C:2006:446, paragraphs 45, 46, 56 and 60, and Bonik, EU:C:2012:774, paragraphs 38 to 40).
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Of course the silly cheap postage from the likes of HK help their sellers undercut the UK sellers subsantually.
Change this and the field would be far leveller….
I started my own investigations after 3 minutes i googled a chinese return po box and got this, as well as other accounts using the same po box
https://www.vatfraud.org/vat-case-studies/ddddadi/
Can get a job at HMRC ?
Or should i focus on screwing people over for tax credits to quality ?
Here is more good news from Chinese PMs visit.
https://www.gov.uk/government/news/pm-announces-significant-changes-to-visitor-visas-for-chinese-tourists-for-the-benefit-of-the-british-economy
https://www.bbc.co.uk/news/business-34717035
An interesting comment on HMRC ability, if they cant prosecute domestic tax evaders no chance of doing anything about the chinese,
https://www.bbc.co.uk/news/business-34717035
“considered a genuine threat to tax collection”
By question would be WHAT TAX COLLECTION ? Because massive fraud on an industrial scale is being ignored.
All HMRC is good for grinding to the bone those people that do pay the correct tax.
Who here can honestly say they pay the correct tax lol
” Monday evening: https://bbc.in/1l3OUZA
(The piece starts at 28 minutes and will only be available in the UK. Apologies to our international readers.)”
Actually, hearing the broadcast without problem on the link from the USA.
On the shipment side, anyway, also a big problem for us in the US as Amazon 3rd party sellers as the USPS (Postal Service) is subsidizing postal prices from the Hong Kong and other China areas.
Please keep reporting these sellers as much as you can to ebay and amazon every way you can help a uk business if you report them by law they will need to investigate them cause its seriously hurting all uk business with all these Chinese sellers the don’t pay a penny tax or vat so please report them this is the only way even if you report one seller a day it will help some uk business.
It’s quite obvious to any interested observer that eBay and Amazon are happy to turn a blind eye to tax evasion as it enables them to be the cheapest source of goods. This provides them with a competitive advantage on top of the other tax efficient ways they structure their businesses.
The two worst things for domestic sellers are this tax evasion and the subsidised postage from China which on one side lets them win on larger items posted from within the UK/EU to UK/EU consumers and on the other side lets them post lightweight items to the UK for less than it costs a UK seller to post to another UK address. With the slim margins available to most domestic sellers, this is an overwhelming advantage for the tax dodgers.
Unless eBay and Amazon are made accountable in some way for helping the incompetent HMRC to limit this evasion, the days are numbered for many domestic sellers. This has a knock on effect on their staff, suppliers and the wider UK economy as jobs, profits and taxes are remitted overseas instead of benefiting the domestic economy.
Unfortunately, in their pursuit of delivering rock bottom cheapness, eBay and Amazon are progressively killing off domestic sellers who are the lifeblood of their seller base. This is a shortsighted strategy which will ultimately lead to a diminished buying experience and loss of buyers.
In fact when someone doesn’t know afterward its up to other
people that they will help, so here it occurs.
As an Idea why dosent Tamebay have a page devoted to naming and shaming Chinese Sellers on here who have their stock located in the UK…This will at least raise some eyebrows at EBay into the scale of the problem and
Example, got one turkey near me with the British flag currently destroying line after line. Same usual cra**. From China, stock located in UK, pretends to be in UK with no VAT
ID = chic2click