If you’ve ever done business in the EU, you know that prices are negotiated and quoted excluding VAT. The VAT rate literally is totally irrelevant to B2B pricing.
If you’re selling B2B from one EU country to another, you don’t even need to collect VAT. Another reason why its rate is irrelevant to EU startups.
Can you name even one AI product that is sold directly to consumers? Most if not all is B2B and there VAT is not used as it is a tax on consumption levied at the consumer, not other businesses.
I thought pavlov was under the impression that the VAT you pay when buying automatically cancels out with the VAT you charge when selling, so the only people who VAT affects are end users.
Do also remember that all your competitors are bound by the same rules, so from a purely economical standpoint prices in a given country with VAT will just appear x% higher accross the board, and then the real question is more of disposable income.
To be perfectly honest I am no expert in VAT, but I do know that a country like Denmark with 25 % VAT is also ranked in the top 5 countries to do business in.
Also don't know what you mean by "As a business you stll have to buy stuff to recover VAT" but oh well maybe you can clarify.
In other words, "if you can't make at least a 20% profit on the value you add, you're not allowed to make a profit at all". This stifles innovation at the margin.
If you buy some computers for $100, do some work, and manage to sell your services for $1000, you get to reclaim $20 of VAT but you have to pay $200 of VAT, so a 20% VAT rate costs this hypothetical business 18% of its revenue, which is hardly "unimportant".
And a typical tech company would be taking in far more than 10x in revenue than what they are spending on VAT-able goods.
EDIT: But see below.