It seems to me that the most practical solution is to say if you're going to charge tax that is going to the tax authorities in another EU country, those authorities must use a standardised EU-wide tax rate for cross-border sales.
This does mean each nation would have to surrender some control over its tax levels, which is a threat to national governments and not likely to go down well. But then this whole policy is designed to undermine precisely that independence anyway, so I'm not sure that's really any worse. After all, it is quite strange that extra-national taxes are effectively levelled in the first place, something that in itself is only enforceable in practice because of EU-level agreements between the affected countries.
Clearly the same idea doesn't scale to a global level without completely killing off small to medium-sized businesses and doing horrible damage to global trade, so if the states of the EU want a special arrangement, maybe the burden should be on the EU to make it workable.
What I do think is that "whaaaa, we have to comply with laws!!! how could you!!!" is a valid business argument.
In general, neither do I. But if you decided to impose a new start-up fee of a billion pounds to operate as a small business and required five different company officers to sign the paperwork, the number of new start-ups you had would not be large the next year. It's about proportionality and reasonableness, and the new system is wildly disproportionate for a whole sector of the economy.
An exception or lighter rules for small businesses would have been great, though.
Indeed, though it's worth remembering that some of the new rules will be all but impossible for almost any business to comply with, unless it's literally large enough to be operating the entire site and payment infrastructure itself, and probably to have dedicated staff responsible for EU tax policy monitoring and compliance from now on.
Well, let me give you one data point. I have a business that is big enough to be worth continuing under these conditions, but only does a tiny amount of trade across EU borders (we're UK based and the US is by some way our biggest international market so far). It's larger than a microbusiness but still in its early days being run on the side by the founders rather than with any full-time staff.
We knew some time ago that the change to charge VAT in customers' local currencies was coming (no thanks to HMRC, I might add) and we planned for that in plenty of time, so from that point of view all we had to do was figure out what tax rates to put into our DB for different country codes. It seems like you think this is all that is required, and if it were then I would agree it wasn't an unreasonable change from a tax policy point of view.
What we didn't know was everything else that was going to follow from that change. For example, we had to implement geolocation and various reporting on top of it, in order to satisfy the two criteria rule.
That required significant programming skill and general awareness of what was possible, which to a non-programmer selling PDFs with a PayPal button would be rocket science. And of course it's only possible because we built our own site; as far as I can tell, most payment services and a lot of marketplace sites don't actually provide enough data to comply yet, and European governments have had to make temporary changes to the rules (basically saying that they'll ignore this one in practice) so there is breathing room to sort the mess out.
Even we are still vulnerable to problems if a customer changes their self-declared location to something that conflicts with their geolocated IP address, because now we're required to find and record a third data point to disambiguate, and what is that supposed to be? Again, not all payment services will disclose that kind of information, so you can't rely on that. You could hassle your customers for extra data, but it might not count because any amount of customer-volunteered information is only deemed to be a single data point for these purposes.
Even given a perfect system where no customer ever disagrees with their geolocated IP address, that geolocation is itself entirely dependent on the availability and accuracy of a suitable database, which no EU government is currently offering to businesses despite officially recommending using a geolocated IP address as one of the data points.
On top of that, there is an as-yet unanswered question about what happens for recurring payments, where typically the data is collected up-front and then later renewals are charged automatically without any customer involvement and therefore without collecting or validating any extra data points to go with that transaction.
All of that is because of one knock-on effect of these new rules, which is not inherent in the tax policy itself. And I haven't even mentioned a bunch of related issues like the data protection implications, the fact that a country code alone isn't actually enough to determine the tax rate in some cases, the consumer protection rules that require displaying the full tax-inclusive price a customer will pay before you necessarily have enough information to make that determination, and the additional burden of updating all your accounting and reporting practices to cope with the barely document MOSS procedures.
Bottom line: As an experienced programmer with full control of the site and reporting scripts, this has still probably taken me a week of effort altogether, maybe more by the time you include all the reading of background material to figure out what was required in the first place. That might have cost another small business hundreds or more likely thousands of pounds if they'd had to hire a freelancer for a short-term gig to do the same work, while those who don't run their own sites and instead operate via marketplaces are entirely reliant on the marketplace to get it right, which most don't
You see, I'm not talking about Grandma's Handmade Socks or the local pizza delivery service - they're not worried about cross-border commerce. These businesses are the vast majority of microbusinesses.
Grandma's Homemade Socks aren't affected this year because they don't supply digital products on-line. If the current plans haven't changed by the time the VAT rules change again in 2016 to include physical products as well, you should probably start planning for another significant dent in the European economy.
Pizza delivery companies aren't microbusinesses. Microbusiness in this context usually refers to individuals who sell something on the side to make a little extra money on top of their day job.
There have been reasonable estimates already that in the UK alone there are more than a quarter of a million such businesses selling on-line and affected by the new rules. Representatives of the UK government and tax authorities have already admitted that they didn't appreciate how many such businesses there were or how much they would be affected by these new rules.
I don't really see what the number of other microbusinesses that may exist has to do with anything. We're talking about on-line sales affected by the new rules, as you noted yourself in the post I first replied to.
Apparently I was dreaming when a 30-second Google search turned up this informative overview that includes, among other things, a bullet list of what an invoice has to contain.
