Amazon’s $2B tax fraud controversy

Members of Parliament (MP) in the UK are accusing Amazon of profiteering from a multi-billion-pound tax fraud, negatively impacting British businesses.

On Tuesday, MPs on the Commons Public Accounts Committee accused internet marketplaces Amazon and eBay of “turning a blind eye” to foreign firms that fail to pay value-added-tax (VAT). They cited organized criminals from China and elsewhere who are selling their goods cheaply on the internet without paying VAT, according to the Daily Mail.

If true, the allegations indicate VAT fraud, a type of tax evasion that happens when a business doesn’t charge VAT as it should, or charges consumers VAT yet doesn’t pay it to Her Majesty’s Revenue & Customs (HMRC).

“The scam takes up to £1.5billion a year from Treasury coffers and lets the sellers undercut law-abiding British traders, forcing them to fold or lay staff off,” the Mail reports.

Labour MP Caroline Flint said: “The by-product of both Amazon and eBay and other online marketplaces is that you are profiting from the evading of tax by these overseas sellers. We are talking about billions of pounds of VAT being lost to HMRC and therefore being lost to the UK, and the putting out of business legitimate firms that are playing by the rules.”

According to the MPs, online retailers take a commission from the total profit traders make. Typically, the VAT would be added to the cost of the product, making it more expensive. If they don’t add the tax, they can undercut UK sellers. Online retailers receive more money when the sellers avoid VAT than if the 20 per cent tax was paid.

If true, the online retailers may be guilty of “profiteering” from the fraud.

According to the report, companies whose turnover is more than £85,000 a year must register with the HMRC to pay VAT. Registering, and then paying it, is the seller’s responsibility.

Amazon operates as an online marketplace, facilitating the transaction. Since it is not selling the wares itself, it is not liable for VAT. Amazon also isn’t responsible for making sellers charge and pay VAT, and insists it is just providing a marketplace.

However, the MPs criticized the retail giant for letting foreign traders store goods in its warehouses, even if they do not have a valid VAT number, according to the Mail.

Steve Dishman, vice president for taxes at Amazon, and Joe Billante, chief financial officer for the European arm of eBay, appeared before the public accounts committee on Tuesday.

From the Daily Mail:

Miss Flint said the firms were “profiteers from evasion of tax.”

But Mr. Billante said: “I do not want these sellers on our platform. If anyone is not compliant and we are notified, we take action.”

Mr. Dishman added: “We recognise there are a proportion of bad actors. We would like all bad actors off our platform.”

Richard Allen, of Retailers Against VAT Abuse Schemes, said: “Twenty per cent is a large sum. If competitors are avoiding the 20 per cent you can’t compete.”

While Amazon leaves it to the overseas trader to register for VAT and pay what is due, it insists it has removed hundreds of “bad actors” already.

The Public Accounts Committee said Amazon isn’t doing enough, and needs to do more to root out firms that defraud UK taxpayers. “MPs said yesterday that, because the online firm was not paying VAT, Amazon is getting more than it would otherwise have done,” the Mail reports.

In the U.S., the president has also accused Amazon of not paying enough in taxes. In one example from June, President Trump tweeted: “The , sometimes referred to as the guardian of Amazon not paying internet taxes (which they should) is FAKE NEWS!”

The Washington Post is owned by Amazon’s Jeff Bezos.

Amazon also admitted that it sold products to at least one person on the government’s black list of people and entities associated with terrorism. Amazon was placed under federal investigation in July.

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