What do businesses say about VAT & e-commerce?
Recently the European Commission published the results of the public consultation on modernizing the VAT for cross border e-commerce. The Commission launched this consultation in September 2015 with the objective to seek the views of businesses, the public and representative organisations on the following VAT changes and regulations:
- The implementation of the 2015 Mini One Stop Shop (MOSS) for e-commerce services;
- The extension of the current MOSS system and payment mechanism to intra-Community and non-EU online sales of goods;
- The introduction of a common EU-wide simplification measure (a VAT threshold) to help small start-up e-commerce businesses;
- Allowing home country controls including a single audit of cross-border businesses;
- Remove the VAT exemption for the importation of small consignments from suppliers in non-EU countries.
The Commission has shared all raw data of the contributions of over 300 e-commerce businesses. The Commission also announced that the official report, including a summary and analysis, will be published at a later date. These raw data gives us a huge insight on what e-commerce businesses are hoping for in terms of future VAT systems and how this should be made possible. As mentioned before, statistical overviews and graphics will appear later on, so in this article we will highlight some of the comments of which we believe are worth mentioning.
Fear of doing online business
A lot of standard answers are given to the question what burdens companies are facing in accounting for VAT in other EU Member States, such as VAT-registration problems, invoicing issues and dealing with different languages. However when we read the comment of a German anonymous stakeholder, we believe this can sum up a lot of the frustrations:
"Keeping up with all the regulations in Germany alone is already a burden - it is very stressful to try and do everything right when dealing with all the additional rules and regulations for VAT in other member states. At some points, I feel like running a business means living in constant fear of getting things wrong..."
Destination principle unknown
One of the other remarkable conclusions is that apparently a large part of all e-commerce businesses are not even aware of the requirement to register for VAT in other EU Member States when the threshold is exceeded. This means that the EU VAT collection mechanism is far away from being a mechanism based on the destination principle. In our view this indicates that the VAT regulations in place do not work and even lead to more distortion of VAT collection between EU Member States.
Sky on VAT
A company also among the contributing stakeholders and worth mentioning is Europe’s leading entertainment company, Sky plc. Sky apparently paid €2.3 billion in tax (we assume VAT) across five EU Member States, but also ‘pays’ a significant compliance burden for interpreting and implementing the local rules into current internal systems and processes.
Sky agrees with the Commission that the current MOSS system is helping to reduce the costs and administrative burdens for e-commerce businesses but also calls on the Commission to extend the scope of the MOSS system to B2C supplies of goods and even to B2B supplies of goods. Sky, known as a company moving beyond the boundaries, also welcome the introduction of non-EU countries into the MOSS system as a way of reducing the barriers to trade globally.
The American Chamber of Commerce to the European Union (AmCham EU) also provided their comments. AmCham EU speaks for US companies committed to Europe on trade, investment and competitiveness issues. It aims to ensure a growth-orientated business and investment climate in Europe. AmCham EU wants to point out that global businesses such as US e-commerce companies active in Europe are facing increasing complexity in complying with the VAT framework throughout the EU, especially because of the lack of effective harmonization in day-to-day practices.
In our view the most interesting comment of AmCham EU relates to the importing process. AmCham EU suggests to separate the VAT accounting from the customs clearance processes as this could have a positive impact minimizing administrative burdens for imports while avoiding distortions for EU-based companies. The removal or changes to the small consignment exemption is to be assessed against that backdrop and should come hand in hand with effective facilitation as it would otherwise lead to an incremental cost increase on low-value shipments destined to the EU.
AmCham EU also likes to emphasize the EU’s role serving as a model for other trade blocks and economies taking fast growing international e-commerce into account.
Ending up in proposal
316 E-commerce companies provided their thoughts, ideas and frustrations on the current and future EU VAT system for cross border e-commerce. Which of these comments will end up being a part of the new VAT system is hard to say. We will provide you with more details and insights on this consultation when the Commission publishes its final report.
If you have any questions regarding this topic, please contact one of our VAT Compliance advisors.
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