back to article Watchdog slams HMRC, Amazon over 'dismal' response to UK biz hurt by online VAT fraud

HMRC, Amazon and eBay have not done enough to crack down on overseas sellers evading VAT in the UK, a “dismal” failure that has hit British businesses hard, the House of Commons' Public Accounts Committee said today. The select committee's report, Tackling online VAT fraud and error, warned that online sellers who do not …

  1. katrinab Silver badge

    "She told The Register, she would believe eBay and Amazon were serious about tackling this issue, when they voluntarily introduced a system of automatically deducting VAT on behalf of sellers."

    Amazon are not allowed to voluntarily deduct VAT on behalf of the sellers.

    If you want to sort this problem, you need to change the law, not blame Amazon for complying with existing laws that don't work.

    1. This post has been deleted by its author

      1. katrinab Silver badge

        You could make the rules the same as for download stores.

        If you put something up on Google Play, you treat it as a sale to a VAT registered business in Luxembourg, they put the sales to end customers on their MOSS return, and the Administration de l'Enregistrement et des Domaines distributes the money to the other EU governments.

        1. Anonymous Coward
          Anonymous Coward

          When we stumble out of the EU, that's likely to happen, as it looks like May and her buffoons will screw up negotiations, leaving us with no free trade deal at all.

        2. anothercynic Silver badge

          @katrinab

          +1. If you want to show you are VAT registered, enter a VAT number. Us individual plebs who aren't just have pay the 20% that's due in the UK...

          1. Steve Davies 3 Silver badge

            Re: VAT Numbers

            Are printed on many invoices so what's to stop you from using say the VAT No of your local chippy or the Berlin Hilton for every purchase?

            1. katrinab Silver badge

              Re: VAT Numbers

              You can check the owner of a VAT number here

              http://ec.europa.eu/taxation_customs/vies/

              For example, if you enter LU 20260743, you will see that that is Amazon's VAT number in Luxembourg. If you enter GB 727255821, you will see that that is Amazon's UK Branch VAT number. They sell more than £70,000 of goods to non VAT registered UK customers, so they have to register here.

      2. VinceH

        "As for eBay, I've lost count of the number of times I've asked for a VAT invoice from a seller, and been fobbed off with all sorts of crap."

        This is also a problem on Amazon. I don't use eBay much, but I expected it would be the same problem. This particular problem is completely separate from the one the article is about - but it is one that could easily be solved.

        Marketplace providers such as Amazon and eBay ought to be legally obliged to provide an invoicing system on behalf of VAT registered traders. Ordered something on Amazon from a third party seller? You get the invoice in the same way you get the Amazon invoice - go to the order and just print the invoice from there. After all, they should have the seller's details - including their VAT number.

        1. Thunder pants

          That's the point... if there not VAT registered you will get nothing, worse still many traders will share the same Bogus VAT number.... my business went from employing 5 people to only having one in the space of 6 months, I sent details to HMRC about the evaders and 2 years later nothing has changed.

      3. BebopWeBop

        Especially businesses which are part of the flat rate scheme.

        The purpose of the flat rate scheme is to recognise ( I was told by VAT people) that it is expensive to maintain adequate VAT record for small businesses on their VAT outgoings, and so as some compensation, by offering a flat rate scheme for certain categories and sizes (different rates) they (a) improved coats for the business and *b( improved compliance. Having been there myself I can apretate that (well I was implying bt it was a pain - self respect bound to list very small amount of VAT on numerous transactions). I found that as a sole trader it worked out (time vs return ) roughly equal with a small gain on my side.

      4. BebopWeBop

        They should provide a VAT invoice for the full 20%, but it's like pulling teeth to get it.

        You still prove a full receipt though

    2. Anonymous Coward
      Anonymous Coward

      "you need to change the law"

      That's what Italy did for AirBnB & C., because it turned out most renters were not paying taxes on rent incomes, so now the law require to deduct the flat rent rate at the source... of course the "platforms" didn't like it.

      Where is written that laws can't adapt to a changing landscape?

