The UK government is on the brink of striking an agreement with major online marketplaces eBay and Amazon that will give the British tax agency, HM Revenue & Customs (HMRC), access to their data. The aim is that this data sharing will help the government to crack down on value-added tax (VAT) evasion by overseas retailers.
VAT evasion is increasingly a priority for HMRC. In 2016 and 2017, the government lost an estimated £1 billion to £1.5 billion to VAT errors and evasion in online marketplaces.
“The growth of online marketplaces has helped many businesses to sell more products across the UK and has contributed greatly to the economy,” Mel Stride, financial secretary to the UK government, explained. “However, there is a small minority of sellers not paying their fair share of tax, and we’re committed to working with marketplaces on multiple levels to tackle tax evasion.”
Under the agreement, the online platforms will be required to share merchant data with the tax authorities so that HMRC can more easily detect cases of fraud and identify trends. Moreover, under the agreement, eBay and Amazon will also be responsible for educating their customers on their VAT responsibilities, as well as taking more concerted action to target VAT evasion by those using the platforms. Both platforms will also be expected to provide swift notification to the government if they become aware of VAT fraud or errors.
Some have criticized the agreement as too far reaching, with some tax lawyers pointing out that it essentially obliges online platforms to monitor for tax evasion and then throw users off the site and report them to HMRC. However, others, including the UK government, say that this will help the government to go after those using ecommerce to evade tax, helping the government to crack down on the increasingly problematic trend.
“The UK has already led the way in holding online marketplaces accountable for VAT fraud committed on their platforms,” said John Thompson, a chief executive at HMRC. “The agreement goes even further to tackle this issue, with online marketplaces committing to helping their sellers understand their tax responsibilities and ensuring we have the information we need to take action against those who do not play by the rules.”
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