Both Amazon and eBay have recently been in the news having been called up by Parliament’s public accounts committee (PAC) for failing to enforce the evasion of tax by overseas sellers. Caroline Flint, a Labour former minister said, “You are taking money that has been made fraudulently.” (Source)
Essentially the failure of overseas businesses to pay VAT means they are pocketing an additional 17-23% across the EU compared with local sellers who are compliant. Putting many British and EU companies out of business as a result.
Amazon, eBay and everyone else
The big marketplaces such as Amazon and eBay do not want to get involved in tax and make it clear when a new merchant signs up, that the business is liable to declare and pay the correct taxes to the correct authorities. However, this is a lot easier said than done.
To be fair to an individual marketplace, it would be impossible for them to work out your VAT liability as a seller, because you are most likely selling in more than one place. Today’s online seller sells via a plethora of channels. They may be selling on Amazon, eBay, Tesco, Mirakl, Shopify to name a few and have their own bricks and mortar store. There are literally hundreds of marketplaces in just Europe alone from which you can list and sell your products.
Many software providers make your life easier as a seller to control, manage and list your inventory across these channels, however, they fall short on directly integrating with your accounting software, which also is an impossible task. Accounting software was not designed with marketplaces in mind, so as an SME you are faced with the prospect of spending a lot of money on a full ERP system customised for your business. For most SME’s selling via marketplaces this is not a sensible proposition.
Amazon VAT Reports
A new space is emerging, where these problems are being tackled head-on. Amazon is trying; forming partnerships with Accountancy Firms and VAT agencies to help meet the needs of VAT compliance, this is all well and good if you only sell on Amazon. They also require you to sign up to the Pan-EU program which requires registrations in 7 countries. Not everybody fits into this bracket and most sell on more channels than just Amazon.
The need now is how to handle big data, how to collate all those microtransactions happening in different marketplaces in different currencies. From what country was a product shipped? Surely in 2017, this should not be a manual task. Financial technology products are being developed, such as www.crossbordervat.com. Channel data is collected via API, the data normalised, FX rates applied and finally VAT compliance rules resulting in a simple excel output ready for your accountant.