Daily Mirror reports Chinese VAT evading sellers on eBay UK
The Daily Mirror has published a story about how Chinese sellers on eBay aren’t paying VAT and how that’s affecting the livelihood of British traders. It’s called: “VAT evading Chinese firms are wiping out British business.”
The story says: “This Christmas could be the last for many British online traders. Slaughtered, wiped out, destroyed. That’s how some of them describe the tide of Chinese rivals that are driving them out of business. The Chinese tactics used are brutally simple: They don’t pay VAT, which means they can undercut homegrown rivals by 20%. In theory, if a business is based outside the EU but has its stock here then is should be VAT registered. The practice is very different, as a look at just one eBay market shows.”
Penman highlights iPad cases as one area where the practice is rife, but I imagine that many of you will have similar tales to tell about unfair competition. This infographic from the Mirror illustrates the issue in the iPad cases category rather well.
Perhaps the media spotlight will push eBay into action on this practice. If truth be told, eBay has not given this problem much credence in the past.
eBay are quoted in the Mirror article. “A spokesman for eBay promised “appropriate action including suspending the account” if sellers are not VAT registered when they should be. He said: “eBay takes VAT compliance very seriously and works closely with HMRC to remind sellers of their legal obligations in this area.”
It will be interesting to see whether eBay follow up on these words.
Do Chinese VAT avoiding sellers in your category compete with you?
It’s same on Amazon.
Last year I had to battle with China sellers piggybacking on every possible seller’s listings, including my own.
Now they’re moved here and still offering low prices, but with RM 1st class service instead of 3 or more weeks via China Post.
Now theyr’e squabbling in integers of 1p over the Buy Box and devaluing products on a massive scale.
Unless Amazon and eBay step in ….. well, I really don’t like to think what’s going to happen.
Not just Chinese sellers, plenty on UK Reg’d Sellers selling over the threshold & not VAT reg’d i.e xxxxxxxxxx in Milton Keynes whom refused to supply us a VAT Invoice, yet has a turnover in excess of £500K & states on his listing “We are not VAT registered. There is no VAT included in the auction NOR it will be added”.
Surely it is quite easy for eBay to enforce this, by making it a requirement to supply a VAT Number for the country where the threshold has been exceeded by the seller & if they refuse then a rolling threshold limit will be placed on sales in that country.
Complied list is here; http://www.vatlive.com/eu-vat-rules/distance-selling-eu-vat-thresholds/
One of the bigger problems is the postage. I’ve received packages sent from China where the postage costs less than posting the same item within the UK alone.
How can Royal Mail handle a Chinese parcel for less than the cost within the UK? What kind of international postal agreement is in place and why does it favour some countries more than others?
Amazon knocked out some of the worst culprits from China by introducing their minimum fee.
Not from where I can see Ross, I wish it were the case.
I’ve been monitoring my competitors and not one of them have altered their prices.
I believe they don’t know or don’t care.
It was at the lower price end of the scale. We were selling a £3 item that ended up being undercut to 40p including postage! Amazon’s minimum fee cut out the crazies that were doing that.
If it’s a UK competitor selling at a loss we can expect them to run out of steam at some point, the Chinese sellers don’t seem to have a cut-off point.
The only saving grace we have is that punters won’t wait 10-45 days for an item to arrive. I do wish Ebay and Amazon would make it much much clearer when the seller is sending from overseas.
Now we will see what ebay towers will do about this, probably nothing, beyond some lip service.
Another trick I came across when looking to buy something earlier this years, is Chinese registered sellers having multiple ‘agents’ resident in the EU and shipping from their EU address.
This particular seller ships not only from China, but also France, Germany & the UK. All different people/sellers shipping from the EU, but all using the same registered ebay ID….. !!
With overall feedback of 1000+- pcm for this ebay ID .
So who is responsible for VAT payments, as the company is based in China, but the multiple sellers individually probably do not exceed the required EU country’s VAT threshold.
This is all before you start comparing postal costs from China to the cost in the UK & EU, the playing field is far from even….!!!
This is just the tip of the iceberg. It isn’t just this fraud that is taking place.