Look at the length of the document you just linked to. Seriously. Then consider how many other documents like that someone might have to read and understand to determine which tax rates apply and what else they need to do. Then consider how much effort would be required for compliance by someone who makes a few hundred Euros a year selling a PDF of face painting ideas for kids' birthday parties, and tell me whether it's still worth trading.
Again, maybe I will learn something new today, but so far I assumed that existing cooperations of the tax authorities would make it so that only your countries tax agency will ever audit you, however it may do so on request from another tax authority.
We simply don't know yet. It is clearly the case that any of the 28 states' tax authorities will have the legal right to audit. There appear to be some procedures under discussion that would try to make things more sensible in that any audit would be co-ordinated by your local tax authority, at least in some states. But again, you're talking about 28 different tax authorities that each work their own way and they can and do interpret VAT rules differently. It is certainly not as simple as "only your home tax authority can ever audit you". That would rather defeat the intended point of these changes, after all.
That is exactly what a lot of those very small businesses are doing.
It is mind-boggling that you seem to think killing off trade because of overweight administrative burdens is a good thing. The entire purpose of the EU, or rather the original organisations that have now become the EU, was to facilitate international trade.
Yet strangely, thousands of businesses do just that.
And as of 1 January 2015, most of them are either ignorant of the law or breaking it one way or another.
Most of the crying comes from the UK, however, because of a special rule there which exempts most small business from registering for VAT at all.
There is no longer any such rule, at least for practical purposes, if you sell across the EU. And you can't reliably not sell across the EU if you sell on-line, because people can access your site from anywhere.
Technically, I think you still don't have to register for UK VAT if you instead register for the equivalent system in every other EU state where you sell and you're below the UK threshold, but unless your business really does sell exclusively to one or two other EU states somehow, that seems a highly unlikely strategy.
Also, it's just that the UK tends to be stricter about interpreting tax laws than certain other parts of the EU, where in some cases tax avoidance or outright fraud has historically been rampant anyway so this is just one more rule for merchants to ignore. However, in other parts of Europe where there is a similarly compliant culture already, there are similar concerns about the unworkability of these new rules.
Firstly, most people who are half-way serious about selling something online use some kind of merchant service that will manage that for them.
Wrong. On some estimates so far, that group is actually a minority of the small and microbusinesses affected by these measures. It certainly isn't "most".
Secondly, you don't need to read the whole law. You only need to understand what the tax rate for your product is.
Wrong. You also have to understand, for example, the rules for issuing VAT invoices, which again differ widely among the 28 EU states.
Of course, even if you were right, "understanding what the tax rate for your product is" is no small thing now. Each state has its own quirks about different rates for different types of product. You can't even rely on the obvious indicator, the ISO country code that pretty much everyone's database uses, to reliably determine which tax rate applies in some cases.
To be a crime, and not just a misdemeanor, you have to commit tax fraud intentionally. You won't get extradited for a misdemeanor.
Of course it's unlikely that someone is going to be shipped off to another country and tortured to death because they didn't collect 17 Euros of VAT. However, you are effectively now subject to audit by any of the 28 states' national tax authorities if you sell digital products within the EU, and if you've ever actually run a business and had your number come up for an audit, you'll know how much fun that is.
If your business is selling socks and your webshop software doesn't do proper tax handling, then wtf are you paying for?
What is this "webshop software" you keep talking about?
Not everyone uses marketplace sites. The people most damaged by these new rules are mom-and-pop stores selling some small digital product with little more than a home page and a PayPal button.
Yes, there's some paperwork involved. So, do the paperwork and there are no problems. It's the cost of doing business.
Congratulations, you just killed an entire sector of the European economy, which can no longer afford to operate.
You don't run a successful economy by making the price of doing business, particularly for small businesses, more than they generate in total revenues. That is literally now the case for thousands of businesses, though no doubt many of them will continue to operate illegally anyway because they don't even know they're doing anything wrong.
As others have noted, it isn't nearly as easy as that. For example, perhaps you didn't realise, but there are huge numbers of small vendors selling on-line who don't use marketplace sites. There are multiple payment services with multi-billion dollar valuations that support that kind of set up, and many more smaller ones in a fast-growing field. This is not some minor edge case. This is hundreds of thousands of businesses.
Also, the workaround you proposed for the conflict between displaying tax-inclusive prices for B2C transactions and not knowing the tax rate before the sale has been made is probably insufficient to comply with consumer protection rules in most, if not all, EU states. Typically the point of the rules is precisely that the figure you show must be what the customer actually pays, without them having to do anything funny to work out the real amount. Also, under the last round of crazy EU changes earlier in 2014, if you're an on-line merchant and don't get this stuff exactly right, the penalties can be severe. Think along the lines of the customer getting to keep the product but the merchant having to refund the entire purchase price, and you're on the right kind of level.
Because actually adhering to the laws of the countries you are doing business in is now an unbearable burden?
When the law says you effectively have to record and file taxes on the same scale as, say, Amazon, because you sell e-books for 5 Euros on your site and someone from another EU country happened to buy one copy... Yes, adhering to those laws is now an unbearable burden. It is literally not commercially viable for microbusinesses and even quite a few larger but still small businesses to operate across Europe today.
Plenty of vendors have, at least temporarily, closed their doors to international sales as a direct result. The EU, or rather its ultimate predecessor, was originally created to facilitate international trade, and now they've killed a significant chunk of it overnight because they were so ignorant they didn't even know these businesses existed.
Personally, I stopped offering digital downloads - the costs (and more to the point, risk) of compliance simply weren't cost effective given the time could be better spent charging an hourly rate.
