Amazon had been criticised by MPs for failing to carry out proper checks.
Over 48 hours, tens of thousands of products had disappeared from the site after their suppliers were banned from using the platform. The crackdown follows a deal with HM Revenue & Customs (HMRC) this year under which online platforms including Amazon and eBay agreed to provide data and block vendors engaging in persistent tax evasion.
According to the National Audit Office, the government lost up to £1.5b last year through tax evasion by overseas companies selling goods to UK consumers without charging or accounting properly for VAT.
HMRC has estimated that non-EU sellers, mostly from China, account for 60% of the fraud. UK retailers have warned they are being put out of business by the unfair competition.
Chinese firms have taken advantage of online marketplaces to send products in bulk to the UK, where they are dispatched to consumers from warehouses. These products would usually incur VAT but Amazon has faced criticism from MPs for carrying out minimal checks, allowing abuse and fraud.
The pressure led the company to agree to the voluntary deal with HMRC. However, rivals such as Alibaba, the Chinese internet giant that is expanding its presence in the UK, have refused to sign up.
Richard Allen, from Retailers Against VAT Abuse Schemes, which helped to lead the campaign for a crackdown, said that much more needed to be done. “It should not have taken as long as it has to get where we are,” he said. “Unlike high-street sales, there is an electronic record of every VAT abuse that has taken place.”
He continued: “While Amazon has taken a step in the right direction, it needs to make sure that these firms don’t spring up again under different names. This illegal scam has already had a devastating effect on small, law-abiding British companies and cannot be allowed to continue.”
Amazon confirmed that it had removed “thousands” of sellers, adding that they could be reinstated if they became VAT compliant. It urged other online retailers to sign up to the agreement with HMRC.