Amazon, EBay Put Spotlight on Rivals in U.K.’s Tax Fraud Fight

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By Ben Stupples

Amazon.com Inc. and eBay Inc., two of the world’s largest online marketplaces, have put pressure on their rivals by publicly signing up to the U.K.’s latest efforts to crack down on value-added tax fraud.

The U.K. government May 29 published a list of companies that have signed up to the measure so far: Amazon, eBay, and U.K.-based e-marketplace Fruugo.com Ltd. This comes after its call April 25 for e-marketplaces to publicly commit to tackling VAT fraud among traders using their online platforms.

Targeting VAT fraud among online marketplaces has become a priority for the U.K.’s tax authority, largely due to foreign traders skirting the levy on their sales to consumers based in the country. This evasion undercuts U.K. traders and online sellers as they must charge VAT on their sold goods.

Sue Rathmell, VAT director at accounting firm MHA MacIntyre Hudson, previously told Bloomberg Tax the agreement’s public nature will “put the spotlight” on the businesses that haven’t signed it.

Alibaba Group Holding Ltd., China’s largest online retailer, said this month it is in talks with the U.K. government about the agreement. U.S.-based Etsy Inc., meanwhile, hasn’t responded to four requests for comment from Bloomberg Tax about whether it plans to sign up to the measure.

Her Majesty’s Revenue and Customs “has published this agreement to help build a collaborative relationship with online marketplaces,” the U.K.’s tax authority said in April 25 guidance on the measure. In addition, it aims “to promote VAT compliance by users of the marketplaces.”

Key to U.K.’s Finances

Specifically, HMRC has asked e-marketplaces to sign up to educating their users on VAT obligations, provide data on traders, and react swiftly to evidence of non-compliance. Any business that fails to uphold the agreement’s standards will be removed from it, according to an April 25 news release.

Levied on the sale price of goods or services, VAT made up 21 percent of the 594.3 billion pounds ($787.5 billion) collected by the government in the latest financial year.

Similarly, the U.K. is a key country for online marketplaces. Last year, it was Amazon’s fourth-largest and eBay’s third-largest individual geographical markets, according to their annual reports. Rival business Etsy Inc., meanwhile, lists the U.K. in its own 2017 annual report as a “core” market.

Originally launched in Finland, e-marketplace Fruugu became a U.K.-based businesses in 2012 following a management buyout. The company operates across 32 countries, according to a profile of the business on the website of the U.K.’s Department for International Trade.

Tesco Plc, Britain’s largest food retailer, told Bloomberg Tax May 23 it was reviewing HMRC’s agreement. Last week, though, the company said it plans to close its loss-making e-marketplace.

HMRC Reacts to Efforts

In a statement, HMRC praised the efforts shown from Amazon, eBay and Fruugo.

“The U.K. has led the way in holding online marketplaces accountable for VAT fraud committed on their platforms,” a spokeswoman said May 29. “This agreement goes beyond those legal obligations, 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.”

“We welcome the commitment from those who have signed the agreement and encourage others to do the same,” she added.

To contact the reporter on this story: Ben Stupples in London at bstupples@bloombergtax.com

To contact the editor responsible for this story: Penny Sukhraj at psukhraj@bloombergtax.com

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