Amazon and eBay profiting from fraud, hurting UK businesses, says watchdog

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British business is being hit hard by unfair and illegal tax practices by overseas competitors using online trading platforms, including eBay and Amazon, according to parliament’s spending watchdog.

In a report published today, the Public Accounts Committee warned that online sellers who do not charge VAT when they should can undercut prices offered by UK businesses by up to 20%, “forcing many to lay off staff or even go out of business”.

Taxpayers are also losing out as online VAT fraud leads to a significant loss of revenue to the Exchequer, depriving public services of funds at a time of austerity, the report added.

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The Committee has criticised HM Revenue & Customs (HMRC), which estimates that UK taxpayers lost £1 billion to £1.5 billion from online VAT fraud in 2015–16, for failing to use its powers to launch a crackdown.

In the report, it accuses HMRC of “playing a game of cat and mouse” with companies based outside the UK and calls on the authority to take high profile enforcement action.

Meg Hillier MP, chair of the committee, said VAT fraud is “hugely damaging” yet, as online sales continue to grow, the response of HMRC and the marketplace where fraudsters operate has been “dismal”.

“HMRC needs to be far tougher in protecting the interests of British businesses and taxpayers. As a priority it must inject more urgency into enforcement action. But it should also push the case for further new powers,” she added.

“Online marketplaces tell us they are committed to removing ‘bad actors’ yet that sentiment rings hollow when those same marketplaces continue to profit from the actions of rogue traders.”

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