“As we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns – the ones we don’t know we don’t know.” See here.
An article on the BBC website (see http://www.bbc.com/news/business-34650014) states that Amazon and eBay are jointly “liable” if they ignore VAT fraud committed by sellers on their marketplaces.
This is a timely question, because tax authorities have started looking at online payment platforms (not just at online marketplaces) to account for the vendor’s VAT. The reason is simple: the payment platform collects the money on the vendor’s behalf and therefore the platform would be a great “one-stop-shop” point for collection of VAT revenue. I am sure that more details will be made public about this approach in the course of next year.
The danger is in the “unknown known”: something that we intentionally refuse to acknowledge that we know.
For the liability of fraud, sure, if anyone is aware of VAT fraud being committed and this is not reported to the appropriate authorities, silence in itself is a liability. The question is rather how far online marketplaces should reach to identify VAT fraud committed by third parties (their customers or their customers’ customers) – what should they do to minimize risk?
First, an ongoing check of the VAT registration number (and any other identifying number) provided by the third party is already required and should be the first call of a risk management protocol. This could be tricky in situation where the seller is not a business, but an individual who incidentally sells.
Second, I am a strong proponent of the idea that a prudent online marketplace should have a strong relationship with the tax inspector. In a positive relationship the marketplace provides the inspector an overview of the sellers’ activities. I also believe that the onus is on the inspector to create such a relationship which should be mutually beneficial.
I could even picture a situation where marketplaces create an annual certification requirement for their sellers – to certify that they filed correct and timely VAT returns, if the seller would be legally required to file returns.
However, in my opinion online marketplaces can not be compelled to look into their customers (sellers) wallets to see if they indeed reported output VAT properly.