This is one of the things that has most annoyed me. I have multiple businesses, one of which is a consultancy that charges for my time and therefore lets me put a very clear lower bound on how much my time at work is worth. By that standard, the amount of time I have spent dealing with this issue on behalf of other businesses interests I have is already a loss of thousands of pounds.
So, the "correct" commercial decision for me is to just carry on with the consulting business and close down all the genuine start-up work I've been building up on the side just as some of those ideas are starting to show returns. Of course, this is exactly the "wrong" decision if your goal is to support European economies and increase long term tax revenues, because in that case you really want me to take the risks and start the new businesses that have a chance of succeeding on a larger scale, not to follow the "safe" but inevitably more limited consulting path.
We're talking about online supply of digital goods (at least for this year; it changes again in 2016). There is no shipping address.
Customers can self-certify their location, but in that case you need to correlate it with the registered bank/card location, which not all payment services will give you. This will probably change now, but certainly many services don't do it yet, while the new rules have already come into effect.
Even if you can get that information eventually, you still have the consumer protection/advertising catch-22: you can't show the correct tax-inclusive price before the sale unless you know where they are, but you don't know where they are until after the sale.
Then we get to subscription services, where you typically collect this kind of supporting data at first payment but then automatically charge again each month/quarter/year without any further customer contact to revalidate everything.
This is a complete screw-up from start to finish, and it wasn't at all well thought out, starting with the now-acknowledged fact that no-one involved in making these rules even considered the effect on thousands/millions of small businesses because they were so busy lining up their sites on Amazon and friends.
HMRC's 'proactive' communication was to send a notice to all VAT registered businesses
And as a director of multiple VAT-registered UK companies, I can tell you that they didn't even do that effectively. As far as I'm aware, none of my companies has received any notification about this change from HMRC, and our accountants have confirmed to me in writing that they were not notified on our behalf either. So at best, the "notification" was some aside in some paperwork a long time ago that neither we nor our accountants realised even merited a brief discussion about whether it might affect us, which is an extremely low bar.
That's impressive: 4 points stated with great authority, and every single one of them is either inapplicable to the current change or simply wrong.
1. Vendors selling on-line don't (and in most cases can't) meet the required standard of evidence for their customer's location. This is one of the big problems with the new rules, and a lot of people have been talking about it, and various national governments have taken emergency measures within the last few days to mitigate the problem temporarily having realised that they've imposed an impossible burden on small businesses.
2. Vendors are the only ones responsible for keeping their own tax records, and within the EU they are now subject to audit by any of the 28 states' national tax authorities. There are various criminal offences related to not reporting or paying the correct tax. Being misled by customer-supplied data is explicitly not a defence, because any amount of customer-supplied data only constitutes one of the required two non-conflicting data points.
3. Hiring an accountant is great, but as it turns out, even most accountants didn't realise what was about to happen. Also, hiring an accountant costs real money, and for many of the microbusinesses caught by this new set of rules, it simply won't be worth the cost of hiring them as it would take every penny the business earns just to pay the accountancy fees.
4. Again, the entire point of the new rules is that if you sell on-line, you now have obligations to every one of the 28 states in the EU. Failing to meet those obligations will be a criminal offence in your home state if you're within the EU. Time will tell what -- if anything -- happens to anyone outside the EU who refuses to register and pay the taxes.
It will *DESTROY* compettetion between member states of the EU by small traders, while making absolutely no difference to Amazon, ebay, chinese sellers etc.
The irony is that if they don't fix this mess quickly, it will make quite a different to big business. Specifically, big business will be the only business that can afford to keep track of the compliance rules, so small businesses will have to sell via marketplaces run by big businesses and give big businesses a substantial cut of the revenue. Amazon and friends won't need to play games basing themselves in tax-efficient places in Europe; they can just place themselves tax-efficiently on a global level and wait for all the small businesses in Europe to give them a 30% cut of everything sold on-line.
It's even more fun if you're in the EU, because apparently there are also laws that mean discriminating against customers elsewhere in the EU based on which EU nation they're from is itself illegal. According to the people citing those rules, you can sell to all or you can sell to none, but you can't sell to your home state and not to other EU states.
That said, I'm not sure how long that would stand up in court, when the defence inevitably argued that they weren't discriminating on the basis of the customer's state but on the basis of the commercial viability of the sale.
I'm blowing several moderations in this thread to make this point, but it's important enough that it needs to be made.
Almost no small sites were doing there own checkout process, those that are can use VAT MOSS in the UK (I'm sure equivalents exist in other EU countries) to avoid registering with ANY new tax authorities.
That is some combination of unrealistic and simply wrong.
For one thing, there are thousands of small/micro businesses -- actually, it could be millions, but no-one has accurate figures across all of Europe yet -- that are theoretically affected by the new EU VAT rules this year. The governments of the states individually and at European level completely dropped the ball on this one. They didn't even realise those businesses existed, as they have now openly admitted while panicking about the damage they've inadvertently done and now can't fix in time.
Many of those businesses have no idea they are now breaking the law. They haven't been told anything by any government authority, most of them don't have an accountant, and even if they do, even most accountants didn't see this one coming. Until this year those vendors probably weren't doing anything wrong because they were far too small to go above their state's VAT registration threshold while they sell their band's music or their knitting patterns or their e-book as a digital download. Under the new rules, there is no minimum threshold for registration any more: sell a 5 Euro download to one customer in any other EU state and you need to register either with that state's national tax authority or with your home nation's MOSS scheme.
