UK lawmakers say Amazon, eBay not doing enough to combat VAT fraud

LONDON (Reuters) – A UK parliamentary report has criticized Amazon and eBay for not doing enough to prevent tax fraud on their online market places and recommended the government hold the online giants accountable for tax lost to evaders.

In April the National Audit Office said Britain was losing up to 1 billion pounds ($ 1.3 billion) a year in value-added-tax (VAT) because of fraud or error by frequently China-based sellers on eBay and Amazon.

The Public Accounts Committee published the results of an investigation into the problem on Wednesday which said the companies had been slow to take even basic actions to tackle fraud, such as requesting VAT registration numbers.

The investigation also said the companies had resisted sharing data with Her Majesty’s Revenue & Customs (HMRC), the UK tax authority.

“These people are profiting from VAT fraud, because they still take their commission,” said member of parliament Meg Hillier, chairwoman of the committee.

The companies say they take the problem seriously. A spokeswoman for eBay said it wants a fair marketplace for all its buyers and sellers. An Amazon spokesman said the company was reviewing the committee’s recommendations.

Hillier said the fraud was costing jobs at UK online retailers who were being undercut by rivals not charging VAT.

HMRC, which estimates total VAT fraud involving all online marketplaces of up to 1.5 billion pounds, had also not pursued the problem with vigor and had failed to use all the powers at its disposal, the report said.

The government last year introduced measures to cut down on online VAT fraud, including the potential for marketplaces to be held liable for unpaid VAT where they had ignored calls to remove illegal sellers.

However, the committee said these measures were not strong enough and indeed potentially totally ineffective.

The committee said VAT was regularly being evaded on goods stored in UK-based “fulfillment centers” or warehouses and dispatched by UK-based companies including Amazon’s UK arm.

In the past the frauds often involved goods dispatches direct from places such as China.

Reporting by Tom Bergin, editing by David Evans

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Amazon drops encryption feature in Fire tablet software

(Reuters) – Amazon has quietly dropped support for disk encryption on its Fire tablets, saying the feature that secures devices by scrambling data was little used by customers.

Privacy advocates and some users criticized the move, which came to light on Thursday even as Apple was waging an unprecedented legal battle over U.S. government demands that the iPhone maker help unlock an encrypted phone used by San Bernardino shooter Rizwan Farook.

On-device encryption scrambles data so that the device can only be accessed if the user enters the correct password. Cryptologist Bruce Schneier said Amazon’s move to remove the feature was “stupid” and called on the company to restore it.

“Hopefully the market will tell them to do otherwise,” he said.

Amazon joined other major technology companies in filing an amicus brief supporting Apple on Thursday, asking a federal judge to overturn a court order requiring Apple to create software tools to unlock Farook’s phone.

Amazon spokeswoman Robin Handaly said in an email that the company had removed theencryption feature for Fire tablets in the fall when it launched Fire OS 5, a new version of its tablet operating system.

“It was a feature few customers were actually using,” she said, adding that Fire tablets’ communication with the company’s cloud meets its “high standards for privacy and security including appropriate use of encryption.”

Encryption expert Dan Guido said that Amazon may have eliminated the feature to cut component costs for tablets that sell for as low as $ 50.

But digital privacy advocates and customers said those arguments were not good enough reasons for discontinuing the feature.

“Removing device encryption due to lack of customer use is an incredibly poor excuse for weakening the security of those customers that did use the feature,” said Jeremy Gillula, staff technologist with the Electronic Frontier Foundation.

“Given that the information stored on a tablet can be just as sensitive as that stored on a phone or on a computer, Amazon should instead be pushing to make device encryption the default – not removing it,” Gillula said.

David Scovetta, a security analyst who owns two Kindle e-readers as well as Amazon’s TV set-top box, said he is now wary of buying new gadgets from the company.

“Amazon could just as easily be encouraging its users to adopt it rather than remove it as a feature. That’s a massive step backwards,” he said.

(By Jim Finkle and Mari Saito. Editing by Stephen R. Trousdale and David Gregorio)



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