Amazon and eBay face crackdown over VAT fraud by overseas sellers
Amazon and eBay say overseas vendors are responsible for their own VAT obligations Getty Images

Her Majesty's Revenue and Customs (HMRC) is examining if it can force online shopping portals like Amazon and eBay to bear the cost of increasing VAT fraud, caused by a horde of overseas sellers. Many of the most popular items on major British online shopping sites are sold by overseas vendors who do not pay VAT charges.

Anticipating the Christmas shopping rush, many overseas sellers have chosen to import their goods to warehouses in England, and collaborated with Amazon and others to have them delivered in the UK. These overseas vendors, many based in the US, China and Hong Kong, are known to avoid paying VAT.

Conservative Peer Lord Lucas said: "Amazon and eBay have been collaborating with hundreds of overseas retailers to defraud the tax-man of millions of pounds every day." Both companies have vehemently denied being a party to such tax evasion.

Lucas still has demanded an investigation by HMRC so that "effective and speedy enforcement for the fairness of the tax system" is ensured and "honest internet retailers" are protected.

Another Conservative peer, Lord Ashton, said, "Her Majesty's Revenue and Customs takes all forms of evasion seriously. HMRC has established a task force to undertake operational and intelligence-gathering activity to investigate this form of VAT evasion by overseas online retailers." He also claimed that officials at the tax authority were collaborating with online retailers to end VAT abuse.

Ashton said: "A meeting with the top online retailers at a very senior level took place only last month. HMRC has dedicated 25% of its customs and international trade operational resource to this problem and has set up a national task force to deal with it."

Amazon and eBay issued separate statements on the subject. Amazon said: "Marketplace sellers are independent businesses responsible for complying with their own VAT obligations. We do offer tools and information to assist sellers with their compliance, but we don't have the authority to review their tax affairs. Naturally, we cooperate with HMRC as we are required to by law."

eBay made a similar claim in its statement and said: "We are committed to working with HMRC to ensure our sellers are complying with their legal obligations."