  2. Anonymous Coward
    Anonymous Coward

    "Fulfilment centres" physically based in the UK

    Surely the goods arriving at these centres would have passed through a UK customs check? Is VAT on imported goods not due at the point of entry? To me this is much more of a customs problem than one caused by marketplace sellers shirking their responsibilities. And as far as VAT numbers are concerned - what about the small-time sellers who fall below the VAT threshold?

    1. katrinab Silver badge

      Re: "Fulfilment centres" physically based in the UK

      VAT is payable on import on the wholesale price, not the retail price they would sell it at from the Amazon warehouse.

    2. Anonymous Coward
      Anonymous Coward

      Re: "Fulfilment centres" physically based in the UK

      Sure, the issue is exactly at customs...

      https://www.theguardian.com/world/2017/mar/08/uk-faces-2bn-fine-over-chinese-imports-scam-say-eu-anti-fraud-investigators

      http://www.politico.eu/article/uk-faces-e2-billion-eu-payment-for-china-fraud-trade/

    3. Doctor Syntax Silver badge

      Re: "Fulfilment centres" physically based in the UK

      "And as far as VAT numbers are concerned - what about the small-time sellers who fall below the VAT threshold?"

      If I, as an individual, not a trader, have something I no longer need but has value I could sell it on eBay or I could sell it at the local auction house. In the latter case the auction house charges buyer and seller a commission and, because they're VAT-registered, charges VAT on that commission. If I were a trader selling through the auction house I'd have to treat the sale price as being VAT inclusive and deduct the VAT element from what I keep (allowing for the fact that I'd got the VAT on commission to partly offset this) but that's my responsibility as a trader. The auction house doesn't have any authority to determine which of these applies and, therefore, can't get involved further. I can't see why eBay should be expected to do something the local auction house doesn't; after all they have less contact with sellers than the auction house who have the seller roll up at the door with the actual goods.

      The point raised about VAT invoices is an interesting one I'd never thought about concerning real auction houses. As a buyer there I've no idea who the seller is; if I were a VAT registered trader buying something for my business how would I go about getting a VAT invoice for anything more than the commission?

      1. Vehlin

        Re: "Fulfilment centres" physically based in the UK

        You'd handle it the same way as if you bought something from a non-VAT registered business: you'd pay no VAT on the purchase and thus have no VAT to reclaim from it.

        1. Anonymous Coward
          Anonymous Coward

          Re: "Fulfilment centres" physically based in the UK

          I'm living in another EU country at the moment and I've noticed over the last few years that nearly all stuff coming through E-bay now gets stopped if it's not from another EU country.

          I now get a note in the post asking me how much I paid and to send proof. The appropriate tax bill is produced which I can then pay via the post office when I pick up my parcel.

          I'm not saying it stops all fraud but it seems to catch quite a lot and seemed easy to implement without a change in the law. It did need extra staff to do the checking but the revenue raised has more than covered that according to the news.

    4. Thunder pants

      Re: "Fulfilment centres" physically based in the UK

      Customs get stock that is under declared and if you live / trade outside of the U.K. With stock in a fulfillment centre you have to pay VAT as there is no threshold.

  3. Rono666

    Tax

    If you stood back and saw what tax is you'd know it is theft...

    1. Anonymous Coward
      Anonymous Coward

      Re: Tax

      OK, we'll stop stealing your money. You stop using the roads we built, stay away from the hospitals and schools and when a man with a big stick corners you in an alley and demands all your money, don't have the cheek to run whinging to the police. Actually please leave the internet, because I'm fairly sure there have been some subsidies and tax money in here somewhere.

      1. #define INFINITY -1

        Re: Tax

        Name your country of origin, @Rono666! Then I'll decide my vote.

    2. strum

      Re: Tax

      >If you stood back and saw what tax is you'd know it is theft...

      If you stood back that far, you'd fall off the flat earth.

  4. Anonymous Coward
    Anonymous Coward

    UK taxpayers lost up to £1.5bn in 2015-16 from online VAT fraud

    this is NOT true. Arguably, it's the HMRC that "lost" that amount. What happens with that money, they could have been, but never was is moot (but hey, it always looks great to push that view that "we, the taxpayers lost"). Of that 1.5 bn, arguably, an x amount was "not" lost, because not having collected this x amount, this x amount was not re-used - and subesequently was not "lost" on one of the abortive government project (which might have lined up the profits of incompetent of crooked contractors in the UK (or offshored).

