Amazon and eBay are under investigation by tax officials on whether the companies can be held responsible for ballooning VAT fraud associated with lots of small overseas sellers now dominating sales of many popular items. It turned out that lots of high-value gifts including electronic gadgets are being sold on Amazon’s website without VAT being charged.

In advance of the Christmas rush, an increasing number of small overseas sellers have imported goods into the Amazon’s warehouses in the United Kingdom. These VAT-free sellers usually have virtual office or residential addresses in China, Hong Kong and the United States, and the UK tax officials know little about them. Moreover, in November eBay was going to report a number of sellers on its site to tax authorities after discovering that some Chinese traders provide invalid VAT numbers or share, or clone, numbers belonging to other companies.

As a result, British tax authorities have set up a task force to investigate VAT evasion by overseas online sellers and have already held urgent meetings with senior figures at Amazon and eBay. The companies deny that they had been collaborating with such overseas retailers to defraud the taxman of millions of pounds, pointing out that responsibility for charging the correct VAT lies with sellers, not the platform. The duty of the website is just to help sellers understand their tax obligations, so they can’t be held liable in cases of evasion.

In respond, the officials admit that the current VAT rules belong to a pre-Internet age and are now open to widespread abuse, so online platforms should perhaps be made liable for VAT.