I often do test purchases from other sellers to see how they offer what they do. If you buy from China or South Korea, and the stock is there, then every parcel sent out is marked as a Gift which is fraudulent. By doing this the parcel avoids VAT, duty and a RM handling fee. This makes it impossible for any UK VAT registered business to compete.
How much tax money is the UK losing as a result?
That is in addition to the Chinese selling product BIN for 99p with free p&p from China. How do these economics work?
Its high time both Ebay, HMRC and RM came down on this and caught up with the market.
The economics work because Chinese sellers pay for postage by the bag weight regardless of how many packages are contained in the bag. So they can ship 100 lightweight items airmail for £10 for example. In addition because they manufacturer and are self employed cottage industry type production plants they cut out the middleman and so any return above material and shipping cost is pure profit. Cost of living in rural parts of China can 10% of what it is in the UK.
As far as airmail goes it is split 1/3 equally between the postal services of the two countries and the airfreight carrier. So as far as Royal Mail go they take a big hit on delivering packages from China but can’t do anything about it because of international obligations. European, American and Australian airmail prices subsidise the Chinese.
True about the gift although the last couple of products I bought turned out to be from South Korea and marked as a gift but got a nice £11.80 customs/handling charge.
Disgraceful. How dare you suggest Paypal should lose millions of 20p transaction fees !!
All very unfair on legitimate businesses. Its hard to understand why HMRC is unable or unwilling to take action. eBay need to be forced, by HMRC to do something.
Similar issues on Amazon, we have had £100k wiped off our sales this year by Chinese sellers. They mark the goods up and reduce to normal price, so if we sell an item for £14.99 they mark it up to £90 then reduce it to £14.99 and buyers think they are getting a bargain.
It’s not obvious to buyers they are buying from China or elsewhere when they buy on Amazon either.
Also I test purchased an item and it came from Belgium?
Chinese sellers is a huge problem on both ebay and Amazon but neither want to tackle it.
Many of you are missing the point of this article.
It is not talking about Chinese sellers who are shipping from China, but rather Chinese Sellers who are shipping from the UK (fulfilment centres)
All foreign based sellers fulfilling in the UK (NETP’s) are required to charge VAT from £0.01. As many of you will know this isn’t happening – and the list of sellers above mostly fulfil from the UK.
This makes the “cheap china post” less of a relevance (although many abuse this by shipping small parcelforce boxes at a time and evading import tax), then combined with charging no output VAT on the consumer they gain a massive advantage.
eBay and Amazon won’t do anything about it as its their only way of getting Chinese sellers after they lost the domestic market to Alibaba. They are probably glad the fraud is going on as it helps them grab new chinese sellers.
I reported just such a seller to HMRC over 9 months ago. They still have 80,000 feedback and are still selling on eBay.co.uk without a VAT number. Goods are in UK and they are a Chinese seller. I believe HMRC just do not have the staff to investigate
What does investigation really involve?
Ask seller for VAT reg details (a few mins). Seller fails to provide. Automatically breaking law (NETP).
Send notification to eBay and Amazon.
Fraud prosecution and potential back claims can come after as this is a lot harder (requires legal system in China which will be expensive and heavily biased).
At least in the meantime it will stop ongoing fraud on that account.
After enough bans – Chinese sellers will start to realise that there is a real risk that their accounts will be banned / investigated for VAT evasion and either sign up for VAT or stop selling.
In the jewellery category that VAT is being avoided is a problem but the biggest problem is Chinese sellers offering fake precious metals and avoiding regulations like Hallmarking / Nickel directive. This has been going on for years and nothing is done. Is eBay facilitating?
It’s great to see the national press highlighting these issues. Perhaps Tamebay could be doing more? I believe that you have the ear of some eBay execs.
A lot of our UK based Chinese competitors list their address as a UK Residential address, which leads me to suspect that Chinese company’s are sending an employee or 2 to the UK, renting a 3 bedroom semi-detached house and garage and piling it high with stock sent directly from the company they work for. The stock is likely declared at 10% of the value for import purposes and these staff are probably paid peanuts, pay no VAT, business rates, Tax etc. I cant get anywhere near their prices, and it is very worrying for the future of my business.
