Progress on VAT issues

The VAT-MOSS issue was raised today in a debate in the European Parliament by a number of MEPs.

Encouragingly, European Commission Vice-President Timmermans, responding to the debate, confirmed that the Commission was taking these concerns very seriously, and that they had started to work on it even before David Cameron raised the issue at last week’s European summit — presumably because of the Labour MEPs (including myself) and others who have been raising it with the Commission in recent months.

I spoke to Timmermans after the debate. I understand that the Commission will be looking into three aspects in particular:

  • the question of a threshold below which smaller companies would be exempt from charging VAT
  • the rule requiring sellers to retain records for 10 years
  • the rule requiring two proofs of identity from the buyer

I was assured that the Commission wishes to act rapidly on this. However, let’s not forget that this was a decision originally taken not by the European Commission, but by national governments of the EU. Any proposal to change the existing legislation therefore also requires the assent of all 28 national governments. This is one of the downsides of the unanimity requirement which applies in some fields of European decision-taking.

So it’s essential to make the case to nation governments, not just to the Commission!

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  1. This is indeed good news.

    It leaves me wondering whether those governments who didn’t want a threshold have been stifling innovation in their own countries without realising it? Even before this fiasco, I wonder how many potential businesses in Spain and Sweden have been abandoned even before they got started, because a potential entrepreneur would have to account for VAT from the first day of trading? How many entrepreneurs in the Netherlands decided that the threshold of €1345 was simply too low to take the risk of even starting?

    It’s too easy to think that an entrepreneur starts out with £100,000 bank loan, hires premises, takes on an accountant and starts making money, all on day one. Maybe some do, but most start out in the back bedroom, selling small amounts on the web, doing the accounts on the kitchen table and, most of all, trying to reduce the risk of dire financial consequences if it all falls apart.

    I believe that a reasonable threshold of say €100,000 across the whole Europe would give small business a boost and improve the economy across the whole EU.

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