Treasury to HMRC: "Don't be too hard on Amazon"

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A newly released secret recording suggests HMRC was told by the Treasury not to be “too hard” on Amazon.

The recording is from a conversation between Guy Westhead, at the time a senior member of HMRC’s VAT policy team, and Richard Allen, a VAT tax campaigner. The audio clip has been published by tax QC Jolyon Maugham on his Waiting for Tax blog.

In the clip, Allen addressed his concerns that “ministers have some kind of agenda to basically not annoy Amazon”, pointing to the retail giant’s ardent lobbying of regulators in the US as an example.

In response, Westhead seems to acknowledge there had been some pressure from the top. “I’ve heard of that,” he replied to Allen. “I’ve heard from the Treasury; the Treasury didn’t want us to be too hard on Amazon. But I think that was a brackets ‘yet’ close brackets.”

The leaked audio comes after a recent PAC report which found that the Amazon and eBay marketplaces were being used to carry out extensive online VAT fraud, enabling foreign sellers to undercut UK businesses by up to 20%. The report chastised HMRC for being “too cautious” in its approach and not doing enough.

Asked whether the recording was an accurate reflection of how the tax authority applies the law, an HMRC spokesperson told AccountingWEB: “We would never give a company or individual preferential treatment. Multinationals must pay all taxes due and we don’t settle for less. Last year alone, HMRC secured and protected over £8bn in additional tax revenue from the largest and most complex businesses.”

They added, “HMRC has a strong track record of tackling avoidance, evasion and non-compliance and the UK has one of the lowest tax gaps in the world.”

Two-tier approach to taxation

But despite the tax authority’s insistence that there’s nothing awry, the recording will only add to the suggestion that one rule exists for multinationals and another for small businesses.

Maugham has been a prominent critic of HMRC’s perceived lax enforcement. He has commented extensively in the past that something was impeding HMRC’s motivation in pursuing major multinationals.

Speaking to AccountingWEB, Maugham said the recording bears out what many have been saying for years “about the two-tier approach to taxation operated by this government”.

“This is a very senior officer at HMRC speaking in his own field, saying very clearly and explicitly that HMRC comes under pressure from Treasury as to how it applies the law in the case of US tech companies.

“I’m sure that Treasury is persuaded that the UK benefits from it being perceived by US tech companies as a place where they can do business. How they’ve come to that view is a matter of speculation.

“What troubles me is what it means for trust in the establishment and democracy more generally, if those in positions of high authority are revealed to have been inconsistently applying the law.”

About Francois Badenhorst

Francois

I'm AccountingWEB's business editor. Feel free to get in touch with comments, tips, scoops or irreverent banter. 

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26th Jan 2018 09:53

Is anybody surprised?
Angry, disappointed and frustrated yes, but surprised?

It's time that HMRC/Treasury were forced to provide some form or real and independently verifiable calculation of cost vs tax collected.

A massive multinational might require an HMRC team of perhaps 50 more or less permanently. That might be £2m or £3m a year. If they collect 10 or 20 times that amount each year over and above the first submission of computation/return, that is good business.

Certainly better business than having a team of perhaps 400 chasing contractors for 13 years and counting, having spent probably millions on cases (they won't say how much), forcing many to bankruptcy and more to come and eventually only solving the problem with retrospective law.

Still never mind, HMRC solve the "value for money" equation each time they are asked by simply increasing the number of impacted individuals - easy.

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By DMBAcc
26th Jan 2018 10:16

makes you wonder when you see ex Ministers and senior civil servants getting directorships in companies after retirement or nice jobs on the Brussels gravy train

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26th Jan 2018 10:56

Not suprised in the least.

its a common theme with clients to not buy from Amazon marketplace to shave 10% off the price as there is no VAT receipt. Given tis all electronic and there are full records of the sales, and who got paid the cash it ought to be trivial for HMRC to get on it hard and fast, and close down the fraudsters, and force Amazon to take them off. HMRC don't do it, as they dont have the manpower or political will to solve the obvious fraud that is occuring.

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26th Jan 2018 10:57

All smacks of crony-capitalism, doesn't it?

No surprise there.

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26th Jan 2018 11:07

Now we know what TM and DT were talking about in Davos. Free trade No Tax. Better than paying to trade with the EU methinks.

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26th Jan 2018 11:12

Yes let's not be too hard on the tax/VAT dodging company that's been responsible for forcing out hundreds of retailers in books/music who did pay their VAT & tax. Not to mention the lost PAYE on all those employees who lost their jobs in those retailers..

