Updated: Apr 11
Millions of new businesses; billions in missing taxes!
Frustrated tax authorities in the UK, Europe and the US are struggling to recover billions in missing VAT and sales tax from millions of e-commerce sellers. At best it is a lack of understanding of the obligation to register in other states. But a ballooning proportion is down to tax evasion.
So the tax agencies are making a new collections friend – global online marketplaces. And they won’t stop there in getting others to mop-up missing taxes; next up are payment providers.
Online sellers operating under the tax radar
Online marketplaces can make anyone an entrepreneur – no need for lots of stocks or a shop. And these new businesses can ‘go global’ just by clicking the consent forms of the marketplaces’ T&C’s. However, these foreign and out-of-state traders escape the traditional tax net of tax agencies. The result is an estimated £1.5billion missing e-commerce VAT in the UK, and a €5billion VAT gap in the EU. In the US, where the Supreme Court Wayfair ruling last year freed states to tax out-of-state sellers, the taxes up for grabs are estimated at $33billion per annum.
European and US tax authorities are struggling with the overwhelming burden of attempting to detect and register these international businesses. Meantime, they have enviously looked at the huge transactional data lakes of the marketplaces – with the all the tax calculation information and sellers’ details – and decided to make tax compliance their problem, too..
Governments co-opt marketplaces on e-commerce tax evasion
In the past twelve months, governments around the world have implemented or lined-up legislation to impose tax compliance obligations on the marketplaces. In particular, they are looking at platforms that have evolved from simple listings into becoming ‘facilitators’. A marketplace facilitator is an online service that sells third-party merchants’ products and services and accepts money from customers on their behalf. Websites like Amazon, eBay, Etsy, Alibaba, Otto and eBay are the best-known examples.