UK lawmakers target online tax fraud

LONDON •, eBay and other online marketplaces are failing to take seriously online tax fraud by vendors using their platforms, a panel of British lawmakers said, calling on the companies to work with the United Kingdom's tax authority to tackle the problem.

The tax agency, Her Majesty's Revenue and Customs (HMRC), has been too timid in using its powers and has failed to prosecute a single seller failing to charge value-added tax (VAT), Parliament's Public Accounts Committee said yesterday 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It described as "out-of-date and flawed" HMRC estimates that the problem costs the Treasury as much as £1.5 billion (S$2.7 billion) a year.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 chairman 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 - where sellers fail to charge value-added tax of 20 per cent on goods - allows them to undercut domestic suppliers, and it costs the Treasury money, according to the report.

VAT is also known as goods and services tax in some countries.

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 the 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 that there should be a requirement for all online marketplaces to ensure that a valid VAT number shows for any non-European Union trader selling goods into the UK, where the goods are already in Britain.

It also recommended that the HMRC carry out a new study by March into the scale of online VAT fraud, and that the tax agency should "name and shame" as well as prosecute those committing VAT fraud online.

The HMRC should also hold marketplaces liable for VAT fraud carried out through their platforms, the panel said.


A version of this article appeared in the print edition of The Straits Times on October 19, 2017, with the headline 'UK lawmakers target online tax fraud'. Print Edition | Subscribe