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2015 Means EU Tax Increase On Cloud Storage, E-books and Smartphone Applications
schwit1 writes With the new year, a change in fiscal rules in the European Union is increasing the tax on many purchases of digital content like e-books and smartphone applications. Under the new rules, first approved in 2008, the tax rate on digital services like cloud storage and movie streaming will be determined by where consumers live, and not where the company selling the product has its European headquarters. Tax experts say Europe's revamped rules could add up to an extra $1 billion in annual tax revenue for European governments.
And how much in compliance costs? I've seen stats on the US federal income tax that put compliance costs at about $300B for businesses and individual filers. It's not necessarily the tax rate that hurts the economy so much as it is the paperwork burden. Tax rates may hurt, but they can at least be planned for in advance. It's all of the compliance work that costs incredible sums of money to keep everything in order.
While the OP in principle is correct, the increased tax revenue is not the most important consequence of the change. The drastic part is the legal burden added on companies offering e-services. Any company (regardless of whether they are located in the EU or the US, regardless of their size, and regardless of their annual turnabout) that want to makes sales in the EU will now have to read and understand 28 different national tax laws regarding VAT. Not only do all these countries have different VAT rates, but they also have different exceptions depending on what it is that is sold. In one country the VAT rate might be 20%, unless the sale can be categorized for example as advertisement, in which case the VAT rate is 10%. In another country the item that is sold might be categorized in a different manner.
The burden of figuring out what tax to charge lands entirely on the salesman, even if he's just a hobbyist selling a single item. Needless to say, learning and keeping track of 28 different legislations is impossible unless you are a large corporation. But despite this, a german shop owner charging the wrong VAT rate for a bulgarian customer might end up being sued in a bulgarian court of law. And in the long run get extradited to bulgaria. Since this law change in practice is going to wipe out small business owners, there have been quite vocal protests raised. For example a twitter storm ended up making the #EUVAT hashtag trending at number 3 worldwide. (see http://euvataction.org/2014/12...) More information about what the salient consequences of the law change are can be found at http://euvataction.org/key-fac....