Now, as soon as you're caught in the net, you are now into the practically impossible auditing requirements that require two non-conflicting data points to verify a customer's location. Even most payment services, marketplace sites and professional accountants can't cope with this yet, never mind your mother's side business selling PDFs of the local church's choral arrangements for a token charge to raise some money to fix the church's broken window with a simple web site and a PayPal button.
Of course, all of this is being done because you now have to charge VAT at your customer's state's rate instead of your home state's. You almost certainly don't know that yet when you first show a customer the price, because you don't have the required multiple non-conflicting data points to satisfy the audit rules. In practice, that means you probably can't comply simultaneously with both the new EU VAT rules and existing consumer protection legislation that requires prices for B2C transactions to be advertised tax-inclusive, and you will be breaking some law one way or another even if you make a good faith effort to comply.
Even if you are doing almost everything yourself and can comply with the audit and advertising rules, you then need to register with your national data protection authority because you'll have a requirement to maintain personal data about your current and past customers for 10 years and be subject to audit at any time by any of 28 different tax authorities. Or you don't need to register, because the data falls within an exception. Not even national governments are giving consistent information on this point so far.
Once you've registered with everything you need to register for, you might then wind up putting up your prices for everyone, because you're now effectively prevented from relying on the VAT threshold (though to be fair at least some EU states have taken emergency steps within the last few days to address this problem).
On top of all of that, you now have ongoing reporting obligations that probably require you to understand a minimum of two VAT-related returns (one national in your home state, one MOSS) so you can look forward to either spending several days becoming an expert on your national tax law or paying a substantial amount of money to professional accountants and hoping that you can find one that understands the
however, you don't need to shrink edge cases to zero in order for the tablet market to flourish and the laptop market to languish.
That is certainly true, and you make a fair case for your proposed set-up. In return, I offer the following more widely applicable points that would count against it:
1. You are almost completely dependent on a working mobile data connection. We are a very long way from having a near-100% reliable connection in near-100% of useful locations here in the UK, and even when we have a connection available, it is slow and has very low data caps and very high prices for increasing the amount of data beyond that. More fundamentally, our current mobile technology simply doesn't scale up enough for everyone to work as you describe in the near future, because physics.
2. Tablets are convenient for content consumption and light interaction, but poor for content creation. As various posters have already discussed, there is the screen size issue, but you also have the problem that no tiny keyboard designed to match a tablet will ever be very good ergonomically. Again, it might be fine for light interaction like sending the occasional short e-mail or posting on Facebook, but you aren't going to be seeing people typing at 100+wpm for whole days on these things, and even if they did there are the usual concerns about RSI and the like. Even high-end laptops seem less than ideal for these reasons relative to a proper desktop with a full-size keyboard.
3. The software base just isn't available for tablets/on-line. The best on-line office suites and other content creation tools are far from the level of the best native ones. Now, it's true that for a lot of people, this might not matter enough to be a deal-breaker. Most people aren't power users, and some of the communication benefits for the on-line tools might be worth more than you lose with the dumbed down interfaces. But they are generally dumbed down all the same. Try writing a serious technical spec or legal document in any on-line "office suite" service I've come across and you'd be in for a lot of frustration in my experience.
There is some truth in that, but a lot depends on the exact circumstances. For example, in some cases, the default position is now that the provider musn't actually provide until the end of the 14 day cancellation window, and if you want to get around that then various explicit acknowledgements are required from the customer about immediate supply and giving up the right to cancel once provision has started. Moreover, if the provider gets any of this stuff wrong, the penalties can be heavily one-sided in favour of the customer. As usual, whether any of this actually matters depends a lot on whether the amount of money or other risks involved are significant enough to take meaningful action. Also, if we're talking about privacy/security/data protection concerns, the consumer protection rules might not be the most relevant part of the law anyway.
(I spent a significant part of this year taking legal advice about these changes, but I'm not a lawyer myself, so you shouldn't trust the above any more than any other random legal commentary you find on the Internet.)
No, because they limit freedom of speech and private property rights
So your position is that one artificial legal right should not be protected because it impinges on two other artificial legal rights that you personally happen to like more?
So basically, sure, if they want to shield their entire building from outside RF, with the exception of the entranceway, and as long as its clearly labeled for anyone entering to expect their devices to not work...then fine.
I think if this is allowed then the restriction should also be clearly disclosed at the time when a potential guest is choosing whether to make a booking. I err on the side of not limiting what someone can do within their own premises without a very good reason, but the flip side of that is customers must be able to vote with their wallet for a competing hotel that does not impose the same limitation if that's what they want to do.
It certainly seems to be true that courts in the UK have shied away from questions of whether any given level of consideration is sufficient, favouring a simple finding of whether there was any consideration or not. My intended point was more that while obvious nominal consideration explicitly written into a negotiated contract might reasonably be interpreted as a demonstration of intent to enter into a binding agreement, in this case I'm not sure how well that argument works. In other words, it's not just about whether 1p constitutes consideration, it's about whether that nominal consideration demonstrates an intent to commit to the deal. It would be interesting to hear what any actual lawyers thought about this argument, but sadly it doesn't look like we'll find out here.
Slashdot Mirror
But do his computers still exist?
Perhaps not, though I suspect neither is collecting the level of extra tax revenues they think they're going to get from the recent EU VAT rules...