But why would eBay care? If eBay allow this then the marketplace can offer dirt cheap products which attracts more customers, and in turn eBay generate more profits. If eBay blocked and reported these non VAT registered sellers, then product prices would go up to what they should be, and their dear precious customers would no longer find a bargain on eBay and go elsewhere.
ebay dont pay a fair share of UK tax regardless. So its hardly going to bother them if the very sellers they promote best pay tax in the UK is it ?
Also many UK based Chinese sellers are here on ‘non working visas’, like many work on the side no questions asked, so they trade under the radar.
Both eBay & Amazon could easily have systems that block a seller selling once they reach the UK VAT threshold, if no VAT registration number is held on eBay, no more sales.
But of course they will just register again with another ebay ID.
I agree, but their are ways around it, I’m sure. If they re-register another account, they will likely have the same Paypal or bank details, the same trading address and probably even the same name. Their are dozens of ways for eBay to identify the same person setting up a new account. If they want to that is…..
eBay is a very competitive marketplace but I don’t mind that. I enjoy the challenge of competing against similar sellers for sales, and I have done well at it for many years. But it is unacceptable trying to compete against illegal sellers, who are breaking the law. It’s impossible to compete with them, and as time goes on, more and more “UK based” Chinese sellers are flooding the marketplace. If things don’t change I cant see myself on eBay in 12 months time.
New accounts are a problem, however an account with thousands / 10’s of thousands of feedback is more valuable than a new account.
If Chinese sellers continually found their established accounts banned and had to resort to creating new ones (until they were too banned) – it would at least provide them with a headache and disadvantage in ranking (assuming eBay take this into account which I guess they do)
The article was based on a report I wrote for HRMC VAT Fraud team – who haven’t taken any action. I also sent the report to Tamebay 4 months ago – but got no reply.
It highlights £1billion of VAT fraud on eBay & Amazon. Both NON EU Companies & Fake UK Companies with no VAT. One company is doing £10,000,000 on eBay.co.uk and even told me that they where not VAT registered – they have a fake company name. PO Box address and no action has been taken against them by HRMC or eBay. What do we have to do to wipe out VAT fraud on eBay
Perhaps I should make the report public now – name and shame the sellers…..
If it isn’t illegal to release the list why not!
Are any of the broadsheets interested?
Can we try get them to headline that eBay/Amazon are facilitating the fraud. Public will respond to this much better.
Also in ukbusinessforums you mention that a few of these have now updated with new VAT details registered to individuals/companies not necessarily related to the original seller.
Is this another loophole? Provide a vat number assigned to an individual/company just to satisfy eBay/Amazon – but don’t actually collect VAT for HMRC
Th EU has a pretty powerful & comprehensive database of VAT registered companies in the block. Any EU registered company can access & cross check registration.
If eBay & Amazon become serious (by EU/HMRC intervention) about sorting this, it could be fairly automatic when any seller enters a VAT #, just like eBay/Amazon check payment card details against registration details instantly….
Asking ‘Do Chinese VAT avoiding sellers in your category compete with you?’
Is not really a good question, because the answer is, if its small and light. Say under 500 grams. You can be sure Hong kong/chinese sellers are across the first 2 pages and dominating search.
Its not just small electronics covers for example take search
‘Motorcycle cover’ – Dominated by HK/Chinese sellers.
‘Kitchen taps’ – high percentage asian addresses HK/China
‘door lock’ – same…
You name it they are there. ebay is basically now Hong kong bay. Whilst i now use amazon, on ebay i tend to also end up buying from HK Sellers. The fact ebay boosts HK Sellers up to page 1 so nicely also helps them out. But profits leave the UK and they dont pay VAT let alone any other taxes. Nor to they employee a UK accountant etc etc. We vote UKIP, but we have only ourselves to blame not migrants but weak laws and enforcement of them.
I bet if you had a heat map of where they all came from – HK, Shenzhen and Guangzhou would be red hot.
Yes they have taken over every market…….
When will eBay, Amazon & HMRC take this seriously….
