‘Chinese’ eBay and Amazon sellers under spotlight for VAT dodging

The issue of VAT avoidance on both eBay and Amazon has reached the mainstream media with UK Trading Standards saying that as much as £2bn a year could be going unpaid because sellers from overseas aren’t declaring their sales properly.

This problem, often characterised as one where sellers from China aren’t properly displaying their VAT numbers, won’t be new to to Tamebay readers. We’ve written about it several times before. Of course, it could be related to any overseas sales from non-EU countries.

A piece on the BBC website headlined Amazon and eBay ‘liable’ if they ignore VAT fraud says: “Amazon and eBay could be liable for billions of pounds in unpaid VAT if they fail to properly investigate traders using their sites to escape sales tax, the BBC has learned. The online marketplaces could be legally required to spot the tax evasion committed by many of their overseas sellers. UK firms say they are being put out of business by the unfair competition.”

And in the Guardian a piece titled UK losing millions in VAT from non-EU sellers on Amazon and eBay says: “Both firms say they have no obligation to police VAT compliance by sellers as Brussels warns of huge rise in goods shipped with value under-declared.”

The BBC piece quotes an official from UK Trading Standards: “Paul Miloseski-Reid has been the lead officer on e-commerce for UK Trading Standards for the last nine years. Based on an analysis of thousands of marketplace traders he estimates up to £2bn of VAT is being lost each year. “The legislation provides a safe harbour defence for intermediaries, up until the point they become aware of that illegality,” he said. “To keep that defence they need to demonstrate that they acted quickly to stop that illegality in the future. This could be an automatic solution where the VAT number given by the seller is automatically checked against the European database.”

We asked eBay for a statement and they told us: “eBay reminds all its users of their need to comply with their legal obligations and we also provide helpful guidance on VAT through our Policies and Help pages with the aim of providing a safe and fair marketplace for all our buyers and sellers. 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.”

Amazon is quoted in the BBC piece as saying: “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.”

We’ll be interested to see how this unfolds. Because as far as we can see the situation is complex. The HMRC rules regarding the display of VAT numbers are not clear when it comes to online marketplaces and it’s worth noting that this situation has been bubbling up for some time. There is a clear need for the rules to be clarified and enforced by HMRC.

eBay and Amazon have been clear that they believe that they are fulfilling their obligations under the current rules. Neither seems keen to take the matter in hand and be a strict enforcer above their minimum legal requirements. It seems to us that they are operating to the word of the law and take very few steps to verify or confirm VAT numbers or details that sellers do display.

And that is very frustrating for compliant UK and EU sellers who quite rightly consider the situation intolerable. It’s tough to look out and see non-complaint sellers from places like China clearly selling at lower prices than compliant sellers and also see the marketplaces doing little or nothing on their behalf in the interests in fairness.

This media spotlight is long overdue.