“VAT a Mess” – New EU Tax Rules Set to Close Small Businesses

15, December 2014: The new EU VAT legislation that comes into force on the 1st of Jan 2015 brings corporate levels of regulation and administration not just to boardroom tables, but also to the kitchen tables of sole traders. Thousands of the smallest businesses cannot physically comply with the data requirements and are faced with a stark choice at the end of this month – either to close their cherished businesses or to break the law. That is not a reasonable choice to force them to make. 

Businesses all over the world must soon capture personal and financial data about their customer in order to find out where they are in the world. They must then charge and administer VAT to that customer according to each EU country’s rates – which, confusingly, means understanding 75 different rates in 28 EU Member States. These businesses must also keep customer records securely for ten years, become a registered data handler and take on the responsibility of ensuring none of their customer’s personal data is compromised or leaked. 

These technical requirements are unachievable for most tiny online businesses, which are often run from people’s kitchen tables or in their spare time to supplement their income. Suddenly selling a £2.99 eBook from Belgium to a customer in France becomes a costly, bureaucratic nightmare. 

This new law applies only to digital products but the EU has made it very clear that if the 2015 rollout is a success they will be applying similar legislation to all physical goods and services from 2016 onwards. Other countries around the world are following suit, with South Africa, Japan, Canada and Singapore already implementing or planning similar digital tax legislation. Soon any online business, no matter the size, could find itself remitting tax to dozens of countries around the world. 

Thousands of small business owners have now found themselves united through the power of social media. Knitting pattern sellers, digital scrapbooking designers and musicians are standing shoulder-to-shoulder with software app developers, eBook authors and digital training providers to try and stop the new EU VAT legislation from irreparably damaging or closing their business on the 1st of January. 

A small group of these business owners have founded the EU VAT Action Team at www.euvataction.org whose primary aims are to give the worldwide digital small business community a voice and to show the EU (and global) tax authorities that they are not willingly going to accept these new changes. 

Following the success of an 11,000-strong UK petition that called for Vince Cable to uphold the VAT exemption laws for British business, which achieved its aim, a new EU-wide petition has been launched at http://chn.ge/1wyXUtU calling on Pierre Moscovici, the EU Commissioner for Economic and Financial Affairs, Taxation and Customs, to unilaterally suspend the introduction of the new EU VAT laws for micro-businesses and sole traders. 

Meanwhile the EU VAT Action Team has been conducting a EU-wide quantitative research survey to assess the financial and human impact of the new legislation on micro businesses and sole traders. Thousands of small business owners have responded already. The initial results are shocking: 

• Only 4% expect to be able to comply with the legislation in time.

• 60% of affected businesses sell direct to their customers, rather than through third party platforms such as Amazon or the App Store.

• 45% are going to have to make major changes to their business this month – either removing all EU VAT-liable digital products from sale or excluding EU customers altogether.

• 50% believe they won’t be able to comply, at any stage.

• 20% will be putting up their prices to consumers, to cover the additional VAT and the administration / new software costs.

• Consumers will be hit by price rises and a reduction in choice, as many sellers will restrict the countries they sell to and stop their digital downloads.

• 10% are going to be closing their business completely in less than three weeks’ time. 

The EU VAT Action Team is now organising another Twitterstorm to bring more attention to this issue and to give the small business community a voice. The bureaucrats who wrote this legislation are refusing to acknowledge the massive gap in their understanding of how eCommerce works when the implementation of these new laws will impact the tiniest and most vulnerable businesses all over the world. 

Accounts which will be targeted as part of the Twitterstorm include:

https://twitter.com/pierremoscovici
https://twitter.com/GoettingerEU
https://twitter.com/Ansip_EU

On Tuesday the 16th of December at 10am GMT, thousands of small business owners will take to Twitter with the hashtag #EUVAT to show the European Commission that they will not accept these new laws in their current format and to raise more awareness across the EU for their cause. 

For all media enquiries: please contact the EU VAT Action Team at: [email protected] or 07437 905435 (Clare) / 07806 529351 (Lorraine)