Back in Parliament and I was absolutely delighted to be elected on to the Public Accounts Committee. In my opinion, this Committee plays a really important role as it scrutinises the value for money of public spending and generally holds the government and its civil servants to account for the delivery of public services. As the Committee follows the taxpayers’ pound, its remit has spread beyond government departments to also examine public bodies and private companies providing public services. In more recent years it has also considered the role of HMRC and its effectiveness at closing the tax gap – what tax is collected versus what actually could be collected.
The first Committee of this Parliament tackled the subject of some overseas sellers (outside of the EU) who fail to charge VAT on online sales. This may be due to deliberate fraud, a mistake, or because they do not understand the rules….Whatever the cause it creates two main problems; firstly it is estimated that we lose approximately £1-1.5 billion in tax revenue and secondly this puts other retailers at a 20% price disadvantage which has caused some local businesses to suffer and even to go under.
Online sales accounted for 14.5% of all UK retail sales in 2016, up from 2% in 2006 so the scale of the problem has been growing as more of us buy products from companies such as Amazon and Ebay. During the Committee meeting we heard evidence from campaign groups representing retailers who pay their taxes, HMRC, plus representatives from Amazon and Ebay. It became clear during the meeting that whilst some action has been taken to close this tax avoidance loophole the scale of the problem is still massive and distorting the marketplace. Retailers find it impossible to compete with an online company from China selling low price every day goods without VAT as this 20% price advantage is sometimes more than the profit margin! This has got to be stopped and companies such as Amazon and Ebay have to play a role in properly vetting their sellers and checking they are registered for and paying VAT. Hopefully the public scrutiny will ensure they move quickly to put adequate systems in place to stamp out VAT fraud.