It seems to me that the most practical solution is to say if you're going to charge tax that is going to the tax authorities in another EU country, those authorities must use a standardised EU-wide tax rate for cross-border sales.
This does mean each nation would have to surrender some control over its tax levels, which is a threat to national governments and not likely to go down well. But then this whole policy is designed to undermine precisely that independence anyway, so I'm not sure that's really any worse. After all, it is quite strange that extra-national taxes are effectively levelled in the first place, something that in itself is only enforceable in practice because of EU-level agreements between the affected countries.
Clearly the same idea doesn't scale to a global level without completely killing off small to medium-sized businesses and doing horrible damage to global trade, so if the states of the EU want a special arrangement, maybe the burden should be on the EU to make it workable.
What I do think is that "whaaaa, we have to comply with laws!!! how could you!!!" is a valid business argument.
In general, neither do I. But if you decided to impose a new start-up fee of a billion pounds to operate as a small business and required five different company officers to sign the paperwork, the number of new start-ups you had would not be large the next year. It's about proportionality and reasonableness, and the new system is wildly disproportionate for a whole sector of the economy.
An exception or lighter rules for small businesses would have been great, though.
Indeed, though it's worth remembering that some of the new rules will be all but impossible for almost any business to comply with, unless it's literally large enough to be operating the entire site and payment infrastructure itself, and probably to have dedicated staff responsible for EU tax policy monitoring and compliance from now on.
Well, let me give you one data point. I have a business that is big enough to be worth continuing under these conditions, but only does a tiny amount of trade across EU borders (we're UK based and the US is by some way our biggest international market so far). It's larger than a microbusiness but still in its early days being run on the side by the founders rather than with any full-time staff.
We knew some time ago that the change to charge VAT in customers' local currencies was coming (no thanks to HMRC, I might add) and we planned for that in plenty of time, so from that point of view all we had to do was figure out what tax rates to put into our DB for different country codes. It seems like you think this is all that is required, and if it were then I would agree it wasn't an unreasonable change from a tax policy point of view.
What we didn't know was everything else that was going to follow from that change. For example, we had to implement geolocation and various reporting on top of it, in order to satisfy the two criteria rule.
That required significant programming skill and general awareness of what was possible, which to a non-programmer selling PDFs with a PayPal button would be rocket science. And of course it's only possible because we built our own site; as far as I can tell, most payment services and a lot of marketplace sites don't actually provide enough data to comply yet, and European governments have had to make temporary changes to the rules (basically saying that they'll ignore this one in practice) so there is breathing room to sort the mess out.
Even we are still vulnerable to problems if a customer changes their self-declared location to something that conflicts with their geolocated IP address, because now we're required to find and record a third data point to disambiguate, and what is that supposed to be? Again, not all payment services will disclose that kind of information, so you can't rely on that. You could hassle your customers for extra data, but it might not count because any amount of customer-volunteered information is only deemed to be a single data point for these purposes.
Even given a perfect system where no customer ever disagrees with their geolocated IP address, that geolocation is itself entirely dependent on the availability and accuracy of a suitable database, which no EU government is currently offering to businesses despite officially recommending using a geolocated IP address as one of the data points.
On top of that, there is an as-yet unanswered question about what happens for recurring payments, where typically the data is collected up-front and then later renewals are charged automatically without any customer involvement and therefore without collecting or validating any extra data points to go with that transaction.
All of that is because of one knock-on effect of these new rules, which is not inherent in the tax policy itself. And I haven't even mentioned a bunch of related issues like the data protection implications, the fact that a country code alone isn't actually enough to determine the tax rate in some cases, the consumer protection rules that require displaying the full tax-inclusive price a customer will pay before you necessarily have enough information to make that determination, and the additional burden of updating all your accounting and reporting practices to cope with the barely document MOSS procedures.
Bottom line: As an experienced programmer with full control of the site and reporting scripts, this has still probably taken me a week of effort altogether, maybe more by the time you include all the reading of background material to figure out what was required in the first place. That might have cost another small business hundreds or more likely thousands of pounds if they'd had to hire a freelancer for a short-term gig to do the same work, while those who don't run their own sites and instead operate via marketplaces are entirely reliant on the marketplace to get it right, which most don't
You see, I'm not talking about Grandma's Handmade Socks or the local pizza delivery service - they're not worried about cross-border commerce. These businesses are the vast majority of microbusinesses.
Grandma's Homemade Socks aren't affected this year because they don't supply digital products on-line. If the current plans haven't changed by the time the VAT rules change again in 2016 to include physical products as well, you should probably start planning for another significant dent in the European economy.
Pizza delivery companies aren't microbusinesses. Microbusiness in this context usually refers to individuals who sell something on the side to make a little extra money on top of their day job.
There have been reasonable estimates already that in the UK alone there are more than a quarter of a million such businesses selling on-line and affected by the new rules. Representatives of the UK government and tax authorities have already admitted that they didn't appreciate how many such businesses there were or how much they would be affected by these new rules.
I don't really see what the number of other microbusinesses that may exist has to do with anything. We're talking about on-line sales affected by the new rules, as you noted yourself in the post I first replied to.
Apparently I was dreaming when a 30-second Google search turned up this informative overview that includes, among other things, a bullet list of what an invoice has to contain.
