A question that occurs for me is how TTIP would affect this situation, though. If TTIP was established, would the EU then require US businesses to collect VAT in the same fashion? Because that would be really sucky for you.
Yes and no.
Yes the EU authorities would love for the entire world to collect VAT from its citizens.
No because the EU has absolutely no way to enforce this worldwide.
However, the big fun is coming on Thursday, when the EU is due to rule over Google and politely requesting that Google splits off search from the rest of its business.
I believe this decision will be indicative of how crazy the EU lawmakers might be prepared to go.
For example, if they try and enforce splitting up Google, maybe they'd have the sheer bloody-mindedness to try and enforce blocking sales from EU cards to e.g. non-registered US sellers?
That's not accurate. What the European Parliament is due to vote on is a non-binding resolution that would recommend that the European Commission consider proposals that would include unbundling Google's search from other commercial features.
> I believe this decision will be indicative of how crazy the EU lawmakers might be prepared to go.
Or it might be an indicator of what people in general are willing to do when their actions have no direct effect (non-binding resolution) and therefore don't actually have to address the details of substantive concerns.
This doesn't seem to me the same as "splitting up Google", more like unbundling or splitting up products. For example, I can see them mandating that Android support other search engines in the launcher/Google Now.
Can you provide examples of that?
The European Parliament passing a non-binding resolution recommending that the European Commission take seek a certain goal as part of a remedy if its concerns aren't otherwise resolved in an ongoing proceeding is not analogous to the US DOJ actually seeking a particular remedy in a proceeding.
My point stands regardless. Show me where the United States Government attempts to force major European or Asian companies to split into pieces. I'd love to see numerous examples of the US Government doing what the EU Commission is doing.
Yes, but the issue isn't the EC seeking to do that as part of any enforcement action, the issue is the European Parliament passing a non-binding resolution recommending that the EC should do that (and, as I understand it, that it should do that if its issues with Google aren't satisfactorily resolved otherwise.)
So, the US DOJ actually attempting to do that in a concrete enforcement action wouldn't be a parallel comparison, it would be a much more significant action than what is actually happening in Europe right now.
> The DOJ's domestic powers are far greater than the EU Commission's ability to impact Google, but that's not for lack of wanting to.
More relevantly, either the DOJ or the EU Commission, within their respective jurisdiction, actually do substantive antitrust enforcement actions, and actual enforcement actions by those entities are categorically quite different than non-binding resolutions recommending elements that should be sought in such action by the respective legislative bodies.
> My point stands regardless. Show me where the United States Government attempts to force major European or Asian companies to split into pieces.
A non-binding resolution by a legislative body isn't really much of an effort to force anything. Its more of an effort to be seen as engaged without actually doing anything substantive.
> I'd love to see numerous examples of the US Government doing what the EU Commission is doing.
The European Commission isn't actually doing anything here. There are lots of examples of the US Government not breaking up foreign companies.
Conflating the European Commission with the European Parliament is kind of like confusing the US White House -- or the whole of the Executive Branch -- with the US Congress -- and what you are doing here goes another step further, and proposes an equivalence between non-binding action by the legislature and concrete enforcement action by the executive.
Note that in practice, you probably won't have to fear much as long as your revenue does not exceed a certain threshold. In Germany, for example, the "Bemessungsgrenze" is 17'500€, but I'm not sure if that also applies to your case.
Furthermore, you should also see the positive side: when for example renting dedicated servers from a German hoster, you won't have to pay VAT, so everything is 20% cheaper for you.
This means that if you sell £50 a year of knitting patterns you now have a liability to document the geography of your customers and prove that non are in other EU countries, OR pay tax to each country you sell to individually. HMRC are saying that companies (who may be individuals [sole traders in local parlance]) can not legally refuse to sell across EU borders to avoid this either. Along with that as you're now holding personal information on your customers there is a whole raft of new laws to attend including apparently a £35 registration with the UK Information Commissioners Office (ICO).
Foreigners already don't pay local VAT in the EU do they? This change is about sales to customers in the EU, there is no change AFAICT to transactions with customers not in the EU the VAT laws relevant to that are unaltered.
It's totally bonkers. The people involved have described "micro businesses" as selling < £2million GBP of digital services. They clearly haven't considered the impact on the many small businesses (now being termed nano businesses) that sell maybe a few thousand GBP of e-books or a few hundred pounds of knitting patterns or similar.