    1. anothercynic Silver badge

      Re: UK taxpayers lost up to £1.5bn in 2015-16 from online VAT fraud

      HMRC = The UK Tax Payers, don'tchaknow!

      1. BebopWeBop

        Re: UK taxpayers lost up to £1.5bn in 2015-16 from online VAT fraud

        Who also lose because UK businesses are forced out of business though unfair competition.

  5. Aristotles slow and dimwitted horse

    Ok...

    So if it is that much of a problem for UK Govs finances, and they see eBay and Amazon et al as responsible, why don't they just block any access to Amazon or eBay web services via UK ISPs, similar to ISP level blocks on 3rd party movie streaming sites. I'm not saying that is the complete or correct answer, and I'm sure there are reasons why that can't (or wouldn't work) but if they are that annoyed in Parliamentryland, then it would certainly get their attention to kick off the debate on a more forceful footing.

  6. Anonymous Coward
    Anonymous Coward

    Simplify taxes and make fair

    Just replace complicated taxes with Land Value Tax.

    I seem to recall that an average house would end up at around £6000 per year in Land value Taxes (paid by the owner, not by a tenant unlike Council Tax - the owner gets the benefit of the work of others via rent). That would replace income tax, vat, national insurance, council tax, stamp duty and a raft of others.

    How much VAT, NI and income tax do you pay? How much time do you or others in business waste on these? How many tax mistakes are made by the authorities? How many dodgy tax avoidance schemes are pursued instead of useful activity?

    Cheaper houses/areas - less tax; farmland - very little if any tax.

    Winston Churchill had it right in 1909. Pity he never did much about it in later years.

    "Roads are made, streets are made, services are improved, electric light turns night into day, water is brought from reservoirs a hundred miles off in the mountains -- and all the while the landlord sits still. Every one of those improvements is effected by the labor and cost of other people and the taxpayers. To not one of those improvements does the land monopolist, as a land monopolist, contribute, and yet by every one of them the value of his land is enhanced. He renders no service to the community, he contributes nothing to the general welfare, he contributes nothing to the process from which his own enrichment is derived."

    1. Yet Another Anonymous coward Silver badge

      Re: Simplify taxes and make fair

      My nice country house in Oxfordshire? Oh it's in the green belt so it's a farm, so I don't pay tax. And I get 400K back in tax-rebates for the trees out back. Your flat in London? Oh we added 8K to the rent to cover the 6k in land tax that the "landlord not the tenant pays".

      1. Anonymous Coward
        Anonymous Coward

        Re: Simplify taxes and make fair

        Land value Tax is paid on the Utility Value (similar to what someone could rent it out for).

        A farm with a house on it can be rented out for more than pure farmland. Hence it would incur more tax. Good arable land would pay more than hill farms but still relatively little.

        The biggest change would be to the unfair tax advantages it has now (zero inheritance etc). A lot of farmland isn't used well, isn't farmed by the owner, instead it is held by absentee landlords doing a tax dodge. This would end. Tenant farmers would pay nothing.

        Landlords extract the maximum they can already. If they could charge more they would.

        If they try to charge more, a freehold house would be empty but the Land Value Tax would still be due. This would create a cashflow problem and a less indebted landlord would lower their price. Indebted ones (Buy To Let with little equity) would be possessed (possibly including their main residence). The houses don't disappear, they are just bought by owner-occupiers or less indebted rentiers. Overall rental prices would decline. People could live closer to work, family with less commuting and pollution.

        Leasehold houses (common scam in recent years) and flats are interesting. I haven't come to a conclusion who should pay and in what proportion. The tenants - obvious, nothing. That leaves the freeholder or landlord. I suspect a formula could be worked out.

        Leasehold business property would have the landlords/freeholders pay the tax even if empty. This would force rental costs down.

