Report unearths £1.6bn VAT digital sales loophole
Fresh research has identified a gaping £1.6bn hole in Britain’s VAT collection structure for digital sales, a loophole which (if plugged) could have financed the Olympic Games.
Greenwich Consulting found that British consumers purchasing items from overseas based suppliers cost the UK Treasury £10bn in lost revenue between 2008 and 2014, more than the £9bn cost of the London Games.
The revelations have piled additional pressure on multinationals operating in Britain such as Amazon, Starbucks and Google to pay more tax and forced the Chancellor to urge HMRC ro clamp down more forcefully on tax dodgers.
Commenting on the matter the prime minister said: "The issue for government is how we tackle that tax avoidance … What we have to do in government is make sure we are tackling that kind of aggressive tax avoidance. We are doing that in a number of ways. We are bringing in a general anti-avoidance rule, we are working with other countries."
An HMRC spokesman said: "It is a natural consequence of the VAT rules rather than any lack of compliance that a business in say, Germany, supplying such services to UK customers will account for VAT in Germany and not in the UK.
"Businesses have the freedom to establish themselves in whichever member state they wish. However, some UK businesses claimed to have moved their operations to other member states in order to benefit from lower VAT rates where in reality the supplies were still made from the UK. HMRC has successfully challenged such arrangements."