How can Amazon and eBay heed MPs’ calls to curb third-party VAT dodging? Hire humans to do the policing

Foreign companies trading on popular online platforms cost the Exchequer £1.5bn in lost tax

Ebay and Amazon have angered MPs over third-party sellers dodging VAT (Bloomberg)

Wherever e-commerce giants roam, controversy over tax seems to follow. The latest involves VAT evasion by foreign companies selling via Amazon and eBay.

This is costing the Exchequer as much as £1.5bn, according to a report by the House of Commons Public Accounts Committee – hurting both public finances and domestic traders who do pay up and are undercut by those that don’t.

The response is what we’ve come to expect from these companies whenever these issues are raised, “We think tax fraudsters are rotters, and of course they should pay what they owe, but we’re doing everything we’re legally required to do to make them do that, and more besides.”

There is an unstated subtext too, however: “They’re the crooks, not us. We’re just the marketplace and we can only do so much so stop your moaning and get HM Revenue & Customs to go after them if you’re not happy (the Pubic Accounts Committee says it should be tougher).”

This sort of attitude can be found throughout the tech industry whenever people use its services for bad ends. Another example would be the response of Facebook/Google when controversies emerge over their use for the peddling of extremist content.

It is sophistry, and obviously so.

If they were really motivated to tackle problems such as these, they would hire more human staff to do the job. Of course that costs money and might impact their quarterly earnings statements.

Being hauled before unhappy MPs isn’t a lot of fun. But if you get a nice bonus at the end of it for keeping the finances tight, then chances are that you’ll put up with it – and go on putting up with it until legislators develop a legal framework to force your hand.

In the absence of that, the PAC would like HMRC to secure an agreement with the tech platforms on tackling the issue by March at the latest.

The Federation of Small Businesses thinks such a deal could help and says the report represents a good start towards tackling the problem.

But even if it leads to its members being unfairly undercut less often, it won’t change what the trade body describes as the “excessively complex” VAT system. Some domestic firms end up paying too little not through attempting to evade the tax but through making honest mistakes. Others are hobbled by paying too much as a result of taking wrong turns as they try to navigate a complex maze of rules.

VAT collection and administration is something that could use a little tech nous. Automation is absent from the system. But while the necessity of reform is recognised by many, it’s going to get a whole lot worse before it gets better. As the MPs note, the Brexit Godzilla is standing over the issue of VAT, online marketplaces, and third-party sellers alike. And it is readying its claws to swat the lot of them.