    2. Jim Mitchell

      Re: Simplify taxes and make fair

      "Cheaper houses/areas - less tax;" Doesn't work that way. The jurisdiction needs X dollars in funding, so locales with lower average property values just pay a higher % of value in tax. This would work if the tax jurisdiction was a very large region, here in New York, it is by county/town.

      1. Anonymous Coward
        Anonymous Coward

        Re: Simplify taxes and make fair

        The US is interesting because it retains property taxes on (as far as I know) a local level.

        Land Value Tax would (in my opinion) work better as a national system.

        Funny how Income Tax in the US is Federal / national but Land Value Taxes are local. I would imagine that if they were reversed we'd see some interesting things happen. Corporate taxation would probably provide a clue to what would happen.

        In the EU, with many different countries close by you get some weird stuff.

        Most taxes are income based. I THINK that most of the tax is determined by where you live.

        Some villages (Belgium, Netherlands, N/S Irelands and others) straddle the border with some houses split in two.

        The differences in tax systems can be huge. I'm not quite sure how it all works, but plenty of people of people commute in the EU between countries.

        Being taxed on the utility (rental) value of the Land / Property you own makes it much easier.

        Also, does Switzerland still add a church tax (dependent on denomination) to your income tax (optional but most Swiss do it)?

    3. Doctor Syntax Silver badge

      Re: Simplify taxes and make fair

      the owner gets the benefit of the money he paid to buy it and the work of others he put in or paid someone else to do to improve and/or maintain it via rent

      FTFY

      1. Anonymous Coward
        Anonymous Coward

        Re: Simplify taxes and make fair

        So council tax house bought some years ago - market value £60,000, bought for £40,000 (discounted price due to UK government scheme) with a £30,000 mortgage.

        Some time later...

        Little maintenance, remortgaged with equity taken out every few years so that 10 years later mortgage is £140,000 and market price is £160,000 and their kids are priced out of the area and as the owners are now pensioners or unemployed, the mortgage (and council tax, insulation and new boiler) is paid by taxpayers (SMI - https://england.shelter.org.uk/housing_advice/repossession/support_for_mortgage_interest_payments_smi).

        Houses don't cost much money. Land with planning permission does cost a lot of money. You can borrow against this land even if you do nothing.

        Hence why 'builders' don't build, supermarkets own huge tracts of unused land, farmland and other kinds of land are bought as investments.

        In your example, the owner bought and waited. If they improved anything it probably didn't payback the cost unless adding more bedrooms or turning a family house into flats or Home of Multiple Occupancy (Dickensian slum dwelling).

    4. Thunder pants

      Re: Simplify taxes and make fair

      What a pile of balls

    5. MonkeyCee

      Re: Simplify taxes and make fair

      Even easier than a LVT (which will end up directly on rents) is to hire more staff at the tax department. Enforce the current laws, and get a wee bit stricter on those taking the piss.

      Personally I think a wealth tax rather than an income tax is a far better idea, in principle. Wages have been so depressed relevant to inflation over the last ~40 years that things that have remained roughly the same relative value (land, property, precious metals) appear to be amazing investments rather than just holding in place.

      So wages have shrunk, but it's still the main place where tax is collected.

      1. Anonymous Coward
        Anonymous Coward

        Re: Simplify taxes and make fair

        Land Value Tax (on the utility value of land and buildings) is the simplest.

        We're in this mess because applying any other criteria - taxing labour, brains, "Value Added" creates such a complex system that big players manipulate the tax system.

        Ask yourself, is it worth going for a promotion for the extra money? If it crosses a tax threshold, probably not.

        Why put the effort in, train yourself up, push harder for the benefit of your employer, take risks and start your own company when the rewards are meagre and the complex admin and uncertainty introduce huge risks that might only be apparent years later when the tax authorities change policy retrospectively.

        That might be why productivity is low, wages have stagnated while costs like housing have soared.

        Productive activities are taxed, (land) wealth is untaxed or is even rewarded (farming or similar subsidies).

  7. Anonymous Coward
    Paris Hilton

    Commons select commitee

    definition of no teeth.... come to be reprimanded by your betters but we won't actually oblige you to do ANYTHING about it (that i have ever seen). Change the law, fire people, i don't care but this charade just makes me say "meh" these days.

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