John Healey, the UK Chancellor, has taken steps to amend tax laws with the aim of preventing tax evasion by foreign online sellers. He announced in the budget on Wednesday that he will strengthen the laws regarding online marketplaces so that sellers cannot evade VAT when selling their goods online.
New Responsibilities for Online Marketplaces
Under the new law, online marketplaces such as Amazon, eBay, and Temu will be required to collect VAT from sellers. Previously, these marketplaces were only responsible for collecting VAT from foreign sellers, while domestic sellers were exempt from this law. Some foreign sellers exploited this legal loophole by registering as companies based in the UK and avoided paying taxes.
Problems Caused by Tax Evasion
The UK government began an eight-week consultation in June to expand the tax responsibilities of online marketplaces, following increasing pressure from domestic retailers. Amazon estimates that up to £3.2 billion of sales in the UK are made by sellers who evade tax collection. This issue costs the treasury hundreds of millions of pounds annually.
This action helps close the legal loophole and brings the UK closer to similar approaches used in Switzerland. Additionally, the European Commission is set to review the VAT collection laws for online marketplaces next year.
Amazon's Comments on the Changes
Monica Arino, Amazon's Public Policy Director in the UK, stated: "This is an important step towards closing the legal loophole that is exploited by opportunists and creating a level playing field for thousands of small British businesses that operate in our store. We will continue to work with the Treasury and HMRC to implement effective, practical, and fair changes."
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