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26th Jan 2018 11:36

Interesting. One of our people recently made an emergency purchase of a camera on Amazon (they were in the middle of a shoot and their camera was stolen). A request to Amazon for a VAT invoice produced the response that we had not actually purchased from Amazon and we should go to the company that supplied it. I have made three requests to that company and have heard nothing! We have kept records and accounted for calculated VAT on the purchase, but suspect that if we are audited our correspondence will not be sufficient to be allowed. I suspect the vast majority of sales are to individuals who would not be bothered with the lack of a VAT invoice. The scale of losses to HMRC here must be huge!

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26th Jan 2018 11:57

"Multinationals must pay all taxes due"
Can we kill this weasel phrase dead please. It is trotted out all the time to justify the FANGs not paying enough tax.

Yes, they pay the tax due under their interpretation and sometime distortion of the inadequate tax laws. What we need is a robust tax regime fit for 2018 that taxes transactions and profits where they actually arise, not where they are "booked", where some sharp accountants are able bend reality.

I have never bought anything from Luxembourg despite what Amazon tells me. I have bought it in my house or office and it come from a warehouse in Luton (or somewhere like that)

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By tedbuck
26th Jan 2018 12:40

JAMIEA4F has it dead to rights - just walk down your local street and look at the empty shops and more to come I don't doubt.
Think of the pollution from the delivery by Amazon and the like - not to mention the cost of returns. What we will end up with is no choice and when they have grabbed all the market the prices will rise and the internet will have no competition and the interaction of personal contact in shops will disappear and people won't talk to one another any more - more loneliness, more despair especially in the elderly.
Great future!

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to tedbuck
26th Jan 2018 14:32

That's how they are set up, they lost millions for years but had a lot of money behind them and aggressively forced out so many retailers. I've seen already how much they can jack up their prices once the competition is gone, and now they hardly sell anything themselves, they rely on others to supply and just take a (large) %age. The puny measures put in for charging internet sellers VAT and tax, such as they are, is too little too late. Should have done it when internet selling kicked off in the late 90's, think of the business rates the government could have raked in from all those (now) empty shops..

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26th Jan 2018 13:51

Fake News
The question was '' Is there anyone there who knows how to be hard on Amazon ?''

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26th Jan 2018 14:38

Whilst the rest of us queue up to do things properly, and continue to allow HMRC to use 'sledge hammers' to extract tax from us. A further example of weak and ineffectual Government allowing 'ruffians' to escape the 'rule of law'.
I am to old now to stand on barricades, but not too old to send correspondence , and the like, in the shape of a Molotov cocktail.

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26th Jan 2018 15:39

HRMC would be expected to treat everybody even-handedly, a rule that applies whether they’re dealing with the largest international corporation or the man on the street.

It’s a bit impenetrable, but it would appear from this recording that this is what is exactly what is being suggested.

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26th Jan 2018 15:47

Who was it that recently got a Knighthood? Of course I forgot, it was the scheister at the top of HMRC.

I have had a significant amount of criticism in the past from contributors to this publication when I say that the client comes first, the client always gets the benefit of the doubt and to hell with HMRC.

I am told that we have a "public duty" to ensure that our clients "pay their fair share of tax" etc. What a load of B******s.

And before AnnAccountant weighs in again with her sanctimonious nonsense - please do not bother.

Taxes are legalised robbery!

Ronmorris please supply the Molitov's - I will give you a hand to throw them.

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to Trethi Teg
29th Jan 2018 12:54

The criticism is no doubt well-deserved or perhaps you have an alternative to paying for things except through taxes. How would you pay for defence for example if not taxes?

Amazon gains a great deal from what taxes pay for but do everything to avoid contributing. They even sacked people in the US at an affiliate so they wouldn't have a presence in a US state and so they could avoid charging sales tax and thereby undercut their competitors' prices. This is about unfair competition not just taxes.

In a report to the report to the Securities and Exchange Commission Amazon said:

"A successful assertion by one or more states . . . that we should collect sales or other taxes on the sale of merchandise or services could . . . decrease our ability to compete with traditional retailers and otherwise harm our business."

But harming theirs is fine.

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09th Feb 2018 17:24

When I ran an Ecommerce business It really did irk me that Amazon, Google and FB could get away with paying minimal rates of tax, whilst I had to pay the full rate. Really creates a bad feeling amongst the SME entrepreneurial community.

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