Germany Steps up Against Seller Tax-Fraud on Online Marketplaces
EU leaders in opinion that low tax rates as a source of resentment about globalization and as unfair for European companies
Germany is considering tightening regulation to hold the likes of online marketplaces such as Amazon and eBay accountable for lost taxes from foreign-partner vendors.
The German Finance Ministry wants multinationals like Google, Amazon, and others to be taxed in their country based on their revenues, rather than only profits as now. The Ministry is also looking for online retailers accountable for vendors who haven’t registered with German tax authorities. If the online retailers fail to block vendors that don’t pay Value Added Tax (VAT), they’d be obligatory to pay the tax themselves.
The new rules state “hold online marketplaces accountable” for lost taxes, which says “it’s necessary to ensure VAT taxing and is therefore in the public interest.”
It is yet unclear which vendors in concerns, but for now, these merchants wouldn’t be able to sell their goods. The problem is that they basically import goods from countries like China, stock these goods in Amazon warehouses and directly sell to the end-consumer. Even though German authorities demands are clear, do not pay VAT and goods are not exanimated on hazardous substances or other European safety regulations.
Amazon is liable for tax evasion on their platform and the marketplace by 1st Jan 2019. New sellers need to provide the required VAT tax information before shipping goods.
Back in last year, French finance minister Bruno Le Maire in a Facebook Live chat said that France and Germany want to introduce a new tax for internet giants.
Turmoil in China
At the beginning of the year, many large Chinese dealers have been suspended on Amazon.de. They received a message from Amazon suggesting that the German tax office is targeting third-country merchants operating illegally on Amazon.
There was a great deal of unease among the big Chinese Amazon dealers. Millions of FBA inventories and merchant accounts on Amazon have been confiscated at the request of the German tax authorities and seller accounts have been suspended.
Obviously, the tax office became active shortly before the end of the last year and confiscated stocks and assets of large Chinese traders. This resulted in an immediate suspension of the Amazon accounts.
EU wide regulation
The law says that Amazon and other e-com marketplaces have to prove that there is a sales tax. If a seller cannot specify this, the marketplace will most likely exclude it directly.
But does this really stop the vendors from paying taxes? As per estimates, up to one billion euro, which have been evaded so far in taxes, will likely to be questioned for the return to government pool.
Internet giants in Europe have been under fire for some time because of the use of tax structures, in which they pay tax in countries with low tax rates on turnover generated in other European countries. The new plan is intended to make such constructions impossible. Germany wants to use the turnover of Internet giants as a reference point to determine how much tax the companies have to pay in all European countries where they generate the turnover.
It is not the first time that such a plan is proposed. Similar initiatives have previously been discussed at European level and presented within the Organization for Economic Co-operation and Development (OECD) group for advanced economies. However, these plans have not led to the introduction of new legislation.