Look at the length of the document you just linked to. Seriously. Then consider how many other documents like that someone might have to read and understand to determine which tax rates apply and what else they need to do. Then consider how much effort would be required for compliance by someone who makes a few hundred Euros a year selling a PDF of face painting ideas for kids' birthday parties, and tell me whether it's still worth trading.
Again, maybe I will learn something new today, but so far I assumed that existing cooperations of the tax authorities would make it so that only your countries tax agency will ever audit you, however it may do so on request from another tax authority.
We simply don't know yet. It is clearly the case that any of the 28 states' tax authorities will have the legal right to audit. There appear to be some procedures under discussion that would try to make things more sensible in that any audit would be co-ordinated by your local tax authority, at least in some states. But again, you're talking about 28 different tax authorities that each work their own way and they can and do interpret VAT rules differently. It is certainly not as simple as "only your home tax authority can ever audit you". That would rather defeat the intended point of these changes, after all.
Then stop doing business there, problem solved.
That is exactly what a lot of those very small businesses are doing.
It is mind-boggling that you seem to think killing off trade because of overweight administrative burdens is a good thing. The entire purpose of the EU, or rather the original organisations that have now become the EU, was to facilitate international trade.
Yet strangely, thousands of businesses do just that.
And as of 1 January 2015, most of them are either ignorant of the law or breaking it one way or another.
Most of the crying comes from the UK, however, because of a special rule there which exempts most small business from registering for VAT at all.
There is no longer any such rule, at least for practical purposes, if you sell across the EU. And you can't reliably not sell across the EU if you sell on-line, because people can access your site from anywhere.
Technically, I think you still don't have to register for UK VAT if you instead register for the equivalent system in every other EU state where you sell and you're below the UK threshold, but unless your business really does sell exclusively to one or two other EU states somehow, that seems a highly unlikely strategy.
Also, it's just that the UK tends to be stricter about interpreting tax laws than certain other parts of the EU, where in some cases tax avoidance or outright fraud has historically been rampant anyway so this is just one more rule for merchants to ignore. However, in other parts of Europe where there is a similarly compliant culture already, there are similar concerns about the unworkability of these new rules.
Firstly, most people who are half-way serious about selling something online use some kind of merchant service that will manage that for them.
Wrong. On some estimates so far, that group is actually a minority of the small and microbusinesses affected by these measures. It certainly isn't "most".
Secondly, you don't need to read the whole law. You only need to understand what the tax rate for your product is.
Wrong. You also have to understand, for example, the rules for issuing VAT invoices, which again differ widely among the 28 EU states.
Of course, even if you were right, "understanding what the tax rate for your product is" is no small thing now. Each state has its own quirks about different rates for different types of product. You can't even rely on the obvious indicator, the ISO country code that pretty much everyone's database uses, to reliably determine which tax rate applies in some cases.
To be a crime, and not just a misdemeanor, you have to commit tax fraud intentionally. You won't get extradited for a misdemeanor.
Of course it's unlikely that someone is going to be shipped off to another country and tortured to death because they didn't collect 17 Euros of VAT. However, you are effectively now subject to audit by any of the 28 states' national tax authorities if you sell digital products within the EU, and if you've ever actually run a business and had your number come up for an audit, you'll know how much fun that is.
If your business is selling socks and your webshop software doesn't do proper tax handling, then wtf are you paying for?
What is this "webshop software" you keep talking about?
Not everyone uses marketplace sites. The people most damaged by these new rules are mom-and-pop stores selling some small digital product with little more than a home page and a PayPal button.
Yes, there's some paperwork involved. So, do the paperwork and there are no problems. It's the cost of doing business.
Congratulations, you just killed an entire sector of the European economy, which can no longer afford to operate.
You don't run a successful economy by making the price of doing business, particularly for small businesses, more than they generate in total revenues. That is literally now the case for thousands of businesses, though no doubt many of them will continue to operate illegally anyway because they don't even know they're doing anything wrong.
As others have noted, it isn't nearly as easy as that. For example, perhaps you didn't realise, but there are huge numbers of small vendors selling on-line who don't use marketplace sites. There are multiple payment services with multi-billion dollar valuations that support that kind of set up, and many more smaller ones in a fast-growing field. This is not some minor edge case. This is hundreds of thousands of businesses.
Also, the workaround you proposed for the conflict between displaying tax-inclusive prices for B2C transactions and not knowing the tax rate before the sale has been made is probably insufficient to comply with consumer protection rules in most, if not all, EU states. Typically the point of the rules is precisely that the figure you show must be what the customer actually pays, without them having to do anything funny to work out the real amount. Also, under the last round of crazy EU changes earlier in 2014, if you're an on-line merchant and don't get this stuff exactly right, the penalties can be severe. Think along the lines of the customer getting to keep the product but the merchant having to refund the entire purchase price, and you're on the right kind of level.
Because actually adhering to the laws of the countries you are doing business in is now an unbearable burden?
When the law says you effectively have to record and file taxes on the same scale as, say, Amazon, because you sell e-books for 5 Euros on your site and someone from another EU country happened to buy one copy... Yes, adhering to those laws is now an unbearable burden. It is literally not commercially viable for microbusinesses and even quite a few larger but still small businesses to operate across Europe today.
Plenty of vendors have, at least temporarily, closed their doors to international sales as a direct result. The EU, or rather its ultimate predecessor, was originally created to facilitate international trade, and now they've killed a significant chunk of it overnight because they were so ignorant they didn't even know these businesses existed.
