Because markets work

The Guardian has reported that:

Amazon is quietly rooting out many of its Chinese traders who do not hold UK VAT numbers to try to protect itself from tax evasion inquiries later this year when new HMRC powers come into force, the Guardian has learned.

The online retailer has been conducting a review of sellers’ VAT compliance in the UK. It is understood to have contacted many Chinese sellers, giving them until the end of the month to provide their VAT numbers.

So here are some questions.

First, why did it take one man – indefatigable VAT campaigner Richard Allen – to make this happen?

Second, why did this only happen when Richard got Rob Marris of the Labour Treasury team on board?

And third, if Amazon knew of this risk why did they not act before now when the cost may have been £2 billion a year to the UK?

If think the first is for HMRC and the Treasury to answer, the second for David Gauke MP and the third for Amazon.

I will be happy to post replies.

The answer is exactly the same reason that markets work. Somebody potters about, observes the world, ruminates, comes up with an idea and tries it out. It’s also why planned economies don’t work – note that HMRC, Gauke, the government, Ritchie the tax campaigner and that centralised organisation Amazon (yes, as Chris Dillow repeatedly points out, corporations are islands of planning in the free market sea) did not spot it. That centre will never have enough information to be able to either understand or plan something as complex as an economy.

Some random obsessive spotted this and changed how things work. That’s as good an explanation of Ford and his moving assembly line as it is of VAT campaigning.

Markets work precisely because they tap into that distributed knowledge, not rely upon that within whatever is the governing or planning structure.

14 thoughts on “Because markets work”

  1. What a paperwork nightmare. There are two solutions here:
    1) A million Chinese companies each get a UK VAT number (and a French VAT number, a German VAT number, etc.).
    2) Amazon collects and pays the VAT on their behalf, based on the buyer’s delivery address.
    Why on earth is the government pursuing option 1?

  2. Seems Allen is almost the mirror image of a tax planner who is doing the same thing looking for various ways to comply with the law.
    The main difference is one is incentivised by stuff that can feed his family the other is doing it for love. I know your views on tax farming (a big corrupt industrial pile of no no) … but is there any wise way of incentivising/ rewarding the independent guy like Allen.

  3. As for the obsessive that caused all this–let us hope some Chinaman finds him and kicks his nosy, meddling head in.

  4. Andrew M

    There is a third option (Well let’s be honest there are a lot of options) – get rid of VAT and reduce the size of the state accordingly. That is one that Murphy is unwilling to entertain, obviously….

  5. Assuming this is Chinese traders running a uk business, then perhaps they don’t have vat numbers because they are not registered because their turnover is below the threshold. Or perhaps they are compliant. After all they are not selling to amazon. It is the customer who will get the vat invoice

  6. “Some random obsessive spotted this and changed how things work”

    No, lots of people spotted it, but kept their traps shut, because they wanted cheaper stuff from China (sans VAT). One random obsessive was enough of a snitch to go to the authorities and complain about it.

  7. I hope you’re not one of those chumps who thinks Ford invented the assembly line, Tim? It’s as daft as the notion that he paid his men enough so that they could buy his cars.

  8. Some are above threshold, some do not have threshold applied.
    But amazon does not have data on what british companies pay in VAT, they cannot learn more about foreign.

    The American companies also have their issues with VAT and collecting it, same as the Chinese. Just not usually mentioned in the media.
    China bad America good apparently. When acting the same way.

  9. “One random obsessive was enough of a snitch to go to the authorities and complain about it.”

    I think that is more than a little unfair. He was a small UK businessman whose VAT inclusive sale prices became uncompetitive due to lack of VAT charged on Channel Islands imports. Not his fault that the VAT rules fvcked over his business.

  10. corporations are islands of planning in the free market sea

    This is meaningless or wrong. It’s meaningless in the sense that all markets are planned. Every single market is merely a meeting of traders, each planning to make their own lives better in some way. If you acknowledge this, then the above statement could only be meaningful if free markets don’t exist in corporations.

    This of course is silly. Every single corporation I’ve worked for had every single transaction done voluntarily for the benefit of all involved. If at any time, you come across a transaction that you don’t think should happen or is not good for you, you are free to quit and work for another company, in the same way that in a free market if you don’t like any particular trade, you don’t have to make it. Like a free market, no one in a corporation can be coerced into doing anything.

    The planning done in a corporation is exactly the same sort as done in a free market. And done for the same reasons.

  11. Personally, I have learned to stop buying from companies located in China on Amazon. It takes forever for your stuff to get here, and it’s usually rubbish, and doesn’t last long, and when it comes to a refund they’re very slippery.

  12. Markets always work.Thats why people can’t afford house prices in London? Sounds like there is a need for a fairly basic intervention.

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