Summary: Governments are failing in their duty to collect ecommerce tax - and losing billions as a consequence.I don’t have much respect for any business that fails to charge me for a product or service because of a failure in their accounts process, IT system or staff training. The same logic applies to Government departments when they fail to collect tax. What I find interesting is that, usually as a result of broad failures in their understanding of technology, Governments regularly fail to collect tax when tax is reasonably due.In an earlier blog post (here) I discussed VAT rules and regulations across Europe. Rather than a demonstration of harmony and common standards, it made clear how every country across Europe has different rules for VAT, different thresholds for VAT and different mechanisms for recovering VAT. By any definition, it’s a complete market guddle.INDEZ looks after a lot of businesses that trade internationally and several of our larger clients deliver high-volume sales across Europe. The value of these sales regularly exceeds the VAT thresholds across a number of countries - sometimes by many times the set threshold for VAT payments. What’s interesting is that of all the countries in the blog-post list, to the best of my knowledge, only one bothered to charge the client when they crossed the VAT threshold. That country is Sweden.I was reminded of this when I saw the just-published HMRC Committee of Public Accounts Report titled “Tackling online VAT fraud and error” available here.The Government report concludes that the loss to the UK public purse is a minimum of £1.5 billion and, in all likelihood, very much bigger.The report claims that sites such as eBay and Amazon are profiting from what they call "VAT fraud" because HM revenue and customs fails to use its powers to 'crackdown' on the non-payers. The point that seems to be missed by those writing the report is that the overseas firms that sell goods in this way and so avoid paying their 20% VAT don't ever get sent a bill by HMRC.The report claims that the tax authorities are "too cautious". Unless I've missed something it's not a case of being too cautious. Rather it's a case of just failing to do their job of collecting taxes.The report also argues that this is hurting the UK's balance of trade because these overseas firms are not paying their 20%. The answer to that is that this overarching failure of Governments to collect VAT almost certainly favours the UK because, in the world of ecommerce, the UK as a whole is a net exporter and foreign Governments are as useless as we are at following our own regulations. Because of this, the UK actually wins as a result of international incompetence.To make matters worse, the report chairman then criticises the marketplaces themselves in saying that "those same marketplaces continue to profit from the actions of rogue traders". Firstly, they are not rogue traders. Second, the only interpretation I can put on this is that the UK Government is criticising the marketplaces for not doing the job of the HMRC for them.If I look back at the UK Government report and focus on the title “Tackling online VAT fraud and error” a casual reader might assume from that title that the Government is concerned because there are lots of businesses out there criminally deceiving the Government and, through mischievous tricks or worse, not paying what they are supposed to pay. The truth is that the vast majority of businesses will pay what they need to pay. If the Government department can’t be bothered (as a result of their accounts process, IT system or staff training) to bill them then they should not be surprised if the businesses don’t pay.Rather than leave this on a negative note, I suggest that all this together should be seen as an opportunity for the Government of any progressive country to better understand how the world of trade has been transformed by the shift towards ecommerce and how technically well informed politicians can set an agenda designed to encourage and optimise twenty-first century trade for the benefit of both businesses as well as the wider society.