LAST YEAR The New York Times posed the question: “Is Google God?” In 2005, eBay is poised to steal the celestial crown in the cyber hierarchy. At any one time, eBay has

105 million registered users and 25 million items on its website. The site comes into its own in the festive season as devotees flock to offload their unwanted Christmas presents.

While eBay’s online omnipotence is the ultimate symbol for the commercial potential of the internet, one organisation is unlikely to be celebrating its success.

The Inland Revenue does not have a specific strategy for tackling eBay tax evaders, but it is aware of a growing problem. Recently, eBay met the Revenue to discuss ways of working together to educate users. They have so far agreed to place links on eBay to appropriate pages on the Revenue website. With the Government’s plans to tackle tax avoidance and promote a fairer tax system, it is likely that other measures will follow.

Ronnie Ludwig, a partner at Saffrey Champness, the accountancy firm, says that it is hoped that the provision on eBay of links to tax information will make it more difficult for private sellers to plead ignorance about the tax laws that affect them, which is the main tactic of tax avoidance. “With its anonymity, eBay may seem like an ideal opportunity to make a fast buck and dodge the taxman,” he says. “However, if you buy goods with the intent to sell them (trading), then tax will be due on your profits.”

Users who simply sell unwanted items online are not liable to incur tax penalties unless the profit they generate is more than £6,000, at which point capital gains tax may kick in. “It is all about intention,” Mr Ludwig says. “The Revenue will take an interest when goods are acquired as ‘stock’ and sold on for a profit. This kind of business is usually home-based and often trades in designer goods.”

One business selling designer shoes is said to earn its founder £70,000 a year. Many sellers give up their day jobs to trade full-time on eBay.

A spokesman for eBay says: “Transactions between users are private. We cannot be aware whether individuals or businesses are paying tax on any items. As with every business and individual, whether trading on or offline, eBay users are responsible for ensuring that they pay the appropriate taxes on their earnings.”

But is the savvy trader, knowing the virtual wall that the Revenue faces in identifying online evaders, likely to heed this advice? Online anonymity is a thin veil, which the Revenue seems confident will not come between it and offenders. A database check of all registered UK users of eBay is one tactic that has been suggested.

Mr Ludwig insists that paying tax will not spoil the fun of trading on eBay, or ruin your profits.

One regular eBay user says: “It is fun, it gives you a bit of a rush competing for stuff. It is the most efficient and competitive marketplace in the world. Power-users (those who buy and sell for a living) encourage price competitiveness, which is a good thing for everyone. As long as they are declaring their earnings, their trading is beneficial, both socially and economically.”