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Amazon and eBay Sellers' VAT Fraud Rife Despite Crackdown (theguardian.com)
Huge numbers of VAT fraudsters are illegally selling goods tax-free to British shoppers on Amazon and eBay, despite new government efforts to crack down on this ballooning 1bn pound VAT evasion crisis, reports the Guardian. From the article: A Guardian investigation found a wide variety of popular goods being illegally sold without VAT on Britain's leading shopping sites. They range from cheap Christmas tree lights, electric toothbrushes and thermal socks to expensive laptops, iPads, music keyboards, violins and pingpong tables. In some cases, VAT fraudsters offer unbeatable prices. Mostly, however, their prices remain in line with law-abiding competitors and the proceeds of evasion disappear overseas, often to China. Guardian investigations found many tax-evading sellers were trading without displaying VAT numbers on Amazon or eBay. Others were showing made up numbers, or numbers cloned, without authorisation, from unsuspecting legitimate businesses.
As ought to be with sales tax, the nexus of a sale for a VAT transation should be the seller's location, not the buyer's. Every seller has only one location or a small set of locations; in every event, the location is well known according to local laws. The task when trying to make the buyer's location the nexus of the sale for an internet transaction is extremely hard not just for ensuring that the taxing authority is the correct one but also for the bookkeeping of sending remittances the right way. It is a ludicrously bad scheme. There are thousands of taxing authorities in the U.S. alone--and the problem is even many times worse when you consider sales all through the world.
Wait, you mean to tell me those who don't like paying obscene taxes on goods the rest of the world enjoys VAT-free, try and find ways around it?
I'm shocked. Shocked, I tell you.
In related news, I wonder how many of those high-level regulators who are super-pissed about this problem also enjoy tax loopholes on a personal level.
Speaking of loopholes, any chance regulators from the Tax Haven of the Universe (Ireland) are super-pissed? They shouldn't be, since they harbor tax evasion on a scale most can't even dream of.
Under that system you still need to deal with stuff like that selling over seas.
Successive UK govts. have severely underfunded the UK's Inland Revenue Service for decades. They don't have the resources to investigate most tax fraud which is why so many individuals and corporations are getting away with it. Remember that taxes are what pay for legal frameworks and judicial systems so that corporations can do trade as well as pay for education and training for their workers, building and regulating transport infrastructure, insuring and bailing out banks, etc. They get a pretty fantastic deal for what they pay but they still want to avoid paying that?
Because the higher taxed locales would put local businesses at a disadvantage and thus encourage them to migrate away? Like the opposite of Ireland.
Value Added Tax is an acronym used in many, but not all countries. USA for instance, has no equivalent of the VAT, instead they have various state sales taxes. Canada has something called the HST (harmonized sales tax), but nothing called VAT. So, unless you do business with the UK, Australia, New Zealand, or other countries with something called VAT, there's no reason you'd know what it is.
If I can be modded down for being a troll, can I be modded up for being an orc, or a balrog?
In the United States it would be sales tax or transaction tax.
The problem is if the seller is in one jurisdiction and the buyer is in another, whose job is it to handle tax? Even within the United States this is a problem, someone in one state buying something from someone in another state is supposed to play sales tax to their state for the transaction. In practice, unless this transaction is sufficiently government-documented (like vehicle titles for vehicles purchased from out-of-state dealerships) then it's exceedingly rare for that tax to be paid. In the United States at least, the onus to pay the tax for out-of-state catalog transactions is on the buyer, not the seller, as the resident is supposed to pay tax for what is purchased, even if from out of state.
The UK cannot compel a business in Hong Kong to play sales tax to it. That business may not have any idea what they'd be obligated to charge. Since the UK factors tax in when prices are listed (as opposed to factoring tax on top of list price like in the United States) it's really not practical for the business to be the entity factoring tax, so really the burden to pay that tax should all on the buyer, not on the seller. After all, the buyer is local to where the law applies.
