Sunday, 23 January, 2022

E-commerce caught up by the tax authorities

It was expected, it happened: in 2019, French e-commerce crossed 100 billion euros in sales. La Fevad, federation of the sector, trumpeted the news on February 5. In twenty years, the sector’s turnover has multiplied by 150. A boon for the State? Not quite. According to an unpublished report from the General Inspectorate of Finance (IGF), unveiled on December 9, this sector would suffer massive VAT fraud. Electronics at reduced prices, iPhone at knockdown prices… There are as many good deals as they are doubtful on the Internet: if they are so attractive, it is because they are sold by thousands of small foreign merchants, often Chinese, who do not pay VAT. However, “the VAT is the tax which brings the most to the State, with more than 50% of the tax revenues”, recalls Elvire Tardivon Lorizon, associate lawyer with Grant Thornton Law firm.

Distortion of competition

The phenomenon is not new, but it has embraced the dizzying rise of the marketplaces. This part of e-commerce sites such as Cdiscount, Amazon or Fnac-Darty which connects consumers to sellers around the world now accounts for more than 30% of their sales. “The market place has solved the problem of the depth of the offer and that of the economic model, thanks to a commission on sales”, points out Emmanuel Grenier, CEO of Cdiscount, who is careful not to communicate the share of Chinese traders . Same silence among the competitors.

For a long time, the extent of VAT fraud thus remained difficult to quantify. Until this IGF report. According to its editors, “the controls of the National Directorate of Fiscal Investigations revealed that 98% of companies operating in controlled market places were not registered and did not pay VAT”. Marc Lolivier, general delegate of Fevad, is offended: “Marketplaces only account for 15% to 20% of the 50 billion euros of e-commerce products. And only a few have recourse to Chinese sellers who do not pay VAT. ” Anecdotal phenomenon? Not sure. According to Brussels, the shortfall would reach 7 billion euros for the European Union. Added to this is the distortion of competition suffered by good students: their prices are mechanically 20% higher than those of fraudsters.

So, just as e-commerce peaks, it is being called to order. For the first time, this January 31, the platforms had to communicate to the tax authorities the turnover achieved by each of their sellers. They will have to do this every year. Their official reaction? “We actively support the efforts of the French authorities to improve VAT collection,” said an Amazon spokesperson. “It’s very good,” said Emmanuel Grenier. Behind the scenes, however, the tension is palpable. “Online platforms are worried about their joint and several liability for the payment of VAT due by third-party sellers, breathes Elvire Tardivon Lorizon. Indeed, the tax administration can now search for VAT payment platforms when their users have failed to meet their tax obligations. This new procedure is obviously easier to apply than to get hold of Chinese fraudsters… “

Alibaba in ambush

That’s not all. From January 1, 2021, a European directive will require platforms to pay VAT themselves on products from outside Europe. The problem: “The administrative burden and the financial burden that this will entail, continues the lawyer, especially for small platforms that do not have a legal department and will have to seek advice.” In the event of failure, the sanctions will drop. From the end of 2018, e-commerce players therefore began to require foreign sellers to register for VAT. While alerting to the risk “that merchants leave European platforms, favoring foreign players who do not play the game”, warns Emmanuel Grenier. The big winner would then be Chinese. Its name: Alibaba.

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