eBay boss issues warning to Labour government over online tax crackdown

Small British enterprises must not be "unfairly" disadvantaged should the government proceed with proposed reforms to how tax is collected across online marketplaces, the head of eBay UK has warned.

It comes amid reports that Chancellor John Healey plans to use his upcoming Budget to make digital platforms directly responsible for collecting VAT owed by all merchants trading on their sites.

While platforms are currently required to collect VAT on sales made by overseas sellers to UK consumers, some foreign companies reportedly bypass this regulation by utilising shell companies.

Under the anticipated changes, online marketplaces would need to gather VAT for any retailer on their platform with an annual turnover exceeding £90,000, regardless of where the business is based.

The overhaul is expected to raise as much as £1 billion, helping to fund reductions in business rates for physical storefronts across UK high streets.

Eve Williams, vice president and general manager at eBay UK, stressed that it is essential for any tax overhaul to "definitely" shield smaller UK businesses from harm.

She told the Press Association news agency: “We strongly support that we ensure overseas sellers meet their legal and tax obligations, because I want to make sure our domestic sellers in the UK get the fairest chance to succeed as well, and that any of these tax changes that are coming in definitely protect small UK businesses.”

She said eBay had held discussions with the Treasury on how to protect growth and ensure small businesses were not “unfairly” affected by any tax crackdown.

Ms Williams continued: “Often, it is those really tight kinds of thresholds that inhibit people’s growth and so thresholds around things like VAT, around national insurance for employees, that are the things that actually stop growth.

“And so what we’ve been talking to the government about and the Chancellor is how do we make sure that everything we’re looking at, and any online sales taxes that might come in place and any new rules… are there things that could hinder small businesses and how do we make sure nothing that comes into place are things that could put people off?

“Because we want to make sure we’re just continuing to see growth.”

She added: “The Chancellor’s got a big challenge ahead to make sure they are taxing the right things, to make sure they’ve got the investment in place.”

A report has been published by eBay highlighting how the potential of small businesses was held back by “persistent productivity gaps and stark regional imbalances”.

The research found 31 of the 40 areas with the highest concentrations of eBay small business activity in the UK had a gross domestic product (GDP) per head below the national average.

Ms Williams told PA it showed online entrepreneurship was developing beyond the expected economic hotspots, and there were “hidden” high streets and businesses which could grow further if they had the confidence and resources to do so.

She said this could be addressed by placing small businesses’ growth at the heart of the government’s economic strategy and raising awareness of the benefits of entrepreneurship.

She said measures including increasing the trading allowance and supporting low-value imports into the European Union could also help support small businesses’ growth.

The trading allowance is a UK tax exemption that allows individuals to earn up to £1,000 per tax year from self-employment, casual services such as baby-sitting or hiring out personal equipment tax-free.

Ms Williams said the allowance should be increased to £3,000 to “make it easier for people to test their business ideas and start earning money”.

Ahead of the Budget on 28 October, the report called on ministers and regional mayors to put small online businesses at the centre of local growth plans, to attract new investment and help existing small enterprises develop.