Ecommerce Guide

£1.5 Billion Of Revenue Lost Thanks To Online Retailers Failing To Pay VAT

Her Majesty’s Revenue and Customs lost more than £1.5 billion of revenue last year in sales tax that was not paid by online retailers outside of the European Union. That’s the findings by a report by the government’s National Audit Office.

The chair of the House Of Commons public accounts committee, Meg Hillier, has called for HMRC to “…finally step up and act to confront this growing problem. This is a double whammy for taxpayers. Overseas sellers who avoid VAT undercut the prices charged by small, law-abiding British businesses, hitting British jobs.”

The news comes after revelations in 2015 about how certain Chinese businesses were evading VAT by using warehouses in UK ports allowing them to offer eBay customers cheap prices (as they are not paying VAT) but able to offer rapid delivery times. This put UK based eBay retailers at a serious and significant disadvantage.

As it stands though, there have been no prosecutions for online VAT fraud to date, but there have been nearly 300 investigations and nearly 400 compliance interventions over the past 12 months. It is hoped that the introduction of new legal powers will make online marketplaces potentially jointly liable for VAT non-payment after they have been informed by an issue with the seller. A spokesperson from Her Majesty’s Revenue and Customs said:

“The UK has led the way in holding online marketplaces jointly liable for VAT evaded overseas, and new reforms will secure £875m for the UK taxpayer. In less than a year, those registering for VAT has risen tenfold to 8,000 in 2016.”

Such issues with tax are not going to go away, as online sales account for 14.5% of all UK retail sales, and this is expected to rise sharply year-on-year. The UK is also the biggest online market in Europe, a position that is not expected to change after Brexit.

The UK is not the only country having issues currently with overseas retailers and tax. In Australia, the Turnbull government are currently proposing a complete change to GST (goods and services tax). Currently, only imported good bought online that are more than AU$1000 are subject to the 10% tax but the new proposals will see ALL sales subject to the tax. According to online retailers such as eBay and Asos, such as tax will seriously undermine their sales to Australia as many consumers will seek out cheaper options from those websites who are willing not to comply with the sales tax.

Overseas taxation will be a growing issue across the world as online shopping becomes ever more popular and cross-border ecommerce becomes more and more common. It’s a question that the UK will may have to address in the next two years as it remains unclear whether the United Kingdom will remain a member of the single market and the custom market when they finally leave the EU.

May also like:  Ecommerce pushes House of Fraser back into profit
Ecommerce Guide

Ecommerce Guide

Leave a Reply

Shopify