have caused a backlash from small and microbusinesses across
the EU, which face disproportionately high costs to comply with
"The difficulties of compliance in terms of
actually locating your customers in the online environment vary
from the massively complicated and expensive to the frankly
impossible," said Juliet McKenna of the EU VAT Action
"When we were in Brussels we were making the case
for the impact on small digital businesses, and when you
actually lay out the facts and figures for people they get it
An evaluation of the system is scheduled for
mid-May, just after the data for the first quarter usage of the
mini one-stop shop (MOSS), the system used to collect VAT from
traders selling to several European countries, are
In the meantime, meetings are taking place to
prepare a review of the system, particularly its effect on
"In terms of a review, and revision of these
legislations, the big concern is the timescale being quoted,"
said McKenna. "The timescale being quoted is anything up to 18
"At various meetings, at various roundtable
discussions, heads were nodding around tables," she continued.
"Turning that understanding into concrete proposals and
concrete action is absolutely going to be a challenge for
legislators here and in Brussels, but if they
don’t want to see the digital economy dead in the
water then they absolutely have to take some initiative."
Donato Raponi, head of the VAT unit at the European
Commission has previously expressed his regret that a threshold
was not agreed upon when the regulations were agreed upon, in
However, for a threshold to be implemented, all 28
member states would have to agree on it.
"The majority of complaints we receive are about
individuals supplying very few services," said Raponi. "It
should be a very low threshold. If not, we have no chance [for
it] to be agreed by the member states."
Deloitte has been commissioned by the EU to carry
out a review on some aspects of the legislation, with data
gathering at the end of the second and sixth quarter being
mooted as a possibility.
While McKenna and the EU VAT Action team are keen
to see quick, decisive action to stop halt the damage being
done to microbusinesses supplying e-services, she recognises
that a thorough and meaningful review cannot be done
"A rough solution could end up being no solution,"
she said. "However, the more delay, the more damage is done, so
what we need now and need quickly is to mitigate the damage
being done in the immediate term – ideally a
suspension of these regulations until they can be thoroughly
reviewed and revised."
"If no concrete proposals on revision can happen
until 2016/2017, the digital single market’s going
to be dead in the water," she continued. "Between now and then,
businesses will be shutting up shop on a month-by-month basis,
as we’re already seeing."
While the UK revenue authority, HMRC, has been
advising microbusinesses to register for the MOSS, it has
recognised that it is often very difficult to determine the
customer’s country and is unlikely to prosecute
sole traders who are making an effort to comply.
Other countries have taken a different view,
leaving microbusinesses out of the equation due to the
disproportionate cost of compliance enforcement activity.
Dermot Donegan, head of VAT policy at the Irish
Revenue, said: "One issue then is your microbusinesses, doing
incredibly small business. What we’ve done is
we’ve said to these people no, you
don’t have to register for MOSS."
"We’re talking about €100,
€200 – there are four or five cases where people
have come to us and we’ve told them no, you
don’t have to register for MOSS, because the cost
of administration is totally disproportionate."
"The compliance activities that member states would have to
engage in would be ridiculous.
We would be very much in favour of having some kind of
minimum pan-European limit – but not as high as some
of the interest groups in the UK are looking for, of
£50,000 and £100,000.
"In Ireland we’d be very happy with a
much, much lower figure. The businesses coming to us,
we’re talking about €100, €200 turnover
from European sales," said Donegan, who was part of the Irish
delegation which held the EU presidency when the implementing
regulation for the VAT changes was passed.
McKenna, aside from her work for the EU VAT Action
campaign, works as a fantasy author, and has seen an impact on
her business as part of the changes.
"My choice is to spend money on developing a
compliant website, which the returns from the direct
European-only sales simply would not justify. If I spent that
money I simply could not spend that money on things like copy
editing and cover art – things that I actually need to
expand my business."
The campaign has already achieved some success
– initially, registering for the MOSS meant that UK
businesses would be liable for UK VAT, even if their turnover
was under the VAT threshold – a position which has now