I have to be honest about this topic I have been chasing this for 2 years and its a shambles. both Chinese sellers and ebay and the government are difrauding the uk sellers. and no one cares or intrested, you have Chinese sellers on ebay who are old Chinese trading companys. and they are ripping the uk market off. most of them don’t even have a uk vat number or even a uk registered company its a total farse and only ebay to blame in my eyes.
oh and one more problem is that they are not vetted by any trading standards or vca or dti its a joke because theya re Chinese the governing bodys cannot catch them so ontop of that lot the inferior quality they are putting into the uk which does not meet any uk regulations in unbelievable so again no uk company can compete againt that because the test house cost money and the Chinese don’t even no what a test certificate is. it just get worse.
Its the biggest problem affecting my online business at the moment, and its not just Chinese sellers, there are many EU based fraudsters doing the same thing, selling into the UK, exceeding the thresholds and getting away with. I reported one of the latter who sells on Amazon, to both HMRC and Amazon 8 months ago, still trading and its 15-20k of VAT fraud a month, its a joke!
It would be very easy to enforce, like everything online, it can all be automatic, for example:
– if company registered outside EU like China, and goods location UK, ebay/amazon automatically deduct VAT at source and pay to HMRC
– when a UK/EU seller has sold more than 80k on their platform in the proceeding 12 months, again start automatically deducting VAT at source, they inform HMRC, and wait for a verified VAT number to be provided. If companies are legit they can claim back as credit on next VAT return.
As somebody mentioned before this really has to be the lowest hanging of fruit from the Treasury’s perspective…just make Ebay/Amazon deduct the VAT from sellers sales at source…… a *massive* win for UK coffers & a massive win for UK based on-line businesses.
we dare bet that because of Legal loopholes and EU regulations deducting vat is not as easy at may appear
I hope not, but like every EU law its not clear cut so why not go for it, and then let the perpetrators prove their innocence, and let a judge decide in court, I’m pretty sure most of these sellers will just disappear. They’ve quite clearly broken the law, can you imagine the tabloids field day if they got away with it!!
Although I still have live listings on ebay, however I’ve completely lost interest and hope in this marketplace. Not only are the Chinese and dodgy sellers a problem, ebays way of doing things is outdated; listing fees, ebay + PayPal cases, listings end, listing templates and custom design, cross-border listings and listing violation, listing limits, etc. The fact that you need to call them every month and ask for an increase in selling allowance is pathetic. They should be supporting the legit businesses.
Ebays days are coming to an end, don’t build your entire business on a declining platform.
I have been on the receiving end of this problem. My sales are down massively from last year so took a look. My biggest seller this year suddenly stopped selling for example. Lo and behold a chinese seller based in U.K undercutting me. whilst all is fair in business and you change prices accordingly to market. What does not help is the fact that it appears in many cases items are listed (with identical pictures)from about 5 different sellers (all chinese in uk,suprise,probably the same person/persons). Ranging the price of the item to ensure sales. This does seem to be a spiraling problem in all catagories on Ebay
we dont blame the chinese,
uk based sellers are buying container loads from chinato sell here,they are just cutting out the middle man . its our authorites that are being a bit slow, loads of dosh to be made from imports ,yet they are so preocuppied with finding things to cut costs on
I have been reading all these posts, let me tell you all one thing we are all wasting our time and I’m a very good example. Has most sellers we have all grown our business round eBay and amazon because they have monopolised the market online 20 years ago it was a pleasure to do business online we used to sell on deal time and kelkoo most of these eBay sellers was not about or even eBay and amazon was not about. We could make profit and we could run a proper company has the scope was there to do so.
Today it’s not ab business it’s a false economy, we used have 240 eBay sellers who we used to supply and they was all making a healthy leaving. Then 2 years ago I noticed more and more Chinese sellers coming onto eBay and destroying the market because they don’t pay vat or any UK business tax. And not only that they get a 12% kick back from their Chinese government for overseas trading. And they don’t get vetted by local governing bodies so of course the writing was on the wall 2 years ago. We have now lost all our UK traders all gone out of business why because of our so called business partner’s eBay. And I say eBay more than amazon because all my sellers were all eBay sellers.