Amazon et al. are also not the buyer or the seller, they're the medium. Tax law could be amended to where the operators of the medium are compelled to apply various jurisdictional taxes simply because the buyer and seller are probably not so good at following the existing laws, but at the moment without that condition then the marketplace as a medium has no incentive to do so, indeed the lowest prices on their marketplace proves the incentive for customers to use them and to collect their fees from those transactions.
These problems predate the Internet. These problems have existed since the days of the first catalogs for interstate or international sales. They didn't fix them back then because it was too hard, and I doubt we'll see that get any better unless those mediums upon which this retail business are conducted are forced to make the transactions compliant.
Do not look into laser with remaining eye.
Cognitive dissonance. Democracies have taxes, voted on democratically by the people. Which part of that don't you understand?
Let me guess.. Freshman in college?
This.
"Value Added Tax" would have taken up few characters and added a LOAV (Lot Of Added Value).
It little behooves the best of us to comment on the rest of us.
While VAT has some similarities to sales taxes, it also has some fundamental differences. With a VAT scheme, the total tax on something that is sold at a retail outlet is collected at every stage at which "value" is added. With a sales tax, the total tax is collected when something is sold. By collected, I mean actually sent to the relevant tax authority (in a VAT scheme, the taxes collected from the customer at the point of sale and the taxes sent to the tax authority are different).
Correct, but the importer can be compelled to pay the taxes.
Again, not strictly true. Goods that are intended for sale to retail customers must include the tax. Goods where the intended customers are VAT-registered businesses may list a pre-VAT price.
The real "Libtards" are the Libertarians!
Note: Sales/Use tax are NOT the same as Value Added Tax.
My professional (accountant) opinion: Sales tax is more reliable and more efficient at collecting revenue than VAT.
227-3517
Good luck enforcing it.
John McAfee 'It was like that time I hired that Bangkok prostitute; to do my taxes, while I fucked my accountant'
Ahh, the slippery torture chair gambit. Touche.
In addition, this is all clearly defined by HMRC.
VAT registration. Basically you must collect VAT on behalf of the UK government if you sell in excess of £83,000 per year.
There is also a very helpful page that outlines what to do if you are selling goods into the UK from outside, which is called "distance selling". Basically, if you sell under £70,000 of goods per year into the UK then you don't have to do anything.
Note that VAT is not duty and is a separate tax. Duty is payable on many items, and if you buy something online and it gets delivered to you, then you are typically responsible for paying the duty on it. Here in the UK it is not uncommon to have your parcel withheld at the post office until you pay the duty. The duty threshold is £20 which is absolutely ridiculous. The Australian threshold for GST is $1000, which "feels" much more reasonable.
I should have added: in addition to paying duty on imported goods, you may also have to pay "import VAT". This page explains it all.
PS: In my experience while their online documentation isn't too bad, HMRC are completely fucking useless to talk to. I once had a personal semi-complex tax query for them and rang them up, after being on hold for an hour I was connected to a staff member who was completely unable to answer the question in any way, and the only path to resolution was for me to put it in writing, post it in, and wait six months for them to reply with a yes/no answer. I guess the Brits love their bureaucracy!
The UK also has basically no recourse if you, as a citizen of another country, do your business from your country. Even if you were the most flagrant example, your country would not extradite you, and it's very likely that unless you visited the UK you'd ever have a problem, and possibly not even then if their various investigative and legal authorities are not working that tightly.
Do not look into laser with remaining eye.
I always thought the ultimate threat was that due to the wide ranging powers of HMRC they have the ability to impound the merchandise, as well as the payment.
So yes, I see what you're saying, but they could certainly shut down your operation.
And I live in Texas where I don't pay ANY income tax... (Just don't get me started on PROPERTY taxes)
Thank You, now get off my lawn, out of my county and don't choose to live in my state...
"File to fit, pound to insert, paint to match" - Aircraft Maintenance 101
To be honest VAT has always been a disaster waiting to happen, and inside the European Union it is an unmitigated nuisance to enforce.
