Tamebay Comment: eBay and Amazon could do more to tackle VAT dodging overseas sellers
There is no doubt we have a problem. Let’s not beat about the bush: those marketplace sellers from outside the EU, often from China, are gaining an unfair advantage over homegrown sellers by using loopholes in the UK tax system.
This means they don’t pay VAT at 20% on goods being sold into the UK when, quite frankly, they ought to.
Obviously HMRC could do more. And we encourage all aggrieved sellers to contact their local MP on that and rester a protest (for all the good it will do, but it’s worth doing.).
Tamebay’s leverage lies with the marketplaces themselves. What pressure can we collectively exert there for a change of policy?
One thing eBay and Amazon could do, as the duopoly marketplaces for ecommerce small businesses, is show rather more respect to law-abiding, tax-paying, compliant and competent small businesses paying their VAT. Both eBay and Amazon could ensure that all registered company information and VAT numbers shown on their sites is verified and genuine.
It seems to us that by retreating to a legal minimum approach to VAT dodginess, eBay and Amazon are kicking honest sellers in the teeth. These are firms that play fair and pay all due VAT to HMRC and also make the marketplaces what they are. These firms also pay a minimum wage and abide by health and safety regulations and create jobs here in the UK.
A few minutes of research on eBay and Amazon will reveal “Chinese sellers” with dodgy business details.
The free pass that eBay and Amazon give to “Chinese sellers” who test the flexibility of the UK tax regime isn’t just a blow to the national coffers. It’s two fingers up to UK sellers doing their best and also a sanction that doesn’t serve UK buyers for the best either. It’s a lose all round.
We call on eBay and Amazon to step up and appreciate EU based sellers and take steps to verify the bona fides of all sellers on their marketplaces. The seller details, the registered addresses and VAT numbers, must be screened and verified as real and accurate. It’s a good practice that will only increase buyer confidence.
Currently, we don’t ask eBay or Amazon to act as a de facto tax authority and report who is trading more than £82k a year to HMRC. Indeed, our request is very small. Help your buyers and sellers operate in an honest, trustworthy environment.
Here’s our suggestion to eBay and Amazon: ensure that registered business details and VAT numbers on your site are real and robust. It really is that simple.
In the last day or two we’ve seen some evidence that eBay may, in fact, be doing this. They could be cracking down on Chinese sellers breaking the rules and we’re hopeful that will do more. And when we can be certain, we’ll report back.
I recently went through an incredibly rigorous screening process by Amazon as part of their Seller Verification process.
Doesn’t that process weed out the dodgy sellers?
Beause they don’t verify vat numbers for non uk sellers using fba in uk.
A simple yet convenient flaw in their system
As Simon says (hehe), Amazon has been working on this for over a year now. Their forums are consistently filled with various questions/complaints about requirements for seller verification. They have an absolutely monumental amount of sellers to go through but they are – systematically.
eBay’s previous efforts have been mostly just to shush enquiring media so as far as actually trying to verify sellers I’ll believe it when I see it.
neither ebay or amazon will go all-out on this kind of thing, until it threatens their pocket.
if there was a government issued fine for “aiding and abeting tax avoidance”, and every single chinese seller with a dodgy vat number cost the marketplace real money, they would disappear overnight.
The thing here is the scale of fraud. Its just the biggest tax scam the uk has ever seen. Volume wise its prob the same gdp of some small countries.
I think when the government realise they are losing the gdp of a small country they will act. It’s just making them aware of it that is the problem
Great post Tamebay.
Yes there are some very simple things eBay and Amazon can do.
There is a tidal wave of negative media about eBay & Amazons complete disregard for honest Law abiding sellers.
eBay & Amazon are just as responsible for the fraud as the vat evading sellers.
EU Law states all non uk companies with stock in the uk need to be registered for VAT and therefore must display their Vat numbers. But eBay and Amazon are ignoring these laws. Amazon have been quoted in the press that this law does not exist. Their lack of knowledge is quite unbelievable
There is a very simple equations they could use to detect vat fraud by non uk companies:
NON UK Seller + UK Stock – VAT Number = VAT Fraud
It’s that simple – so why are they ignoring it and siding with the vat evaders
Government should do more, ok ebay amazon have a moral duty ,though like many here who have a business we would avoid the extra work of policing our buyers if we could
While I feel very strongly about these overseas sellers dodging VAT I’m not sure eBay and Amazon owe that much of a duty to enforce sellers. I guess if they could put a stop to things it would be great but I can’t see either of them having much incentive to do so.
It doesn’t take much work for anyone to find out if a seller is even VAT registered. There seems to be a big issue with HMRC, why are they seemingly doing so little themselves?
I heard they were only recently just aware of the scale of things but surely that can’t be true its been going on for many years.
Under recent legal precedents Amazon and ebay would be liable for VAT if they participated in the transaction (they don’t even have to be the seller) and made money from it. They are liable..no doubt. As for HMRC …they are SHITE!
I presume they pay import VAT when the goods arrive in the UK in containers and as not VAT registered can not claim this back so they aren’t getting away entirely scot free ? Granted paying VAT on cost not sale price. I am sure single packets can slip through the net but I would like to think all containers get processed by customs?