If it becomes feasible ($ wise), perhaps this then can be a new process implementation with lower (but feasible) margins.
If not feasible, then sales stop to the EU.
Then someone will launch a business that will do the same you do, but complying with regulations.
Taxes must be collected; without taxes, the welfare state collapses. You should know that, to be able to sell something in a market, you must understand its regulations first, and respect the decisions the citizens have taken (in this case, regarding taxes) through democratic ways.
The way this is all written, I'll actually have to do work to BLOCK customers from the EU, or face legal issues. It seem more reasonable to require that the people who LIVE in the EU deal with their own local taxes.
Can you imagine having to keep track of tax laws of 195 countries? I'm sure a company like Amazon can deal with that no problem, but self-employed people developing software, music or ebooks are basically screwed and now need to waste a ton of their time trying to figure out exactly how to jump through the ever-changing hoops.
If I do it at checkout time, I am performing sort of a bait-and-switch with customers, which would leave a sour taste in my mouth.
I thought about the idea of adding a surcharge for EU customers since I need to deal with all of this. I don't know enough about international tax law to know if this is ok.
However, the issue is really that it is taking up time from providing a product. Sure, I could charge more, but unlikely enough to hire someone to deal with the issues. Instead it would more likely negatively affect the number of licenses I sell, which would again lead to me probably not being able to afford to pay someone to deal with it for me.
In the end it comes down to the fact that the EU is making it significantly harder for small companies or individuals to sell digital goods. In the end we are talking about every person who writes an ebook, sells some piece of software or sells digital music having to deal with these issues.
It seems the EU is stacking the deck against small companies and instead favoring larger organizations that can afford full-time accountants. Or favoring large companies that then sell VAT services to the individual.
This is a common effect and often an intended one when it comes to regulatory capture and the raising of trade barriers to protect those in power.
Charge more at checkout, EU citizens will either understand or they won't, but they are the ones that need to confront their own laws passed by their politicians.
You mean, like anywhere in the US where the price shown is without tax and you calculate it afterwards?
I have a SaaS service in the EU. I have always paid my taxes and I'm not against them. But I want to have a reliable and hopefully simple process to know how to process payments. The proposed changes are a bit PITA to everybody. I hope they will come with a simpler process, as it's scary all that I will have to do to add a foreign EU customer.
https://www.gov.uk/register-and-use-the-vat-mini-one-stop-sh...
I gather similar schemes are being set up elsewhere in the EU, though I don't know if it's universal.
It appears that as a business that is already VAT registered and filing quarterly returns in the UK, the key points for us will be that:
1. we have to charge VAT to customers elsewhere in the EU at their local rates, which we will be responsible for monitoring in all 28 states;
2. we have to submit all of the VAT to the UK tax authority (HMRC) as we do at present;
3. we have to file an additional quarterly return via MOSS breaking down exactly where our customers/revenues come from, so HMRC can distribute the funds to their counterparts around the EU;
4. we will be required to collect a completely impractical standard of evidence for the location of those customers and will be entirely responsible if and when we fail to do the impossible and it turns out someone lied to us about where they live; and
5. we will be subject to arbitrary audit/investigation by 28 tax authorities instead of just our own, at our own expense naturally (though there is some suggestion that the UK authorities will at least try to co-ordinate this to prevent what they consider an unreasonable burden being imposed).
The real sting in the tail, if I've understood the announcements so far correctly, will be for those who have a low volume of trade and so currently do not have to register for VAT at all. In order to use MOSS, you have to be VAT registered within the UK, and thus either add the current VAT rate onto all your prices when charging customers or take a hit of the equivalent fraction of your existing revenues if you choose to keep prices the same. I really hope I'm wrong about this, but I haven't yet seen anything suggesting that just because you're under the threshold for VAT registration in any/all EU states you'll be exempt from the new funds transfer arrangements, meaning a single foreign customer could suddenly put your entire business within the range of requiring VAT registration.
They're saying you can be registered purely for the VAT MOSS and so account for VAT as if your were unregistered for UK transactions.
I've not read anything on whether you'll be allowed to reclaim VAT on your inputs on e-goods/services you sell with VAT though (which is the usual way VAT registration works, you don't pay VAT on your inputs).
