When the UK Chancellor of the Exchequer George Osborne presented his 2016 budget, he had a warning for online sellers and online marketplaces, saying it was unfair when small businessmen and women compete against foreign companies on the Internet that don’t pay taxes.
“Sites like eBay and Amazon have provided an incredible platform for many new small British start-ups to reach large numbers of customers. But there’s been a big rise in overseas suppliers storing goods in Britain and selling them online without paying VAT. That unfairly undercuts British businesses both on the internet and on the high street, and today I can announce that we are taking action to stop it.”
But The Guardian said some don’t believe the actions go far enough, telling the UK newspaper that it was a mistake for the chancellor “to task under-resourced UK tax inspectors with hunting down VAT evaders. Amazon and eBay are awash with hundreds of small pop-up sellers, based overseas, who are unlikely to be deterred if the new measures allow HMRC to catch only a small number of offenders,” the paper quoted one campaigner.
An eBay spokesperson told EcommerceBytes it has always been committed to making its platform a fair place to buy and sell and expect all sellers to comply fully with their legal obligations, including VAT. “We welcome rules that ensure a fair marketplace and will review the detail of the legislation,” he said.
“Even without such a law, we would not hesitate to suspend sellers found by HMRC to be evading VAT. We are already working closely with HMRC on this issue and will continue to assist their efforts.”
In addition, he said eBay had already established a dedicated information center on its website for Chinese sellers “to assist them in understanding their tax obligations. We have also contacted hundreds of Chinese sellers to notify and educate them on the need to comply with the law.”
An Amazon spokesperson provided EcommerceBytes with the following statement: “We fully support VAT compliance by companies selling products through online marketplaces and offer tools and information to assist our sellers in their VAT obligations. We are currently reviewing the Government’s proposals, and we will naturally comply with any legislation.”
Here’s the text of the Chancellor’s Budget provision on VAT:
Tackling VAT evasion by overseas sellers
The government is taking firm action to protect the UK market from unfair online competition. Some overseas traders from beyond the EU avoid paying UK VAT, undercutting online and high street retailers and abusing the trust of UK consumers who purchase goods via online marketplaces.
Budget 2016 announces action that will help to protect consumers and level the playing field for businesses. HMRC will be able to require non-compliant overseas traders to appoint a tax representative in the UK, and will be able to inform online marketplaces of the traders who have not complied. If traders continue to evade VAT and no action is taken to prevent the fraud, then online marketplaces can be made liable for the VAT.
The government will also introduce a due diligence scheme for the fulfilment houses where overseas traders store their goods in the UK. This will make it harder for VAT evading firms to trade. While the government continues to take action domestically, the global nature of the fraud means international action is also required. The UK has already raised this issue with EU and international partners and the EU and OECD’s current work programmes include further work to help combat this fraud.