VAT, you see, isn't a sales tax. When one company sells stuff to another one, it charges VAT on the deal which the other company can then claim back. In a chain of businesses, this carries on until the end user gets stung with the final VAT charge. This therefore lends its self to a criminal activity called Carousel Fraud, whereby VAT-liable goods are moved around, with VAT being fraudulently claimed back repeatedly. Carbon credits are the current favourite target here, since they are intangible and thus shipping costs are minimal.
Carousel fraud costs the EU thousands of millions of Euros per annum in lost revenue, and probably the same again in administration costs. As taxes go, it is a fraudster's wet-dream and a tax enforcer's nightmare and yet, as with much of the EU, it is a bad idea that is effectively here to stay.
Simply ignoring VAT, as is going on here, is another downside to it; it is simply near-impossible to catch all the fraudsters doing this, since almost no customers will trouble to report people for giving them a good cheap deal.
Super high tax for Europe. Around 20%. Can't understand why anyone would want to skirt that...
Only the State obtains its revenue by coercion. - Murray Rothbard
Article summary should define what this is..??
If there's anything to the Sapir-Whorf hypothesis, Europeans should have at least 400 different words for 'tax'.
Have you tried the IRS here in the USA lately? Shesh, I'm sure they give the Brits a run for their money in the bureaucracy of collecting tax department..
But you have got to admit, that the Brits know how to fashion a useless bureaucracy because they've been doing it longer than most of the modern world, dating back from when they really did have an absolute monarch as a ruler, who invented parliament as a useless "keep the masses from rebellion" gesture of zero actual import...Second, perhaps, only to the Russians where bureaucracy has been a national pastime and source of pride for centuries too.
"File to fit, pound to insert, paint to match" - Aircraft Maintenance 101
VAT was first introduced in France as an alternative to income tax. It was introduced in the UK after WWII to fund war reparations. That debt has now been settled - why the fuck UK taxpayers as opposed to Hitlers bankers had to pick up the tab is anyone's guess.
Charging VAT for EU sales is a nightmare. For B2B sales, you need a valid EU VAT number to zero rate for reverse supply. There is no central registry and it can take forever for EU customers to supply this via email. It's also often not properly indicated on invoices when a supplier has done this.
For consumer transactions, you need to identify the country of consumption and charge at the appropriate rate. Every company supplying into the EU should have an EU VAT ID and collect the tax. Not doing so or charging a consumer an incorrect rate is a criminal offence and again, there's no central information source on the different national VAT rates and rules. Add to the stupidity that many people live in one country and work in another.
In short, only the EU could create such a bullshit, unworkable supranational taxation regime.
The whole point of a VAT (charged at every part in the chain) as opposed to a sales tax (charged only to the final consumer) is that there's a limit to how much you can increase the sales tax rate without rampant fraud at that one single point of sale. Serves 'em right that the VAT opens up new avenues for fraud as well.
"Europe" has no taxation
It's a problem if you're selling intangible goods or services. For anything that's shipped to the UK, HMRC is empowered to confiscate the goods until the recipient has paid the VAT that is owed. The buyer will probably go to Amazon or eBay and ask for a full refund in this case and the seller will quickly end up unable to conduct business via these channels.
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We actually do this for Council Tax (rough analogue of property tax). Each year, the local council is required to send out a breakdown of how the money that your council taxes were spent. They typically extend this to a short pamphlet highlighting some of the things that they consider achievements.
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It was introduced in the UK after WWII to fund war reparations
No it wasn't. It was introduced in 1973 as one of the conditions for the UK joining the EU. There is no connection to war reparations, which were paid by the Axis powers who lost the war, not the Allied powers. The UK had to pay the US off for war loans, but that is a different thing entirely.
Anyway, the main feature of VAT is that, likes any sales tax, it is a regressive tax, impacting the poor more than the rich. Whether that is a good or bad thing depends on your political viewpoint.
To have a right to do a thing is not at all the same as to be right in doing it
They love to talk about their free social programs, but they hate paying for it.