Photographer: Martin Divisek/Bloomberg

U.K. Lawmakers Slam Amazon, EBay for Failing to Tackle Tax Fraud

  • Tax authority has failed to prosecute over online sales
  • Estimates of money lost to Treasury ‘out of date and flawed’

Amazon.com Inc., EBay Inc. and other online marketplaces are failing to take seriously online tax fraud by vendors using their platforms, a panel of U.K. lawmakers said, calling on the companies to work with the government’s tax authority to tackle the problem.

The tax agency, Her Majesty’s Revenue and Customs, has been too timid in using its powers and has failed to prosecute a single seller failing to charge value-added tax, Parliament’s Public Accounts Committee said on Wednesday in a report. It described as “out of date and flawed” HMRC estimates that the problem costs the Treasury as much as 1.5 billion pounds ($2 billion) a year.

“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,” Committee Chairwoman Meg Hillier said in a statement. “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 online fraud -- by which sellers fail to charge VAT of 20 percent on goods -- allows them to undercut domestic suppliers as well as costing the Treasury money, according to the report. Because the marketplace websites receive commissions for sales through their platforms, they “profit from people who are defrauding the British taxpayer,” the lawmakers said.

Both Amazon and EBay said in statements that they are working with tax authorities to tackle online VAT fraud. EBay said it wants a “fair marketplace” and has gone “above and beyond” HMRC’s requirements. Amazon said it promptly removes any seller found to be not compliant with tax rules, and that it offers “information, training and tools” to vendors to help them meet their VAT obligations.

The parliamentary panel recommended:

  • There should be a requirement for all online marketplaces to ensure that a valid VAT number shows for any non-EU trader selling goods into the U.K., where the goods are already in Britain
  • HMRC should carry out a new study by March into the scale of online VAT fraud
  • The tax agency should “name and shame” as well as prosecute those committing VAT fraud online
  • HMRC should also hold marketplaces liable for VAT fraud carried out through their platforms

— With assistance by Giles Turner

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