Myself then found me competing on eBay with this Chinese sellers and I reported them all 2 years ago and have been doing so for the last 2 years to my 8 strategic account managers and Senior Manager – Merchant Development at eBay and none of them ever come back with any answers or any feedback because they cannot. I have spent months and months on this case I even went to offices in china has I have a massive Chinese background I lived there for 18 mths. And I was shocked on what was happening in front of my eyes.
This is a massive infestation now and will be a disaster. I started to research these Chinese sellers and where they was from and low and below they are all trading company’s what are now doing eBay and amazon they have their office in china 200 people working in them because there labour is £200.00 pounds a MTh they do all the advertising from there they do their listings and their customer services from china has well there is 12 groups off people sometimes more and they all speak different languages you have the English team, French team, Italian team, German team, there are many teams all Chinese and they are operating every think from china. They put a UK telephone number on the eBay contact details it’s a bloody skype phone number what never gets answered and goes to an answer machine which says mail box full.
Believe me I have spent 1000s on this, I then started to find out how they worked and there is 100s of them now they all send the products to a warehouse in Ningbo then they all get put into containers there could be 20 sellers products in one container all consolidated, so it makes the costs cheaper. Then it arrives in 4 warehouses in the uk which even the Chinese sellers don’t know these warehouses where they are located because they don’t want it to get out in case there is a rade I know all 4 warehouses 2 of them run by English men and 2 are run by Chinese men I’ve meet them all and they will only deal with Chinese sellers because their money is safe they say because they have got their goods. Then the duty they are all defrauding the duty they pay they are entering the rung commodity codes i.e. gazeboes are 12% they are entering them at 5.5.
I can keep going on and on and on the writing is on the wall for UK sellers and UK business people we have no chance and we are being thrown to the wolves. This year alone I no 40 business what used to import from china all gone to the wall has eBay don’t care.
I have spoken to the hmrc many of times they just cannot cope with the work I even offered to take 2 off them to china and go to these Chinese sellers offices undercover has agents but have a guess what they was not interested.
One of these Chinese sellers from over 2800 sellers I no off now has 12 shops on eBay all multi listings he is my old trading agent in china who I had for 6 years who I found steeling from me because that’s all they know how to do is cheat and lie. I asked him what he does with returns he said simple we don’t even pay for the goods until we sell them and once the container is sold then we pay the factory’s less all the returns and losses, I said what about the uk customers he said we just refund them our profit is fat of course it’s vat they are better off by 32% against a uk seller.
There is more and more what I can write but no one listens no one cares but have a guess what we do 20 million a year on eBay and we pay our taxes and vat but this will soon all end has 2015 my company will also be going to the wall has I can see no changes in the near future and I have no confidence in eBay or hmrc and I’m not prepared to pay my duty’s to eBay or hmrc when there is no support. I will be making 48 people redundant I’m not a mug or a fool and that’s how we are treated.
There is one more important point here again this has been the problem in the uk for years could we actually be allowed to go and start doing this kind of corrupt business in china and there answer is no.
Very sorry to hear you’ve hit a brick wall with the powers that be. It sounds as if you’ve exhausted every avenue to no avail.
Have you contected this Miror journalist or any journalist?
‘Then 2 years ago I noticed more and more Chinese sellers coming onto eBay and destroying the market because they don’t pay vat or any UK business tax. And not only that they get a 12% kick back from their Chinese government for overseas trading.’
They also pay less ebay fees. As eBay fights to market share in china. Not realizing their 2 main rival are state owned. You see eBay needs global market share and China they have none, Similarly in Japan Yahoo auctions are no.1
First of all Keiron I am very sorry to hear you are struggling, have you considered contacting BBC’s Panorama or channel 4’s Despatches, taking them to China would be a real eye opener for everyone!
Just like everyone else we are also struggling, we thought we could survive as we have some branded products that Chinese sellers cant get, but now sellers from US are starting to sell these, again without VAT, its out of control!
