EUVAT – a last thought

Posted By on September 3, 2015

I’m not going to define EUVAT again (daft legislation that even the EU admit was not thought out and is killing small business, but may not fix for 2 years), but I was going throw out a last thought before the EUVAT Symposium in September.

The problem with the proposed solution of adding a turnover threshold to EUVAT is that VAT thresholds vary country to country. A threshold was already rejected when it was originally proposed, so it won’t go through this time.

So why not link EUVAT to company behaviour, so that only companies acting against the European Digital Single Market get hit?

Small firms sell online by Paypal button or similar low cost one-click option. They offer the same thing to all countries and rarely even know where the customer is based.

Large firms like Amazon select by country, offer different or restricted services in each country, and block users from accessing their content outside that country.

So why not link EU VAT directly to this?

If a company geo-selects within Europe on services, they pay EUVAT rates – i.e. they have to pay VAT at the point of supply: the customer’s location since they are obviously already collecting enough data to know this.
However, if a company is using a single click payment option and not changing their offering by country, all sales are counted as domestic and VAT is paid at the rate of the company’s home location.
Since few (virtually no) larger firms use PayPal or single-click payment processors that aren’t linked to an account with details and customer location, this would effectively remove small businesses from EUVAT.

The benefits:
  • This removes small businesses from EU VAT, saving time and hassle without needing a threshold.
  • It encourages larger firms to provide identical cross-border content, promoting the DSM, and penalises those that don’t.
  • It makes it harder for multi-nationals to dodge VAT.
  • It makes it unnecessary to have a turnover threshold.
The disadvantage is proving that the offering is identical, but that should be easily done just by visiting the website from multiple countries’ IP addresses. If prices (not including shipping) change and products vary significantly, that’s EUVAT liability.

Yes, this may be borderline for larger bookshops etc. or DVD and game sellers due to the issues of licences and overseas rights. However, since it is not illegal to sell a printed book or DVD created in one region to another, just to mass-produce or mass-retail them in a third party country without rights, most should be unaffected.

Larger sites that might escape it are Flattr and Patreon, but then both are a way of moving funds directly to small creators, and they don’t care where the donors or creators are based.

It’s better than people being threatened with extradition of 5p, and grannies selling knitting patterns having to pay VAT.

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One Response to “EUVAT – a last thought”

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