Personally, I stopped offering digital downloads - the costs (and more to the point, risk) of compliance simply weren't cost effective given the time could be better spent charging an hourly rate.
This is one of the things that has most annoyed me. I have multiple businesses, one of which is a consultancy that charges for my time and therefore lets me put a very clear lower bound on how much my time at work is worth. By that standard, the amount of time I have spent dealing with this issue on behalf of other businesses interests I have is already a loss of thousands of pounds.
So, the "correct" commercial decision for me is to just carry on with the consulting business and close down all the genuine start-up work I've been building up on the side just as some of those ideas are starting to show returns. Of course, this is exactly the "wrong" decision if your goal is to support European economies and increase long term tax revenues, because in that case you really want me to take the risks and start the new businesses that have a chance of succeeding on a larger scale, not to follow the "safe" but inevitably more limited consulting path.
We're talking about online supply of digital goods (at least for this year; it changes again in 2016). There is no shipping address.
Customers can self-certify their location, but in that case you need to correlate it with the registered bank/card location, which not all payment services will give you. This will probably change now, but certainly many services don't do it yet, while the new rules have already come into effect.
Even if you can get that information eventually, you still have the consumer protection/advertising catch-22: you can't show the correct tax-inclusive price before the sale unless you know where they are, but you don't know where they are until after the sale.
Then we get to subscription services, where you typically collect this kind of supporting data at first payment but then automatically charge again each month/quarter/year without any further customer contact to revalidate everything.
This is a complete screw-up from start to finish, and it wasn't at all well thought out, starting with the now-acknowledged fact that no-one involved in making these rules even considered the effect on thousands/millions of small businesses because they were so busy lining up their sites on Amazon and friends.
HMRC's 'proactive' communication was to send a notice to all VAT registered businesses
And as a director of multiple VAT-registered UK companies, I can tell you that they didn't even do that effectively. As far as I'm aware, none of my companies has received any notification about this change from HMRC, and our accountants have confirmed to me in writing that they were not notified on our behalf either. So at best, the "notification" was some aside in some paperwork a long time ago that neither we nor our accountants realised even merited a brief discussion about whether it might affect us, which is an extremely low bar.
That's impressive: 4 points stated with great authority, and every single one of them is either inapplicable to the current change or simply wrong.
1. Vendors selling on-line don't (and in most cases can't) meet the required standard of evidence for their customer's location. This is one of the big problems with the new rules, and a lot of people have been talking about it, and various national governments have taken emergency measures within the last few days to mitigate the problem temporarily having realised that they've imposed an impossible burden on small businesses.
2. Vendors are the only ones responsible for keeping their own tax records, and within the EU they are now subject to audit by any of the 28 states' national tax authorities. There are various criminal offences related to not reporting or paying the correct tax. Being misled by customer-supplied data is explicitly not a defence, because any amount of customer-supplied data only constitutes one of the required two non-conflicting data points.
3. Hiring an accountant is great, but as it turns out, even most accountants didn't realise what was about to happen. Also, hiring an accountant costs real money, and for many of the microbusinesses caught by this new set of rules, it simply won't be worth the cost of hiring them as it would take every penny the business earns just to pay the accountancy fees.
4. Again, the entire point of the new rules is that if you sell on-line, you now have obligations to every one of the 28 states in the EU. Failing to meet those obligations will be a criminal offence in your home state if you're within the EU. Time will tell what -- if anything -- happens to anyone outside the EU who refuses to register and pay the taxes.
It will *DESTROY* compettetion between member states of the EU by small traders, while making absolutely no difference to Amazon, ebay, chinese sellers etc.
The irony is that if they don't fix this mess quickly, it will make quite a different to big business. Specifically, big business will be the only business that can afford to keep track of the compliance rules, so small businesses will have to sell via marketplaces run by big businesses and give big businesses a substantial cut of the revenue. Amazon and friends won't need to play games basing themselves in tax-efficient places in Europe; they can just place themselves tax-efficiently on a global level and wait for all the small businesses in Europe to give them a 30% cut of everything sold on-line.
It's even more fun if you're in the EU, because apparently there are also laws that mean discriminating against customers elsewhere in the EU based on which EU nation they're from is itself illegal. According to the people citing those rules, you can sell to all or you can sell to none, but you can't sell to your home state and not to other EU states.
That said, I'm not sure how long that would stand up in court, when the defence inevitably argued that they weren't discriminating on the basis of the customer's state but on the basis of the commercial viability of the sale.
I'm blowing several moderations in this thread to make this point, but it's important enough that it needs to be made.
Almost no small sites were doing there own checkout process, those that are can use VAT MOSS in the UK (I'm sure equivalents exist in other EU countries) to avoid registering with ANY new tax authorities.
That is some combination of unrealistic and simply wrong.
For one thing, there are thousands of small/micro businesses -- actually, it could be millions, but no-one has accurate figures across all of Europe yet -- that are theoretically affected by the new EU VAT rules this year. The governments of the states individually and at European level completely dropped the ball on this one. They didn't even realise those businesses existed, as they have now openly admitted while panicking about the damage they've inadvertently done and now can't fix in time.
Many of those businesses have no idea they are now breaking the law. They haven't been told anything by any government authority, most of them don't have an accountant, and even if they do, even most accountants didn't see this one coming. Until this year those vendors probably weren't doing anything wrong because they were far too small to go above their state's VAT registration threshold while they sell their band's music or their knitting patterns or their e-book as a digital download. Under the new rules, there is no minimum threshold for registration any more: sell a 5 Euro download to one customer in any other EU state and you need to register either with that state's national tax authority or with your home nation's MOSS scheme.
