This is one of the reasons why the IT industry in the EU is so weak when compared to the US.
As a citizen of an EU state I can't help but feel that we are here governed by complete morons.
As a citizen of an EU state I can't help but feel that we are here governed by complete morons.
Their incentives are mostly toward over-regulating. If they over-regulate, they mainly harm invisible potential improvements. Whereas if they under-regulate, the big, obvious failures mean they get in a lot of hot water.
It is nothing more than a counter tax avoidance measure.
As far as I know, they don't force minimum tax rates - that's a freedom of a member state. That's also why you pay 33% corporate tax in Belgium and 5% in Malta.
Unfortunately, it is something more than a counter tax avoidance measure, because it has caused vast collateral damage. It's a huge administrative burden that literally makes many micro-businesses unviable, and it imposes prohibitive overheads on slightly larger businesses that are just getting going.
To add insult to injury, it's also impossible in practice to comply with the rules fully even if you make a good faith effort, unless you have a specialist VAT accountant's level understanding of each EU member state's tax system. Obviously no business except for large multinationals actually has this level of understanding available to it.
What is particularly appalling in this case is that the authorities who spent all that time working on the new rules didn't even realise all those smaller businesses existed until the very end. A huge campaign against the new measures was started with just weeks to go. Most of the authorities across all levels of government pointed to years of discussions, said they consulted earlier, and asked why the small businesses didn't say anything before. It didn't even occur to them that the microbusinesses didn't know, because no-one had thought to contact them, unlike larger businesses with well-established VAT management, and because someone running a £500/year side business from their kitchen table to fund their kids' christmas presents might not be following the intricate details of EU tax negotiations.
The icing on the cake is the often dysfunctional systems put in place to administer the new systems, which have made it very clear that even the national tax authorities often don't know what they're doing. Case in point: Multiple national tax authorities have already sent waves of wildly incorrect and extremely hostile demands for payment of supposedly unpaid VAT to small businesses in other countries.
Imagine how you'd feel if you spent a year building up a side business, then one morning you woke up to a demand for over a million Euros, far more money than you'd ever made in your year of trading, saying if you didn't pay faster than you could sensibly get legal or tax advice then you'd be taken to court without further notice, inevitably killing your business.
This is the reality when the EU gets to play with legal and tax rules but the people making the rules fail to understand the basic nature of how those rules will affect smaller businesses or individual citizens who aren't over there playing the games with the politicians. It's a scary prospect, and the way forward some of the EU bureaucrats see for the Internet and for intellectual property as we're discussing today seems many times worse than the short-sightedness they showed with the VAT mess a year ago.
Germany has already made statements that it will not allow other EU members to audit and collect VAT from German companies.
I'm happy that the response to this has finally changed I got downvoted to hell when commenting on the VAT changes when news just started breaking out almost 2 years ago saying that it will kill small businesses and now after the changes were implemented people actually started to see that it have.
The system completely ignores deferential VAT rates for different items in different countries, it forces businesses to register for VAT regardless if they are VAT exempt (e.g. small businesses in the UK with under 100K in yearly revenue) and it forces them to implement a "reliable system to verify the actual point of consumption of your goods and services" without actually putting in criteria on what is reliable or how you should verify the source of consumption if the first place.
"If I use a German bank card to order and item from the UK to Spain where should the VAT be collected?" To this date I haven't received an actual consistent answer or even a consistent thought process to evaluate this. And this is the most simple scenario which can be easily made more complicated like ordering an item from Germany with German payment details to be shipped to Spain from the UK, ordering an item with German payment details from the UK while you are in Spain, ordering an item from the UK with German payment details while you are in the airport in Norway, or doing the same while you are outside of the EU completely.
And these aren't complicated scenarios they things happen all the time the amount of times I had to order something I need from Amazon in the EU to myself while being in another country is ridiculous sometimes I'll order something from Amazon UK to my UK home while I'm away, sometimes I'll order from Amazon to be delivered to some country in the EU, some time if I'll need something down the line in the trip I might order it from country a to country c while being in country b.
And while Amazon could easily deal with this because they have an army of lawyers and tax advisers that will find them all the loopholes and legal justifications to continue to do what ever the frack they want, normal businesses won't be able to coupe with these types of decisions.
So far this seems to actually benefit Amazon the most because all of the people that I know that operated their own online stores for various goods and services have actually moved their store exclusively to Amazon and the likes even when they can charge a commission in the double digits just because it was the only way for them to be able to "ignore" the new tax regulations.
The EU isn't all good or all bad it's just huge.
"held national governments to account for privacy invasions"? They are sending our data to the US (e.g. data for airline passengers).
"have broadly stronger environment and safety legislation" Maybe on paper, the EU agencies did know for years that VW (and other EU car producer) did cheat.
http://europa.eu/rapid/press-release_STATEMENT-15-5654_en.ht... (ECJ overruled blanket Data Retention).
http://www.wsj.com/articles/eu-court-strikes-down-trans-atla... (safe harbour struck down).
Specific instances show there are problems but all large scale human systems are messy.
Yeah the EU isn't perfect but nothing is, I'd sooner my country (the UK) was in it than not though.