Amazon do do a heck of lot of checks for the payments accounts now so not quite sure how they get past that !
In my category the Chinese sellers using FBA dont sell anywhere near as cheaply as non FBA sellers and in a similar price range to us so don’t cause us anymore problems than UK/EU competition
Paying import VAT does not remove the obligation to charge VAT if you then sell the item. I suggest you get a better accountant or a good lawyer if you are involved in this…you’ll need it. .
Just my opinion.
A) Scenario based on a VAT registered trader. Rinning as a LTD company.
if a UK importer marks down the invoice on an import, they reduce the VAT and import tax.
The VAT (which is the bigger number) cancels itself out, it will always be reclaimed, so what remains is the import tax.
For the import tax, (2-10%). In away your saving, lets say a median of 5% on the day, but further down the line you will be taxed 20% on this as extra profit. So you avoid paying some tax, to pay 20% latter on. If your a profitable business.
B) Now if you are not VAT registered, nor even a registered business.
Say you mark down a 30K import as 10K, you saving loads of VAT, Which you will never reclaim and loads of import tax. Your not looking to pay corparation tax, So its money in your pocket.
For the fulfilment centre, they can claim the trader is not a UK business and hence all business can BE VAT FREE.
Its a double wammy, or a ‘Win Win’ situation – Sounds good right, but its better than that, Its tripe dinger !
I have reported several instances of this and similar situations to HMRC in adequate detail for them to take action and, so far, nothing appears to have been done.
In February, I even spoke on the telephone to members of the hotline team (0800 595000) who agreed with me that the evidence I had supplied seemed to make a compelling case and that it would be followed up on very quickly.
Having been a buyer from the operation I was reporting, I even offered that I would be a witness in any prosecution / trial. The operation that the evidence referred to is still trading in exactly the same manner today.
I think ebay and amazon could make a very strong case that they have fully discharged their duty in this respect by having sellers confirm that they are providing a legitimate VAT number and that they are complying with VAT legislation properly
As far as ‘chinese’ sellers are concerned, I think HMRC and her equivalents across Europe have a tough time finding the responsible people.
I suppose they could confiscate the stock that is held in Europe, but what do the tax authorities want with warehouses full of plastic tat? It will probably cost more to dispose of properly than the investigation costs to complete!
So, whilst I am very disappointed that HMRC seems unable (and even unwilling) to chase this particular dragon, I can sort of understand why.
HMRC need to shut these guys down quicker, like you say they’ll probably never catch them.
They should make NETP’s and all EU business (non-UK) selling into the UK market submit monthly VAT returns and payments. Its only Sales they should be reporting so pretty straight forward.
Then make eBay/Amazon provide them with monthly reports of sales by trader where goods are either based in the UK, or any other EU country.
Pretty simple exercise then to match them up on VAT number, as a minimum their reported sales should exceed or match the eBay/Amazon total. Any seller who under reports, or is not found/matched up, immediate notice to eBay/Amazon to shut them down, or they’ll be held liable for VAT.
I reported a local trader for not being VAT registered to HMRC via their website at least three times. Nothing was done.
I wrote to them twice giving my own name and address and provided all the evidence I had on the trader, nothing was done.
I even wrote to George Osborne, no reply and nothing was done.
It took a letter to my local MP before any action was taken. The MP’s support asked for further evidence which they said would be passed on to the “relevant people”.
I was able to provide lots of evidence derived via Terapeak.
After more than three years of reporting VAT fraud the local trader is now VAT registered.
Whether he is paying the correct amount of VAT on his sales is another matter.
What exactly do you mean by Glass Houses?
you need to be careful with the roof
You are a moron AICMFP
Dont tell the Trees!
A more beneficial way forward, both for UK taxpayers and genuine UK sellers, is for HMRC to enforce a witholding tax on all amazon and ebay sales, so Amazon & Ebay would deduct tax of 20% from each sale, its then up to the seller to reclaim this on their VAT return, which of course Chinese sellers could not do.
It works well in the construction industry, and has really cleaned that sector up.
Tell me how this would work for those many UK Traders who do not reach the VAT Threshold and do not have to be registered for VAT. I take it that they would be charged VAT on every sale and not being VAT registered because they do not sell enough would just lose that monies? What about those like myself who sell such as Books which are not VATABLE and do not reach the threshold?
You would declare yourself non VAT registered to Amazon
The way it works in the construction industry is that their is an exemption certificate traders like yourself could apply for, using your income tax registration details.
For non business users the deduction would not kick in until they had done a number of transactions, say 10 a year
Great post Tamebay. I know another seller has been reported to eBay on Tuesday whose monthly turnover was £421,669 in last 30 days according to Terapeak.
They stated in response to a direct question that they were despatching from the UK but were not VAT registered. We will see if eBay act.
its amazing how joe public, individually, can gain this data quite freely, but the inescapable, ever-present, taxman is completely powerless to acquire that same data. or so they’d have us believe.
The taxman is not powerless, just lazy. They have been aware of this VAT evasion technique for many months and did nothing.
the easy answer for the government is to add an online sales tax to every sale regardless of who where and how