Now, as soon as you're caught in the net, you are now into the practically impossible auditing requirements that require two non-conflicting data points to verify a customer's location. Even most payment services, marketplace sites and professional accountants can't cope with this yet, never mind your mother's side business selling PDFs of the local church's choral arrangements for a token charge to raise some money to fix the church's broken window with a simple web site and a PayPal button.
Of course, all of this is being done because you now have to charge VAT at your customer's state's rate instead of your home state's. You almost certainly don't know that yet when you first show a customer the price, because you don't have the required multiple non-conflicting data points to satisfy the audit rules. In practice, that means you probably can't comply simultaneously with both the new EU VAT rules and existing consumer protection legislation that requires prices for B2C transactions to be advertised tax-inclusive, and you will be breaking some law one way or another even if you make a good faith effort to comply.
Even if you are doing almost everything yourself and can comply with the audit and advertising rules, you then need to register with your national data protection authority because you'll have a requirement to maintain personal data about your current and past customers for 10 years and be subject to audit at any time by any of 28 different tax authorities. Or you don't need to register, because the data falls within an exception. Not even national governments are giving consistent information on this point so far.
Once you've registered with everything you need to register for, you might then wind up putting up your prices for everyone, because you're now effectively prevented from relying on the VAT threshold (though to be fair at least some EU states have taken emergency steps within the last few days to address this problem).
On top of all of that, you now have ongoing reporting obligations that probably require you to understand a minimum of two VAT-related returns (one national in your home state, one MOSS) so you can look forward to either spending several days becoming an expert on your national tax law or paying a substantial amount of money to professional accountants and hoping that you can find one that understands the
however, you don't need to shrink edge cases to zero in order for the tablet market to flourish and the laptop market to languish.
That is certainly true, and you make a fair case for your proposed set-up. In return, I offer the following more widely applicable points that would count against it:
1. You are almost completely dependent on a working mobile data connection. We are a very long way from having a near-100% reliable connection in near-100% of useful locations here in the UK, and even when we have a connection available, it is slow and has very low data caps and very high prices for increasing the amount of data beyond that. More fundamentally, our current mobile technology simply doesn't scale up enough for everyone to work as you describe in the near future, because physics.
2. Tablets are convenient for content consumption and light interaction, but poor for content creation. As various posters have already discussed, there is the screen size issue, but you also have the problem that no tiny keyboard designed to match a tablet will ever be very good ergonomically. Again, it might be fine for light interaction like sending the occasional short e-mail or posting on Facebook, but you aren't going to be seeing people typing at 100+wpm for whole days on these things, and even if they did there are the usual concerns about RSI and the like. Even high-end laptops seem less than ideal for these reasons relative to a proper desktop with a full-size keyboard.
3. The software base just isn't available for tablets/on-line. The best on-line office suites and other content creation tools are far from the level of the best native ones. Now, it's true that for a lot of people, this might not matter enough to be a deal-breaker. Most people aren't power users, and some of the communication benefits for the on-line tools might be worth more than you lose with the dumbed down interfaces. But they are generally dumbed down all the same. Try writing a serious technical spec or legal document in any on-line "office suite" service I've come across and you'd be in for a lot of frustration in my experience.
There is some truth in that, but a lot depends on the exact circumstances. For example, in some cases, the default position is now that the provider musn't actually provide until the end of the 14 day cancellation window, and if you want to get around that then various explicit acknowledgements are required from the customer about immediate supply and giving up the right to cancel once provision has started. Moreover, if the provider gets any of this stuff wrong, the penalties can be heavily one-sided in favour of the customer. As usual, whether any of this actually matters depends a lot on whether the amount of money or other risks involved are significant enough to take meaningful action. Also, if we're talking about privacy/security/data protection concerns, the consumer protection rules might not be the most relevant part of the law anyway.
(I spent a significant part of this year taking legal advice about these changes, but I'm not a lawyer myself, so you shouldn't trust the above any more than any other random legal commentary you find on the Internet.)
No, because they limit freedom of speech and private property rights
So your position is that one artificial legal right should not be protected because it impinges on two other artificial legal rights that you personally happen to like more?
So basically, sure, if they want to shield their entire building from outside RF, with the exception of the entranceway, and as long as its clearly labeled for anyone entering to expect their devices to not work...then fine.
I think if this is allowed then the restriction should also be clearly disclosed at the time when a potential guest is choosing whether to make a booking. I err on the side of not limiting what someone can do within their own premises without a very good reason, but the flip side of that is customers must be able to vote with their wallet for a competing hotel that does not impose the same limitation if that's what they want to do.
"free from pornography, gambling, extreme violence and other content inappropriate for children"
There goes the new series of Game of Thrones...
It certainly seems to be true that courts in the UK have shied away from questions of whether any given level of consideration is sufficient, favouring a simple finding of whether there was any consideration or not. My intended point was more that while obvious nominal consideration explicitly written into a negotiated contract might reasonably be interpreted as a demonstration of intent to enter into a binding agreement, in this case I'm not sure how well that argument works. In other words, it's not just about whether 1p constitutes consideration, it's about whether that nominal consideration demonstrates an intent to commit to the deal. It would be interesting to hear what any actual lawyers thought about this argument, but sadly it doesn't look like we'll find out here.