Policy suggestions to improve #VATMOSS

Important VATMOSS update
On 1 December 2016 the European Commission announced a package of proposed reforms to the VATMOSS scheme. Please read this post for the latest updates, as some of the proposed changes may affect the situation described in the post below.

This week members of the EU VAT Action team are in Dublin for the EU FISCALIS summit of European finance ministers, where they are continuing to fight the corner of the sole traders and microbusinesses who were treated with such blatant contempt by the legislators who implemented the EU Place of Supply reforms.

B3AA47bCMAAV2VSThe summit is looking for the common ground of experiences and constructive suggestions. With that in mind I thought I would repeat my own policy suggestions which I made last November when #VATMOSS first exploded into the public eye. It’s important to note that many of these suggestions are a matter of domestic statutes, not international law, but the EU could play as much of a role in enforcing those positive changes from the outside as it has in bringing in the negative problems.

  1. Sole traders need a low value exemption for insignificant amounts of VAT, which surely must mean any transaction in any currency under the .99 figure. When legislators roll their eyes and dismiss complaints about #VATMOSS as a British problem – as the EC’s spokeswoman for tax and financial services did on Radio 4 – they ignore the fact that the marginal cost of processing and accounting for VAT is the same whether an item is 99p or £99. Hence my repeated observation that in practice, VATMOSS means the micromanagement of micropayments to microtraders.
  2. If a low-value exemption is not possible, an alternate threshold exemption could be granted to sole traders whose incomes from self-employment are at or below the level of average median income from self-employment defined in their annual national statistics. In the UK that figure is currently £10,764, a figure well below the recommended minimum income standard of £17,100 but one that the majority of self-employed (including me) are more than familiar with.
  3. The European Commission must clarify the data protection requirements and obligations for all affected sellers across Europe vis-a-vis the current EU data protection regime as well as the draft EU DPR. For me one of the most astonishing accounts of the failures of VATMOSS implementation remains the report of high-ranking HMRC officials being completely baffled when asked about the data protection implications of the reform, as those issues had quite simply never occurred to them. That is as much a failure of the EC’s responsibilities to them as it was of HMRC’s responsibilities to traders.
  4. The European Commission must encourage governments to update the taxonomies used to classify domestic economic activity to an acceptable and current standard. As this is so critical, a failure to do so should involve punitive sanctions. In the UK it has already been proven that our domestic classifications, which have not been updated since 2003, have failed to count no fewer than 100,000 digital businesses as well as every digital sole trader in our national economic measurements. The failure to update the classifications more than once a generation has meant that the digital economy has not been accurately considered in forward planning, including the buildup to VATMOSS. To accuse the owner of a business which literally does not count in their own national economic figures of “moaning” about a law that they were, because of that fact, neither consulted on nor informed about is adding insult onto injury.
  5. Some of the companies cited as being the guiltiest parties in the tax schemes which necessitated VATMOSS in the first place also enjoy generous government bribes subsidies. Rebalancing the unfairness of EUVAT must involve an immediate end to all taxpayer subsidies, including Regional Selective Assistance grants, to high-volume, high-sales multinationals engaging in digital trading. Quite simply, using sole traders’ VATMOSS payments to subsidise Amazon is sick.
  6. Quid pro quo, Clarice. If sole traders living under the minimum wage are to be subjected to corporate levels of regulation, we need to get something back for that hassle. We need to know that the reward we will receive for VATMOSS will be paid sick days, paid holidays, access to a government-backed pension scheme, and access to the currently impossible dream of home ownership. By playing a critical role in making self-employment fairer, the European Commission’s actions in this regard would make the self-employed better legitimised in the eyes of legislators, which will prevent history – in the sense of affected parties being neither consulted nor informed about the laws that affect their work – from repeating itself.

It has been eleven months since sole traders, microbusinesses, and small digital enterprises first heard about the EU Place of Supply reforms. It wasn’t through their accountants, it wasn’t through business support organisations, and it certainly wasn’t through their national tax authorities. It all started with one affected trader writing one blog post. Since then those of us affected have been accused of being unprofessional businesspeople for not having magically heard of a law that hadn’t even been communicated to accountants; we’ve been called supporters of tax avoidance; we’ve been called “moaning” for discussing it in the first place; we’ve been given the patronising “there there, dear, once you understand the legislation, you’ll know it’s easy, really” treatment; and when our personal data was misused by a foreign government, we didn’t even get an apology.

I did not go into business for myself to put up with that over the less than £5 in European VAT I’ve paid in this year.

That’s right, less than £5. All of this has been inflicted on microbusinesses for the raising of tax revenues which would not pay for the breakfast each attending minister in Dublin ate this morning on expenses.

So why is it me who has had to take time out of my day to explain these things? Why have the self-employed individuals who put together the EU VAT Action campaign had to crowdfund to fly to Dublin to point out the obvious?

Something’s not right there and the powers that be in attendance at the FISCALIS summit can either acknowledge that and deal with it, or they can continue to drop soundbites and victim-blame.

About the author
Heather Burns is a digital law specialist in Glasgow, Scotland. She researches, writes, publishes, consults, and speaks extensively on internet laws and policies which affect the crafts of web design and development. She has been designing and developing web sites since 1997 and has been a professional web site designer since 2007. She holds a postgraduate certification in internet law and policy from the University of Strathclyde. Learn about hiring Heather to write, speak, or consult.