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VAT: Evasion

Volume 767: debated on Monday 21 December 2015


Asked by

To ask Her Majesty’s Government what action HM Revenue and Customs is taking to reduce VAT evasion by overseas online retailers.

My Lords, Her Majesty’s Revenue and Customs takes all forms of evasion seriously. HMRC has established a task force to undertake operational and intelligence-gathering activity to investigate this form of VAT evasion by overseas online retailers. Joint investigations with other government agencies are already under way and further targets are being identified. Contacts have been established with key commercial players in the sector and liaison continues with relevant international fiscal and law enforcement authorities.

My Lords, I thank my noble friend for that encouraging reply. As HMRC knows, for some long while Amazon and eBay have been collaborating with hundreds of overseas retailers to defraud the taxman of millions of pounds every day. It seems that HMRC has been very slow in its response. Does HMRC realise the importance of effective and speedy enforcement for the fairness of the tax system and for the protection of honest internet retailers, and why has it been so reluctant to work openly and actively with UK businesses that know this part of the internet backwards and are in a position to help it make its enforcement effective and speedy?

My Lords, HMRC certainly engages with other businesses, in particular with online businesses, and has dedicated customer relationship managers. A meeting with the top online retailers at a very senior level took place only last month. HMRC has dedicated 25% of its customs and international trade operational resource to this problem and has set up a national task force to deal with it.

My Lords, ever since 2010, when this Chancellor came into office, I have been astonished that ideology has triumphed over rationality and that the Government, while purporting to have a campaign against tax evasion, are slashing the staff numbers in the Inland Revenue. Can the Minister give an assurance today that the drastic cuts proposed for the Inland Revenue will not result in the dismissal of any staff whose returns to the Revenue are greater than the costs of their employment?

My Lords, in the spending review the Chancellor confirmed that HMRC is making savings of 18% in its own budget through efficiencies. Of course, in this digital age we do not need taxpayers to pay for paper processing or 170 separate tax offices. However, the Government are reinvesting £1.3 billion of their savings in HMRC to transform it into one of the most digitally advanced tax administrations in the world.

My Lords, I declare an interest as a director of a chain of retailers with 200 shops and a member of the Chartered Institute of Taxation. The problem is with non-established taxable persons. The solution is either to implement Article 14 properly or to bring in regulation—which we are allowed to do by derogation because it is evasion—and push the problem back to the retailers so that they police the evasion of tax.

My Lords, on whether online platforms should be made liable for VAT and duty, HMRC is looking at all possible solutions now and cannot rule anything in or anything out.

My Lords, is the noble Lord aware that some years ago—10 years ago, I think—one of the sub-committees of the European Union Committee looked at e-commerce, and we were astonished to find that there were almost no data within Europe? I know the issue goes wider than Europe, but that is one area where transfer pricing is a big issue. One cannot be surprised, therefore, that multinationals run rings around HMRC. Will the noble Lord look into this question of data collection so that the Inland Revenue data match the Board of Trade data on how much e-commerce there is, which is not the case now, rather than it being treated as insignificant in numerical terms?

The noble Lord is absolutely right to identify data as one of the crucial enforcement tools. The task force has been set up, first, to enable cross-government co-operation with other government agencies and, secondly, to look at issues such as data.

My Lords, have the Government considered a packaging tax on these companies to discourage the wasteful use of wrappings and to contribute to the cost of their disposal?

My Lords, that is some way from the subject of VAT evasion. I am not aware that the Chancellor has considered a packaging tax; if he has, he has not informed me.

My Lords, in answer to my noble friend Lord Davies, the Minister referred to efficiency savings. When the current level of efficiency is improved, how long will people have to wait for telephone calls to be answered, or will they have to wait longer?

Obviously the idea is that they will not have to wait longer. I think everyone at HMRC has acknowledged that the service provided to individual taxpayers was substandard. That is why it recruited more people and has more people in training. HMRC expects that the service will be improved, as do we all.

My Lords, has the Minister had the opportunity to look at John Swinney’s first Scottish budget using the extensive tax powers that have already been devolved to Scotland? He used none of those powers to carry out his so-called anti-austerity programme. In view of the fact that we are now being asked to give the Scottish Government even more powers, will the Government support the amendment to the Scotland Bill put forward by my noble friend Lord Maxton to the effect that if the Scottish Government do not use those powers, they should lose them?

My Lords, again, that is some way from VAT evasion. I am afraid that I have to say to the noble Lord that I have not studied John Swinney’s budget very carefully.