What is the 'VAT escape' problem with Chinese sellers rampant on Amazon and eBay?

In EU countries, it is common to collect value added tax (VAT) in a form that adds to the item price when selling goods. However, in online shopping Amazon and eBay, there are many Chinese cellar selling VAT without including price, and EU countries missed taxes of hundreds of billions of yen.

How Amazon and eBay became a tax haven for Chinese sellers - The Verge
https://www.theverge.com/2018/9/4/17796118/amazon-ebay-chinese-sellers-tax-fraud-haven

Mr. Michael (pseudonym) living in Germany purchased a product of 8.99 euros (about 1200 yen) in Amazon (Amazon.de) in Germany in August 2018. Mr. Michael, a prime member, was very satisfied to purchase the product cheaply for shipping costs, but the receipt / invoice that should have been enclosed in the item was not included. So I contacted the seller named Cseein and ordered the delivery note, but I noticed that it is different from general price notation.

Normally, when you purchase products online in the EU area, three items are written in the invoice, the price of the item, the amount of VAT, the total amount (amount paid), but Cseein's invoice contains the description of VAT There was no VAT identification number. This was suspecting that Cseein did not collect VAT, that is, it did not pay VAT to EU. The address of China / Guangdong province was stated in Cseein's invoice.

When Natalie Harksen, an attorney at AWB in Germany, contacted Cseein, "We have paid VAT to Britain for all the goods we sell in the EU, and we will receive approval immediately" It is said that it was. As Mr. Harksen inferred, Cseein misunderstood that he received an inquiry about the refund of the VAT from the customer, he said that he replied to such a reply. "They seem to have no knowledge of EU's tax laws at all," said Hursen lawyer.

In the EU, obligations are imposed on the seller of goods to report and pay the collected VAT. This is true for online shopping such as Amazon, but in thousands of Chinese vendors selling products at Amazon and eBay's marketplace, there are cases where paying VAT is rampant.

According to Marc Steire, a consultant dedicated to e-commerce, 15.000 Chinese sellers are registered in Amazon.de, one-third of which has the VAT registration number (VAT number ) It is said that it does not specify clearly. According to Mr. Steia, even if the VAT number is explicitly stated, there are many cases that it is ineffective. Mr. Steia estimates that approximately 10,000 Chinese sellers do not collect and pay VAT only on Amazon.de. According to the German Federal Ministry of Finance, tax revenues of several hundred million euros (tens of billions of yen) are lost annually because of "VAT escape" where the seller does not collect VAT.

The fact that Chinese sellers do not collect VAT is not only a problem for the taxation of EU countries but also in terms of fairness in online sales within the EU area. A true seller sells products at a price including VAT even though it is on-line sales, which is causing a situation in which we can not compete with price competition with Chinese buyers selling products at a price without VAT. Martin (a pseudonym), who has been selling bags for many years on Amazon and eBay, said, "We sold about 10,000 small bags for toilets at Amazon's marketplace, which now only sells 400 pieces a year "It says that it is inferior in competition with the Chinese seller who sells without VAT.

A seller suffering disadvantage like Mr. Martin is pointing criticism against enterprises that provide platforms such as Amazon and eBay as being allowed to escape VAT by neglecting management. In response to Verge 's inquiries, Amazon notified the seller to comply with the VAT tax system and said that they are providing guidance and tools. If there is a notice from the German tax office that the seller is not compliant with VAT, it is said that the Amazon side is also working on the countermeasure when closing the account promptly.

by Ben Mortimer

Already in the UK, in order to eliminate VAT escape and regain the fairness of the online market, we are implementing full-scale VAT escape measures, including administrative guidance to four major online shopping companies such as Amazon and eBay. Thanks to strengthening management on the platform side and strengthening the collection of taxes in the EU countries, the pressure on Chinese sellers that escape VAT is gradually increasing.

However, as China's largest e-commerce company, Alibaba, continues to expand its business scale in the EU area, there is also the possibility that Chinese sellers will be able to sell online in the EU in a "VAT free" state It seems that the troubles of the EU countries will not run out.