British MPs Say Amazon Turning a Blind Eye to VAT Evasion

British MPs have accused major online retailer Amazon of evading VAT at the expense of taxpayers. VAT, or value added tax, is a 20 percent consumption tax added to goods and services that are bought and sold in the European Union. In the UK, all companies with a turnover that is greater than £85,000 must register with the government to pay VAT. The allegations come after the UK’s National Audit Office revealed that non-EU retailers’ failure to declare tax online has resulted in lost revenues of upwards of a staggering £1.5 billion – or almost $2 million.

MPs on the Commons Public Accounts Committee, Parliament’s spending watchdog, alleged that Amazon, as well as other online marketplace platforms such as eBay, aren’t taking sufficient action to crack down on organized criminals that use the platform to sell products that are either undervalued or misclassified to the market in the UK. The committee alleged that over the course of the past few years, overseas sellers have increasingly utilized Amazon to sell products illegally into the UK to avoid paying VAT. The MPs alleged that the impact of this practice has been deleterious to British businesses, who have found themselves undercut by foreign firms as a result.

“Twenty per cent is a large sum of money, and if your competitors are avoiding the 20% you can’t compete,” Richard Allen of Retailers Against VAT Abuse Scheme, a UK campaign group, recently told the Guardian.

Increasingly, foreign sellers are storing goods in the UK before they are actually sold to British consumers. By law, all retailers that are based outside of the European Union and that are selling products online to customers in the UK are obliged to charge VAT if the goods they are selling are in the UK at the point of sale. But major online marketplace players, including Amazon, insist that it is the legal responsibility of the seller to determine if they must pay VAT and declare that – not the responsibility of the platform. British politicians are increasingly challenging this.

“The by-product of both Amazon and eBay and other online marketplaces is that you are profiting from the evading of tax by these overseas sellers,” Labour MP Caroline Flint told the Daily Mail in September. “We are talking about billions of pounds of VAT being lost to HMRC and therefore being lost to the UK, and the putting out of business legitimate firms that are playing by the rules.” Flint accused both Joe Billante, an eBay vice-president, and Steve Dishman, a vice-president at Amazon, of failing to stop fraudulent retailers from using their services and said that they were profiting from overseas sellers’ tax evasion. The commission specifically accused the online retailers of taking commissions from overseas firms that are evading VAT, subsequently defrauding British taxpayers.

Online VAT evasion is increasingly garnering public attention and scrutiny in the UK. Online sales comprised almost 15 percent of all UK retail sales last year, which makes the UK the largest online marketplace in the European Union. Around 50 percent of these online sales were what is termed “non-store sales,” meaning they occurred through an online marketplace such as Amazon or eBay.

Amazon insists it has taken some action to ban some VAT evaders from the platform. However, politicians say it isn’t enough. MPs on the Commons Public Accounts Committee insist that it should be easy for Amazon to track down foreign firms that aren’t paying VAT and allege the company should be able to put controls in place to crack down on tax evasion.