The tax authorities are using a website with no budget or staff to help tackle £1.5 billion of online VAT avoidance.
The vatfraud.org website, which is run entirely by volunteers, collects evidence of foreign retailers using Amazon and eBay to sell goods in the UK without paying the duty. In the past four months HMRC investigators have spent 70 hours on the website and visited it more than 1,200 times.
HMRC has an annual budget of £22.5 million to tackle VAT fraud, which its figures suggest cost the taxpayer £1.5 billion a year.
The site its staff are visiting was set up in 2015 by the owner of a small online business whose sales fell by almost half after Chinese companies started selling the same products at ‘impossibly’ low prices online. It relies on information provided by other sellers.
The extent of HMRC’s dependence on the site was uncovered after campaigners noticed that after foreign sellers were featured on vatfraud.org their sales pages disappeared from Amazon.
When they investigated, the people running the site discovered that computer internet addresses linked to HMRC were by far the biggest users, spending more than 170 hours on vatfraud.org over thousands of sessions.
Of the top 20 page views by HMRC, nine were case studies of VAT fraud involving sellers that have since been taken down by Amazon and eBay.
The analysis also showed that the taxman had started using the site after government auditors began investigating HMRC itself over whether it was doing enough to tackle the fraud. HMRC usage also fell markedly during the general election campaign this year.
Richard Allen, from the campaign group Retailers Against VAT Abuse Schemes, said that while they were pleased that tax investigators were taking their work seriously, they were concerned that it appeared to have taken an inquiry by the National Audit Office to prompt HMRC into action.
“There is nothing that we have done that could not have been done by them,” he said. “There is still much more they should be doing.”
This year MPs were told that Amazon stocked, dispatched and collected the money from products sold by 23,000 non-EU companies from its British warehouses, many of which were suspected of avoiding the 20 per cent tax.
Amazon does not require its sellers to have valid VAT numbers posted on the site, but the company says it fully cooperates with HMRC by removing sellers suspected of not complying with VAT rules.
An HMRC spokesman said: “It is right that we use all intelligence and information available to us to make sure everyone is paying their fair share. We introduced tough new rules last year allowing us to hold online marketplaces liable for unpaid VAT by overseas sellers and since then we have seen a ten-fold rise in the number of sellers registering for VAT. The new reforms will secure an extra £875 million tax.”