Iostore Vat Avoidence Presentatoin

Good afternoon everyone, the topic of my report is IOStore VAT avoidance. Firstly, I would make a quick introduction about some definitions in my report. The IOStore is the abbreviation of individual online store, which is 

Someone who have access to get brand new products from factory directly and sell them to others though social media such as Facebook, twitter, google+. etc.(1.they offer a lower price than shopping center without using service platform like eBay or Amazon. etc.)

VAT: value added tax

We found out this kind of IOStore exist in UK by our questionnaires

Even in countries with well-developed VAT administrations, it is hard to regulate and record activities like selling products though chatting apps.

So, my hypothesis is the rapid growth of IOStore reduce the government VAT revenues

To be more specific,  Online shopping create the possibility for IOStore sellers to achieve VAT avoidance through selling taxable products without paying tax.

But how it works, now let’s take a look about the legal process first. We can see the process shows on the flow chart, the factory gather materials and transform them into products, by adding their profit to cost and multiply 1.2 as the selling price to the retailers, this 20% here is the VAT, This amount of money need to pay for the tax bureau.

We can see the same process happens when retailers selling these products to supermarket and stores. Also, price including VAT. And finally, all the tax will be undertake by consumers. But actually, every time when products was transferred to the next stage, the tax bureau can received tax revenues. But companies can offset their input VAT to output VAT. Now, what about the illegal process that IOStore can achieve. It would be like this. In this process, the tax payer is only factories, which means IOStore can sell taxable products without paying tax. Or even some factories can produce more products and transfer some of their products to their secret warehouse without records. It can bring more profit though IOStore selling process and increasing their cost to write down the total revenue, as a result, they can pay less VAT.