We need the public to see this for action to be taken by HMRC & eBay/Amazon, this is in the public eye right now due to the article, maybe we would take the opportunity to take a stand and protest, all small businesses owners would be willing to take part as it is affecting everyone, each person from there own city approach local shops and ask for help by participating in nationwide protest in each major city, this would be seen by local papers, national papers everyone, we need to seize this opportunity now before its too late, show HMRC and eBay/Amazon we mean business!
It seems we’ve all got tunnel vision in our own categories. We’ve been fighting away alone and not realised how bad or how widespread issue is.
Usually I find a little relief in discovering I am not alone in an issue, but this is actually scaring me as unless it’s stopped, it’s going to get worse.
What can we do?
I think its very clear that eBay staff look at this site. For this reason somebody has to acknowledge this. Maybe a change.org campaign needs to be set up. its not only the uk sellers who are at risk of being crippled. Its eBay also as they could potentially loose millions in business extremely fast with uk sellers pulling out of eBay.
However with the new law coming into place will the Chinese have to pay vat? As far as im aware the new law states you have to apply vat in the country of sale and not the company of operation? I know this as companies like skype have contacted us to inform us that as of January the rate of 15% vat charged at the minute will be changed to 20% in accordance with new law. So maybe this will put an end to it quicker than we think? Am I wrong?
The new law is about making companies like eBay, Skype, Google, it think its more for virtual services and fees, pay vat to the UK rather then siphon it off to Luxembourg, where the VAT rate is lower and deals are done behind closed doors.
The issue with the Chinese sellers is a different one, its about VAT on physical goods, the laws exist now to tackle it, NETP VAT rules for example, its just that HMRC are not dealing with it effectively, and eBay, Amazon, et al, turn a blind eye to it, despite their claims otherwise.
HMRC should hold their head in shame, not only are they losing millions, if not billions of potential tax receipts, they are helping the demise of UK based on-line retailers. And the annoying thing is, it would take very little effort to address the problem.
you are all missing the point its not just vat whats the problem. these Chinese seller do not follow any laws in the uk ce certificates, rohs compliance, test reports they have no idea how a uk company is treated in the uk. because no trading standard office or any other uk governing body will be able to chase or contact Chinese sellers in china. same HSE they admitted they have enquirys all the time but they cannot goto china and chase them down. there is no way out of this the testing house alone this year I spent 80,000 pound on certification and having products tested. also if a customer has an accident with a prtoduct next think a uk company gets is a solictors letter through the post no win no fee claim. alone my insurance policys cost me 18,000 a year for product liabellty. tell me how many Chinese sellers have this, I tell you now none not one Chinese seller will have this. all you see on the advert is a Chinese address and a uk shipping town like portsmounth or Suffolk or Manchester how can you chase a seller like that. the game is up and we are being driven out of business they cannot even speak English but they are doing the business in the uk. we have a CS team what costs me 250,000 a year just to deal with customer support how many Chinese sellers have this infrastructure none they don’t need it they have ebay on there side.
Well, finally, someone has acknowledged the problem. I’ve been harping on at eBay about this for years! Maybe HMRC might purchase Terapeak to check for themselves. I reckon if I had a job with HMRC on a 5% commission basis, using the above to spot VAT evasion, I’d be a millionaire in no time.
Another issue, was Chinese sellers allowed to list on eBay UK for 1p auction start price. eBay’s answer to that was to allow everyone to list for 1p …..Joke
Even if you list for 99p with free P&P you will make a loss as the postage, Paypal and eBay fees will come to over £1, so 1p looks a poor business plan, unless you want to use it to advertise your offering in some way?
Only way to stop this is to deduct VAT at source as I mentioned before.
In the USA, Amazon already have a similar system in place collecting sales tax for non-resident business who use their fulfilment centres.
The US tax authorities are very hot on tax avoidance from what I’ve heard, so this probably explains why companies have to do this over there, unlike here in the UK where HMRC let them get away with blatant fraud, and do nothing to combat it.
I agree. I import watches. Or I did. over the last 2 years Chinese sellers have invaded eBay uk results be it Hong Kong or uk warehouses, saturated the market I sell in and driven prices down to basically wholesale. eBay support it as they want the fees from volume sellers
Cassini search engine has also changed the game
My view is eBay uk should be a platform for uk based businesses first