UK government working with eBay and Amazon to catch tax-evading sellers

When it comes to tax avoidance, it's usually big companies that come under the spotlight. Of course, there is nothing -- legally speaking -- wrong with tax avoidance, but it's a very different story with tax evasion. With eBay and Amazon providing a platform for vendors around the world, it is perhaps little surprise that the retail sites are home to a large number of tax evaders.

An investigation by the Guardian found that there are a huge number of overseas sellers who fail to pay VAT in the UK. HM Revenue & Customs is currently looking into whether eBay and Amazon could be held responsible for the tax bills, or what could be done to track down offenders.

Following the Guardian's investigation, eBay announced that it would report a number of sellers making use of the auction site. Sellers in China have been found using false VAT numbers, or even using VAT details associated with other companies.

For Amazon, sellers are able to use the retail giant's UK warehouses as a storage base for goods. Handing over dispatching responsibilities to Amazon -- coupled with fake addresses in China -- opens up the opportunity for the introduction of financial irregularities, and a government taskforce has already been put in place to try to combat the problem. Both eBay and Amazon say that responsibility lies with individual sellers to pay whatever tax they owe, going on to say that the sites should not be held liable.

The Guardian asked overseas sellers to provide VAT receipts for purchases that the newspaper had placed but were given excuses ranging from the seller not being VAT registered, to it being seller policy not to provide such receipts. As part of its investigation, the Guardian spent £1,818.20 on 24 items, which should have incurred VAT of £363.64. In reality, the order breakdown listed £0 VAT.

Not all sellers on eBay and Amazon need to register for and pay VAT on their sales -- just those with a UK turnover of over £82,000. Sellers that are VAT registered feel they are getting a poor deal, as sellers based overseas have been able to undercut their prices by simply not paying applicable taxes.

Photo credit: Mr-Vector7 / Shutterstock