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VAT MOSS: The business impact

8th Jun 2016
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The European Commission’s taxation and customs union has quietly released the findings of its consultation into modernising VAT for cross-border ecommerce, a conversation which closed in December 2015.

The process solicited feedback on the impact of the place of supply reforms and the efficacy of the MOSS system, as well as opinions on potential developments such as MOSS thresholds and the rollout of the system to physical goods. 316 businesses, business associations and sole traders across Europe contributed submissions.

Curiously, the Commission has publicly shared all of the aggregated submissions but has yet to publish any summary analysis or report, which gives researchers a goldmine of fascinating raw data to explore.

The submission responses were, to use an awful ecommerce pun, all over the shop. For example, some business associations praised the changes and said they found compliance easy, while others were scathing in their criticism. Likewise, some businesses praised the compliance support they received from their national tax authorities while other businesses said they received nothing.

One interesting issue raised by several business associations suggested growing tension over compliance obligations for non-EU businesses. IFPI, an industry body representing the music industry, noted that “while many companies are tax compliant, how are EU institutions going to effectively police non-compliant EU/non-EU businesses…? This appears to be an area where competition distortion will remain.”

The Belgian-based International VAT Association wanted that fight against non-EU noncompliance to grow teeth, while cautioning that “any compliance obligations on non-residents must not be any more onerous than those on established businesses, to ensure fair competition.”

Another question raised by both traders and business associations concerned the devil in the details of proposed thresholds. The European Express Association asked “does the threshold referenced operate as a threshold below which sellers do not have to declare and pay VAT on their shipments as long as their total sales do not exceed the threshold, or is it a uniform threshold for intra-EU supplies below which no registration is needed?” Many sellers requested similar clarification.

Beyond further minutiae of ebook VAT rates and tax tables on portals, the cross-border consultation responses were remarkable for another reason. Consultation responses, on a whole, tend to be insomnia-curing exercises filled with pro-forma answers drafted in committees.

What is here, in these spreadsheet cells, is sheer, raw, and palpable anger. Over 200 microbusinesses and sole traders - people who, not long ago, never would have imagined participating in an EC consultation - explained in furious detail how poorly drafted ecommerce and taxation policies devastated their livelihoods.

Yet what’s even more remarkable than their participation is that, for once, the EC listened. Many of the promised reforms announced in April can be mapped directly to the requests made in these consultation responses. Who would have thought that the only people more shaken up than microbusinesses by the impact of the place of supply reforms were the tax bods themselves?

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