This group https://www.facebook.com/groups/DigitalVAT2015/ seems to be useful to keep track of it all from an SME perspective.
Except the citizens haven't taken that decision: the unelected European Commission has.
We could probably go down the reductio ad absurdum road of highlighting their appointment by someone who got elected somewhere along the way, but this powerful body is in no way directly accountable to citizens.
Some of the British North American colonials had a popular mantra of "no taxation without representation", which might appeal in this situation.
No, it really isn't.
When the US people go to the polls to vote for a president, they are voting for the President. There might be some oddities in how the votes are counted, as with any electoral system, but there is no doubt about what position you're voting for or who your vote a certain way will help the most.
The number of levels of indirection involved in the election of European Commissioners and the mandates they receive within the Commission is such that there is really no significant accountability to the general public at all. The reality is that the Commission is often full of failed national politicians who have been given a cushy job as a thank-you from political colleagues when they can no longer credibly run for office in their own country. The "we have to do this, it's a European directive that all national governments must implement" technique has become a standard political tool for introducing unpopular legislation that would cause serious political damage if anyone whose job actually depended on being directly elected were to propose it back home.
The electoral college doesn't get to choose any person for President. It's a direct correlation vote: do this, get that result. Such is not true with EC appointments. You vote for a national government, then you pray they appointment an EC that you favor, but there is no legally required direct correlation that says they have to appoint X person. You make that point within your own post (where you note that governments who have chosen unpopular candidates suffer), contradicting your claim that it's just like how the US President is elected.
Yes, in fact, they do.
> It's a direct correlation vote: do this, get that result.
A lot of people look at it that way, and that's approximately what happens (especially currently), but not because there are any enforced constraints, just because the way electors are chosen gives a very strong likelihood of that effect; historically unpledged electors were a thing [0], and faithless electors remain a thing [1].
1. The citizens vote for a local Member of Parliament to be their representative (the winning MP actually being chosen via the statistically dubious First Past The Post system).
2. The party with the largest group of MPs probably forms the government (except when it doesn't, as with our current coalition administration).
3. The leader of the winning party becomes Prime Minister (except when that leader changes after the election, even if there was an explicit promise before the election that this wasn't what people would be voting for, as with Gordon Brown in the previous administration).
4. The senior executive roles within the government and indirect representatives such as European Commissioners are effectively appointed by the PM and their possibly entirely unelected political advisors.
The idea that European Commissioners have any meaningful electoral accountability at all is crazy. If you don't think so, try this simple test: When our citizens cast their only relevant vote on this matter at the last election in their constituency, was it even possible for them to know the name of the person who would ultimately become the European Commissioner for our country?
More than 50% of MPs have voted for the current UK Government. Yes, they aren't all in the same party. Many countries have coalition governments, and we have no problem with them. A minority government sounds very undemocratic
Right. But that means there is already an average of averages problem, even leaving aside the well documented criticisms of how those MPs are themselves elected. And literally everything beyond that is a matter of political dealing, not representative democracy, so the idea that there is any meaningful democratic accountability at all for the European Commission is still silly.
In any case, we're drifting well off the original topic now and I'm not sure this discussion is going anywhere constructive, so I'm going to stop there.
>I'm almost considering shutting down sales to EU customers.
Do you have a payment processor (like Fastspring)? If so then they're handling all that ugly mess.
http://www.aicpa.org/publications/taxadviser/2013/june/pages... http://www.taxamo.com/digital-eu-vat-myths/ http://ebiz.pwc.com/2013/01/eu-2015-vat-changes-to-eservices...
Even if I were to presume that I could just ignore it since I am small, if I were to become more successful then I could owe back taxes and fines. I'm no expert on international law, but I presume there could be issues if I were running a company avoiding EU taxes and I ever decide to visit the EU.
Currently, I live in Massachusetts, which does not require collecting sales tax on digital goods. According to these new laws, even though I live in the USA, and don't collect any address information for my customers, I now need to:
So, even though I don't live in the EU, don't host a server there, don't ship things to the EU and do all of my business with US banks and so forth, I will now have more responsibilities for sales taxes in the EU than I do for income tax in the US.I'm almost considering shutting down sales to EU customers.