I haven't made up my mind yet about whether we're better off in the EU than out. It's obviously a complicated question. But something that is a big factor in favour of leaving is that there is so much one-sided co-operation: the EU seems to be used as a convenient excuse to justify unpopular rules that might cause political problems at home, because we "have to comply with the EU directives" or some such, yet apparently we have no trouble not complying when the EU rules are less convenient.
If you torrent for example a copyrighted mp3 and you are not leeching, you are actively uploading the file and sharing it with others.
And a lot of lawyers are now actively tracking peer-to-peer networks/torrents to see who is sharing the file. They then send out a "Abmahnung" and charge the user a few hundred euros.
Regulating very new technologies is almost always unwise. There will already be existing generic laws and regulations against serious bad outcomes (you are not allowed to knowingly kill people regardless of method) and for less serious outcomes it's generally better to let the technology shake out and take some time to study and understand it, even if there is a short-term cost to doing that.
Oh, and many payment processors won't give you necessary information to comply anyway. You need 2 pieces of evidence from every transaction (address, IP the purchase is made from for example) and you often don't have access to that information.
It's just typical "we know many small business won't be able to comply and we are not going to go after them for now but there will always be something if we need to" kind of thing.
You need 2 pieces of evidence that agree from every transaction, which is a significantly harder standard to meet.
For now, IP address is being accepted as one of them. However, most estimates seem to put geolocation as accurate only for about 90% of checks, and even if it's accurate, the information you'll get back typically won't be enough to determine which rules to apply in member states that have regional variations in their VAT rules.
It's basically impossible to comply properly with the current rules using a fully automated system, and therefore basically everyone trading on-line is risking compliance issues because you can't avoid them. The whole thing is kind of a joke, except for the not-so-funny part where your number comes up and you get business-destroying levels of overhead dealing with the audit.
- the big companies they intended to hit have the resources to deal with the problem, the smaller onces do not.
- There are such things as proxy servers and VPNs.
- many online B2C transactions within the EU are for amounts < 5 euro, the overhead of paying VAT for a single customer from say Slovenia does not weigh up against the profits so entire countries will simply be cut off from being served a variety of services.
It's a huge mess, and let's not get into the Irish authorities incompetence in setting this whole thing up and their communications with businesses all over Europe.
Incidentally, you missed one of my favourite points that the authorities still seem to have overlooked: they apparently continue to assume that those small businesses who do trade on-line are all selling something via some marketplace site, which can therefore take on much of the burden of compliance, record-keeping, and the like. I guess we'd all better start shorting Stripe, GoCardless, and friends, because presumably according to the EU they have no small business customers. ::facepalm::
And as others have also pointed out, there are plenty of very small busineses who could never afford that level of ongoing accountancy support, nor to hire people to develop the relevant record-keeping systems and automate the corresponding reporting processes.
Are we living on the same planet?
In some EU countries re-selling an item will not trigger VAT, in some it will, in some it might require some work to be done (e.g. refurbishing) in which case you need to charge VAT but even that's not that simple because in some countries you only charge VAT on the actual work and bill of material that went into the refurbishing process, in some countries you need to charge VAT for the whole amount based on the final sale price and the list goes on and on and on.
VAT MOSS also completely ignores the fact that you might be VAT exempt in your own country, if you are in the UK you can choose not to register for VAT if your business earns under 100K a year in this case you simply do not charge VAT, but well Spain doesn't care about that so they might come knocking because you have a Spanish costumer or 2.
There is no realistic way for people to figure out when and how much VAT you'll need to charge, and you'll need quite a good and expensive accountant to sort that out and even they might actually not know everything.
No, but my payment processor did.
so... I don't know anything about the EU law we're talking about, but I do know a bit about US sales tax.
First, if I sell a service, not a physical product, my understanding is that I don't pay sales tax at all. Next, even if I am selling physical product, I only need to worry about sales tax in the state in which I do business. In my case, California (and maybe Washington, as I have a contractor there.)
But really, it's a non-issue, because I'm selling a service not a product.
Now, if I was selling a product, it is more complex than it sounds. Yes, as the business, I don't worry about taxes in the states where I don't have a presence, but those customers are expected to file a 'use tax' - many people don't, and some businesses take advantage of this, for example, provantage will ship my supermicro crap from California to Ohio or some other midwestern state, then back to me, so that I don't have to pay them sales tax. It's super irritating, because I pay my use tax, so it's extra accounting work for me, and it is extra shipping money and time. I usually end up getting the provantage price and sending it to my local supermicro re-seller (kingstarusa) and buying from them afte rthey price match. But the point being that the selling company doesn't worry about sales tax if they ship a physical product to a state they don't have a presence in. That's the recipient's problem to sort out (or ignore)
But that's not really the complexity of the US sales tax system. The complexity is that within the states you do business, every county has a different sales tax. And I'm supposed to figure out what county you are in and calculate your tax. (fortunately, I don't have to pay each county; I pay the state board of equalization) - it's a pain in the ass. you need to buy a special database, because counties don't line up with zipcodes always, and yadayadayada. It's doable, just not fun. But I bet that's more complex than calculating a different vat for each EU country, though actually paying each EU country might be a bigger pain in the ass. Seems like something that could be outsourced to your payment provider, though.
(note, this information about state sales tax is about a decade out of date; that's about as long as it has been since I sold physical goods. Point being that it's both more and less complex than you imply.)