Online Marketplaces: VAT Evasion

Baroness Kramer Excerpts

Monday 22nd October 2018 Lords Chamber

[Lord Bates]

There are other ways of approaching the issue, one of which is to crack down on the loopholes. We have introduced successive initiatives and we have spent some £2 billion for HMRC to cut down on evasion. Next April, we will bring in an important measure to address the point made by my noble friend Lord Leigh. It will require that due diligence is carried out on online marketplaces to ensure that people are actually paying the correct amount of tax. Our emphasis and focus is on closing the gap and ensuring that more people pay the tax that is due rather than looking at the rates.

[Baroness Kramer (LD)]

My Lords, despite its expanded powers, HMRC is shockingly poor at collecting VAT from overseas sellers. The number has been 4% of the amount that it is owed, and if I understand the Minister’s numbers, it will not even attempt to get the figure up to 10%. As we go through the Brexit process we run the risk that another 27 countries are going to fall into the same overseas sellers category without the single market and the ECJ to ensure that we can collect VAT from entities that are based elsewhere but selling in the UK. What does he anticipate will be the consequence of that?

[Lord Bates]

We have to recognise that the UK has the largest online marketplace in the EU. We also need to recognise that beyond the EU, this is a global issue. Most of the goods coming in are actually from outside the EU, and that is why the G20 and OECD base erosion and profit shifting initiatives are so important, as well as moving our tax system on to a digital basis so that we can ensure that digital businesses pay the correct amount of tax due.