An influential committee of MPs is poised to launch an investigation into Britain’s £1bn online shopping VAT fraud crisis after sellers on Amazon and eBay evaded hundreds of millions of pounds in tax in the run-up to Christmas.
Conservative MP Richard Bacon, who sits on the public accounts committee, said: “I think this is absolutely an issue we need to look at.
“We’ve already been discussing VAT fraud in online retailing informally and I expect that it is something the committee will want to turn to.”
The National Audit Office could also be asked to examine the subject, and how well it has been addressed by HM Revenue & Customs.
In recent years, overseas sellers, particularly from China, have come to dominate many popular goods categories on eBay and Amazon, illegally selling goods without VAT.
As a result, many small British businesses have been left unable to compete.
Parliament’s public accounts committee has previously played a central role in shining a spotlight on other tax scandals involving the likes of Starbucks, Google and Amazon.
Its work has helped trigger international tax reforms as well as generating important evidence for European commission inquiries into alleged sweetheart tax deals for multinational corporations.
Now the MPs are expected to turn their attention to the issue of overseas traders committing VAT fraud on an industrial scale through well-known online shopping sites – a scandal first highlighted by a Guardian investigation last year.
HMRC has since admitted VAT evasion in online shopping had become a “very big issue”, estimating it cost up to £1.5bn a year in lost tax. But officials have been frustrated by what is seen as the uncooperative approach taken by some big websites, including Amazon.
In January, Lin Homer, then head of HMRC, told a parliamentary committee: “We do feel, just as with beer and alcohol, that those people who manage the supply chain should ensure enough diligence is built into it. Marketplace providers [such as Amazon and eBay] have responsibilities.”
Two months later, the Treasury announced new powers for HMRC to make large marketplace websites liable – in some circumstances – for VAT revenues lost to fraudulent overseas sellers.
News of a likely parliamentary inquiry came as the Treasury minister Jane Ellison claimed HRMC’s new measures, which came into force in September, were already proving successful.
Latest figures show 7,185 overseas sellers have come forward to register for VAT since January, compared with just 695 in 2015 – a rush, she said, in anticipation of tough action from HMRC.
But Ellison’s claim that HMRC was now tackling online VAT fraud “in time for Christmas” was greeted with scepticism by Bacon and tax fairness campaigners.
“I think it’s a bit early to declare HMRC’s actions an unbridled success,” said Bacon, who added the public accounts committee would want to scrutinise such claims closely.
Last month, a second Guardian investigation showed widespread evidence of ongoing VAT fraud by sellers on Amazon and eBay – despite the HMRC’s new powers.
HMRC insists action is being taken. “We are already using new powers granted from September to directly tackle these overseas businesses,” it said.
Meanwhile, Amazon and eBay have repeatedly said they cooperate with HMRC where required, but that they are not responsible for policing the VAT compliance of independent sellers.
A spokesman for Ellison would not comment on whether HMRC had recovered back taxes and penalties from the influx of overseas traders now belatedly registering for VAT.
A spokesperson for campaign group VATfraud.org said: “It’s all well and good HMRC handed out 7,185 VAT numbers to internet retailers in the last year; it just proves this fraud is enormous.
“What HMRC failed to say is how much undeclared VAT they have recovered from these retailers. We want to know if HMRC is simply giving out VAT numbers without any due diligence or investigation into these retailers’ online trading history.”
