Online marketplaces such as Amazon and Ebay have been urged to take responsibility for VAT collection and remittance in the UK.
Trade body the Association of Accounting Technicians (AAT) today called on the government to make tech firms liable for the goods tax, citing concerns about growing fraud.
HMRC has estimated that VAT fraud by sellers using online marketplaces costs the exchequer more than £1bn per year.
The government has tightened up laws requiring firms such as Amazon, Ebay and Etsy to better police their platforms, and they are now jointly liable for ensuring businesses on their platforms are paying the correct tax.
However, the AAT said there was a lack of evidence to show these measures had been effective, and called for the platforms to take full liability, mirroring policies in countries including the US, Australia and New Zealand.
“The impact on the taxpayer is significant because billions are not being paid, that’s billions that cannot be invested in public services as a result,” said Adam Harper, AAT director of strategy and professional standards.
“There is arguably an even bigger impact on the success of legitimate small businesses who sell online. This is because they are competing against fraudsters who can offer an unjustified and illegal 20 per cent VAT saving.”
The EU has passed new legislation making firms liable for VAT collection, but they will not come into force until January 2021, when the UK has left the bloc.