Amazon and eBay could be liable for billions of pounds in unpaid VAT if they fail to properly investigate traders using their sites to escape sales tax.

The online marketplaces could be legally required to spot the tax evasion committed by many of their overseas sellers.

UK firms say they are being put out of business by the unfair competition.

Amazon and eBay said they make all users aware of their legal obligations.

“If the scale of the fraud is as big as the anecdotal evidence indicates, then we could be talking about billions of pounds,” said Rita de la Feria, a professor in tax law at Durham University.

She says that under EU law Amazon, eBay and other online marketplaces could be held jointly liable for all unpaid VAT, along with the offending traders, if action was taken against them.

“If you knew that fraud was being committed you are liable,” she added. “If you should have known that fraud was being committed, you are liable as well.

(BBC)