The new report by the NAO Tackling Tax Evasion in High Street and Online Retail which was published yesterday is very welcome. Like it's 2017 predecessor Investigation into Overseas Sellers Failing to Charge VAT on Online Sales (to which RAVAS also contributed) the report gives a good overview of the problems caused by outdated customs compliance models and legislation vis à vis the exponential growth of online retail since the beginning of the new millennium.
As noted in the report's conclusions and as highlighted by RAVAS to the NAO "Significant gaps remain in checks around online retailers, and overseas companies can falsely present themselves as UK-based to evade VAT". Specifically, the UKs removal of border VAT assessments for packages with a value of £135 and a somewhat ludicrous, unenforceable obligation for mail order retailers located outside the UK to register for UK VAT has resulted in yet more industrial levels of abuse, as summarised in this graphic from the report.
There is also the issue of non-UK sellers pretending to be established in the UK, to avoid the collection of VAT by online marketplaces, which has to date been the most successful policy introduced by HMRC after a long campaign by RAVAS and VATfraud.org .
The new report sweeps a broad brush covering various forms of tax evasion but with regards to the evasion of Import VAT online, it highlights what HMRC, Companies House and other government agencies have or have not done to deal with the problem. It is also highly likely the sums of VAT being lost to fraud on imports is much higher than estimated given that HMRC underestimated by a factor of four the VAT being lost on Amazon and eBay to overseas sellers. Having experienced at first-hand how unresponsive HMRC has been to the problem of online VAT abuse, their actions to date are somewhat varnished in the report however it does recognise that there is governmental problem that requires a strategic and organisational evolution to bring systems up to the same level of efficiency as those operated by online retailers, who run rings around enforcement and the law.
I am hopeful that the new Labour Government will realise what needs to be done but I believe that what is required is some kind of Commission that can oversee and organise the kinds of structural collaborative changes that need to take place. I do not believe that leaving each Government agency to continue to apply sticking plasters, when prompted, will in the longer term achieve what needs to be done. I began campaigning on this issue 20 years ago and so far progress has been painfully slow.
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