|Andrus Ansip is a new entry this year|
Free trade is a core principle of the European Union (EU) and the European Commission (EC) has always made efforts to expand intra-EU trade. Online trade brings with it both opportunities for greater trade between member states, and for greater protectionism.
Just 4% of online trade in the EU is cross-border from another member state, with 42% remaining within national borders and a staggering 54% coming from the US. To increase the intra-EU share of the pie, former two-term Estonian Prime Minister Andrus Ansip has been tasked with creating a Digital Single Market (DSM).
International Tax Review: The release of the DSM strategy is surely your team's greatest achievement of the last year. Which aspects of it are you most proud of?
Andrus Ansip: Yes indeed, only a few months after the new Commission started its work, we presented our strategy to create a DSM. We need to act quickly, as we are losing out on unexploited potential. According to a study by the European Parliament, a DSM could contribute €415 billion ($451 billion) per year to our economy and create hundreds of thousands of new jobs. We need to break down the many barriers which remain in our online environment. People and businesses miss out on goods and services and have their horizons limited by 28 fragmented markets in the EU. Think about e-commerce: only 15% of consumers buy online from other EU countries, and only 7% of SMEs sell cross-border. It is too complicated, too expensive, too risky. Many startups leave Europe to scale up on other continents: this is simply not acceptable.
Our strategy is based on three pillars which are equally important: (1) better access for consumers and businesses to digital goods and services across Europe; (2) creating the right conditions and a level playing field for digital networks and innovative services to flourish; (3) maximising the growth potential of the digital economy.
One of the initiatives under the first pillar is related to VAT: we want to reduce the administrative burden businesses face from different VAT regimes: so that sellers of physical goods to other countries also benefit from single electronic registration and payment; and with a common VAT threshold to help smaller start-ups selling online.
In total, 16 initiatives will be presented by the end of this year. We presented our first proposals in December 2015. The new rules on digital contracts aim to better protect consumers who buy digital content or goods online across the EU and help businesses expand their online sales with a common and complete set of consumer protection rules across the EU. The other proposal will ensure that Europeans who have purchased films, series, sports broadcasts, games or e-books online while at home can access them when they travel across the EU. Together with this proposal, we outlined an action plan to modernise EU copyright rules.
In parallel to these proposals, we also reached key agreements with the European Parliament and member states on ending roaming charges and on new net neutrality rules, on a stronger data protection framework and on the first EU-wide cybersecurity rules.
ITR: What work needs to be carried out in 2016 to realise your aim of a VAT reform for B2C retailers by 2017?
AA: Working together with my colleague Commissioner Moscovici, our objective is to make a proposal to the European Council in the second half of this year which will include a package of measures to modernise cross-border e-commerce for business and consumer transactions of both goods and services. The work on the proposal is advancing well. In September last year, the Commission, together with Irish Revenue, organised a conference [attended by ITR] with representatives of member states and of businesses, large and small, to discuss the details of the DSM initiative. One of the key outcomes of this conference was that the vast majority of businesses and member states were positively disposed to the VAT initiative in the DSM strategy. Further, we have just completed the open public consultation which attracted more than 370 submissions. The next step is to prepare the impact assessment which will also assess the implementation of the 2015 changes, and then prepare the legislation. This work is being overseen by the DSM project team which I am chairing.
ITR: The implementation of the destination principle for VAT on cross-border B2C e-commerce, telecommunications and broadcasting brought with it calls for a threshold. You were one of the more vocal supporters of such a threshold – why do you think this issue is so important, and what do you think the chances are of a threshold being agreed in 2016?
AA: As a first point, it should be recognised that the mini one-stop shop (MOSS) is a substantial simplification – more than €3 billion was collected through it in 2015 and independent consultants have estimated that this mechanism saved businesses more than €500 million in its first year. As regards the threshold, it is regrettable that member states did not provide for this in the 2015 changes despite support by the Commission and a number of member states, such as the UK.
In the DSM Strategy, the Commission committed to including a threshold and perhaps other simplification measures for small business in the VAT e-commerce proposal. The level of this threshold will be determined on the basis of an economic impact assessment. I understand why some member states are reluctant to introduce a threshold as they are concerned that they will lose VAT revenues and that differences in VAT rates may put their own business at a disadvantage to suppliers from other member states. However, I maintain my position that a suitable threshold and other simplification measures would be positive overall for small business without distorting the single market.
ITR: What else will you be working on in 2016?
AA: It will be a busy year. After important preparatory work done last year – we launched more than 10 public consultations – we will present all the remaining initiatives included in our strategy.
One of our objectives is to come with a package to further boost e-commerce in spring. It will include measures to tackle unjustified geo-blocking, make parcel delivery more efficient and review our rules on consumer protection cooperation.
Our DSM strategy is forward-looking, paving the way for future innovations. We want to ensure a thriving digital economy and society in the long-term, this is why the third 'pillar' of our strategy notably focuses on data, interoperability and digital skills. Data is a catalyst for economic growth, innovation and digitisation across all economic sectors, particularly for startups and for society as a whole. Education and digital skills are crucial for Europeans to create new technologies and benefit from them.
Once all our initiatives are on the table, I count on the support of the European Parliament and member states to agree on them quickly. As I said, there is no time to waste if we want European citizens and businesses to make the most of the digital revolution.