Gangs using online sales sites to avoid £1.5bn tax

‘Double whammy for taxpayers’

TAXPAYERS are losing up to £1.5billion a year because foreign traders and criminal gangs are using online marketplaces such as Amazon and eBay to dodge VAT.

In a report today, the public spending watchdog accused HM Revenue and Customs of failing to crack down on the scam despite knowing about it for years.

Retailers must charge 20 per cent VAT on goods sold in the UK and hand the money to HMRC but many are failing to do this either due to ‘fraud or error’, according to the National Audit Office.

The report said that overseas sellers – particularly from China – are exporting goods to the UK and storing them in warehouses owned by internet retailers such as Amazon.

This allows them to deliver items quickly when they are ordered online.

But it has also allowed rogue traders to dodge tax for years, enabling them to sell goods at rockbottom prices and undercut British rivals.

The watchdog said this tactic resulted in between £1billion and £1.5billion in lost tax revenue in 2015/2016, but stressed there is a ‘high degree of uncertainty’ about this estimate.

British firms say it has been going on since 2009 but the NAO said it has got ‘significantly worse’ over the past five years as online shopping has boomed.

Meg Hillier, the Labour MP who chairs the Commons Public Accounts Committee, said: ‘This is a double whammy for taxpayers.

‘Overseas sellers who avoid VAT undercut prices charged by lawabiding British businesses, hitting British jobs.

‘Add to that the billions in lost tax… and no one wins except the VAT avoiders.’

The Government introduced new legal powers last September to ensure online marketplaces share responsibility for tax dodging on their websites.

HMRC said: ‘New reforms will secure £875million for the UK taxpayer.

‘In less than a year, those registering for VAT has risen tenfold to 8,000 in 2016.’

Amazon said: ‘We work closely with HMRC on this matter and we promptly remove any seller that they inform us is not VAT compliant.’

A spokesman for eBay said: ‘We will continue to work closely with HMRC to ensure that all sellers on our platform comply with the law.’