|Meg Hillier was
also in the Global Tax 50
The UK's Public Accounts Committee (PAC), chaired by Meg
Hillier, has had a busy year – scrutinising all
aspects of public spending including Brexit.
But while any discussion of the UK's exit from the EU will
draw media attention, it is perhaps the PAC's admonishment of
online marketplaces eBay and Amazon that has raised the most
eyebrows within tax circles.
In a report published on October 18 2017, the PAC slammed
– not for the first time – the UK's HM
Revenue & Customs for not doing enough to crack down on tax
While in the past HMRC has come under fire for so-called
'sweetheart deals' with large companies, this time the PAC's
ire was directed at its unwillingness to investigate sellers on
Amazon in particular, with the committee accusing HMRC of
"playing a game of cat and mouse" with foreign sellers.
"Online VAT fraud is hugely damaging yet, as online sales
continue to grow, the response of HMRC and the marketplaces
where fraudsters operate has been dismal," Hillier said when
the report was released.
For years, sellers have been operating on online platforms
without valid VAT numbers, selling imported stock from
warehouses within the UK and paying no VAT. This distorts the
market, skewing the playing field in favour of fraudulent
foreign sellers while brick-and-mortar shops face decline.
"Online marketplaces tell us they are committed to removing
'bad actors', yet that sentiment rings hollow when those same
marketplaces continue to profit from the actions of rogue
traders," added Hillier. "HMRC needs to be far tougher in
protecting the interests of British businesses and taxpayers.
As a priority it must inject more urgency into enforcement
action. But it should also push the case for further new
Proving the power the opposition party, and committee
scrutiny generally, can have to influence a weak minority
government – Hillier herself is a Labour and
Co-operative MP – legislation was introduced in the UK
budget to this effect.
The measure will "enable HMRC to hold online marketplaces
jointly and severally liable for any unpaid VAT of a non-UK
business arising from sales of goods in the UK via that online
marketplace where that marketplace knew or should have known
that the non-UK business should be registered for VAT in the
UK," according to a policy paper published on November 22.
As online sales continue to increase, and countries around
the world are at a critical juncture on how to levy and collect
VAT on these sales. The OECD is ascertaining to what extent
online platforms can be enlisted to collect VAT, and the EU is
also making strides in this area.
Brexit and the customs problem
When mentioning the EU, it is impossible to ignore Brexit
– an issue upon which Hillier has been able to offer
an independent and more realistic opinion.
In recent revelations, it has emerged that David Davis, the
UK's secretary of state for exiting the European Union, has not
tasked his department with undertaking a formal assessment of
the effect of leaving the EU customs union.
Despite this, it has been the government's position that
leaving the customs union is the right thing to do until, very
recently, it appeared to finally agree to maintain regulatory
harmony with the EU on customs issues.
The UK has released a white paper examining the
possibilities for customs post-Brexit, though it contains
– as with most of the UK's plans on Brexit –
scant detail, particularly on the issue of the border between
the UK and Ireland – an issue that should be solved by
the deal struck on December 8.
Hillier, for her part, is more realistic about the customs
union than anybody British who is actually involved with
"Failure to have a viable customs system in place before the
UK's planned exit from the EU would wreak havoc for UK
business, trade and our international reputation," she said in
November before the Irish border issue came to light.
She has said that HMRC, which has suffered cuts to its
budget by successive Conservative and Labour governments,
requires more money – a relatively modest £7.3
million ($9.8 million) – to upgrade its Customs
Handling of Import & Export Freight (CHIEF) computer
system. Yet, the amount of money given to HMRC was cut once
again in this autumn's UK budget.
Without the funding it needs – which could stretch
to £450 million in the case of the most extreme form of
Brexit – "The queues [could be] 180 kilometres (111
miles) if there is a delay at the port of Dover," said Hillier.
"It could be catastrophic."
As a rare political voice of sanity on customs, UK taxpayers
can only hope the government starts to listen to Hiller and the
PAC soon – at least for as long as it refuses to carry
out its own impact assessments.
On other tax matters, the PAC provides a crucial anchor on
tax policy matters to ensure there is some accountability.