Online tax evasion growing and ‘very big issue’, warns Revenue

Tax evasion by online retailers is emerging as a serious and growing risk, Lin Homer, the outgoing chief executive of HM Revenue & Customs, warned on Wednesday.
The illegal sales of tax-free goods over the internet was “a very big issue”, Ms Homer told members of the Commons public accounts committee. British retailers say they are being undercut by foreign companies — particularly from China — which sell their products through e-retailers such as eBay and Amazon but fail to charge VAT.

Dame Lin said the e-retailers were not accountable for the evaded tax but added: “We do feel, just as with beer and alcohol, that those people who manage the supply chain should ensure enough diligence is built into it. Marketplace providers have responsibilities.”
Dame Lin, who this week announced she was stepping down in April, said the Revenue had been investigating online VAT evasion since last spring and was considering the need for policy as well as behavioural changes within the supply chain.
About £500,000 of goods had been seized before Christmas because they were not correctly imported, she said, adding that ordinary buyers were being drawn into the fraud. “Individuals unknowingly are becoming the importers of goods [and thus] the person responsible for excise and VAT, thinking they are just the purchaser. That is the new challenge we are looking at.”
Britain is the first country to experience and spot this form of evasion, she said. “Our online shopping habits as a country are changing faster than anyone else but France and Germany are also prepared to look at this with us. Some of this may well need international change as well.”
Dame Lin faced tough questioning over the tax authority’s approach to criminal investigations. MPs suggested the government’s decision last summer to set a target to prosecute 100 wealthy people was a sign that individuals had wrongly escaped prosecutions in the past.
Stephen Phillips, a Conservative MP, said the Revenue had sent out a message: evade your taxes and you will not be prosecuted. “Very wealthy people are not being prosecuted,” he added.

Dame Lin rejected the assertion the Revenue had ignored rich people and gone after the poor. “I do not want the message to go out there that there are certain people we would not go after,” she said.
The MPs also challenged her over customer service, which Meg Hillier, chair of the committee, said generated more letters to its members than any other issue.

Dame Lin insisted the Revenue’s performance had improved significantly since the first half of last year, when as many as one in three phone calls went unanswered. The tax body said its call-handling rates in December 2015 were almost 90 per cent, with an average waiting time of six minutes.
MPs also voiced concern about the loss of experienced staff as a result of the sweeping restructuring announced at the end of last year, which will result in the closure of four out of five Revenue offices and the establishment of 13 new regional centres.
Dame Lin said the Revenue had taken into account the need to retain experienced staff in its plan. More than 90 per cent of the workforce would be within a reasonable travel distance of the new offices, she said.