There have been a few recent news reports about people effectively stealing large amounts of money from the government by committing VAT fraud. Value Added Tax is a tax that is added to a company or business when they have an income of over £81 000. A VAT return from must be completed every three months to show an exact record of the sales of your business, as well as purchases and VAT that is owed, and submitted to HMRC. Over the years, more and more products have become exempt from VAT charges, the biggest and most controversial probably being the removal of the VAT charge on women’s sanitary protection, many arguing that it should have been done a long time ago. In March 2016 ex-Prime minister David Cameron announced the end to the nicknamed ‘Tampon Tax’ calling them ‘unflexible’ and that they will no longer be deemed a luxury item. Whilst this VAT charge was overturned, there seems to be many a business that resent paying their extra Value Added Tax, despite being at a liberty to earn the money back on the products they are selling. As a result, there are more and more sellers discovering sneaky ways around the compulsory VAT in this country, making VAT fraud more and more of an issue for the country.
Earlier in the year, eBay and Amazon both came under fire for VAT fraud due to overseas sellers that utilised their site. Their VAT avoiding ways were costing the country thousands in lost tax receipts and eBay and Amazon were warned that they would be held responsible for their overseas sellers lack of tax payments if VAT was not produced within 30 days. The overseas companies had a way of under declaring the value of items they were shipping, to avoid paying any VAT on the packages. This also made them cheaper for eBay users to order over to the UK, meaning the popularity of such goods was high. Even when consumers had paid a high amount for the product, they were still going through customs with a lower value. In order to offer a cheap and fast shipping process on their items, Chinese run factories were popping up in UK cities. When asked for a VAT number by a customer, they were told that it wasn’t available as no VAT is added or were just given an invalid VAT tax number, despite their being clear VAT guidelines on eBay itself. In order to save the country’s money, something needed to be done.
More recently it has been announced that any sellers still trading illegally on the sites would have to produce VAT numbers by the end of June if they wanted to continue to do so. These companies are unsurprisingly still in the bestseller ranges on Amazon as the goods they are offering are cheap, and despite this being a huge issue for HMRC and the government, major companies, such as Amazon, seem at no hurry to do anything about it, insisting in many cases that the concern does not belong to them. They have simply stated that they do not have the authority to review a seller’s actions in such a way, as they are independent businesses. whilst the packages do pass through customs, it is becoming difficult for officials to scrutinise the value of each package, when they have to prioritise safety, searching for drugs and terrorist threats.
Not only is the country being affected due to a lack of tax being paid, there is also the issue of other UK sellers being affected who can’t compete with the low prices that come with VAT avoidance. Slowly but surely, steps are being taken to reduce the issue, such as HMRC raids on Chinese run factories, seizing large amount of goods and having meetings with the big bosses at places such as eBay and Amazon. However, for the moment, this still remains one of the largest tax avoidance issues in the UK.