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Nov. 9 — Europe’s chief of the digital single market, Andrus Ansip, has urged the continent to “hurry up” with implementing the single market, warning it is falling behind on plans to break down national barriers to digital goods and services.
Ansip made the comments Nov. 8 at a roundtable discussion on the DSM at the Web Summit technology conference in Lisbon.
“We would like to make paying of VAT easier for our companies, especially for small companies.” Ansip told Bloomberg BNA Nov. 8.
In an interview, Ansip told Bloomberg BNA that the EC could, among other things, simplify the value-added tax Mini One Stop Shop (VAT MOSS) scheme and ensure that digital books are taxed similarly to traditional books.
He also said that some three billion euros ($3,281 billion) in taxes were paid through the VAT MOSS scheme in 2015, even as the U.K. and others criticized it as too bureaucratic.
“I agree it’s still complicated and we would like to simplify this system and I hope everybody will be happy with this solution,” Ansip told Bloomberg BNA.
Breaking down digital intra-EU barriers to trade was one of European Commission President Jean-Claude Juncker’s priorities upon taking power in 2014.
The commission announced its DSM strategy in May 2015 with an eye on a broad array of areas like e-commerce, competition, geo-blocking of cross-border shopping, copyright reform and VAT. Under the DSM strategy, 16 key actions are to be delivered by the end of 2016.
“The Digital Single Market is based on the premise of growth and digital innovation” that will allow start-ups access to a larger market that is conducive to growth, said Gerard Grech, chief executive officer of Tech City UK, at the Nov. 8 discussion.
Another area of possible tax action is over e-books. The European Court of Justice in 2015 ruled against France and Luxembourg’s application of lower VAT rates—5.5 percent and 3 percent, respectively—for e-books than for paper books. The rulings considered the supply of electronic books to be ineligible for VAT rate reduction, but “do not prevent Member States from introducing a reduced rate of VAT for books on physical support, such as paper books,” according to judgments in cases C-479/13, involving France, and C-502/13, regarding Luxembourg.
“I hope we will make this proposal to treat equally e-books and traditional books” in terms of VAT rates, Ansip told Bloomberg BNA.
While not limited to digital issues, Ansip said the common consolidated corporate tax base is “also one of those proposals the European Commission is working on,” and that is “the clear position for the European Commission” that all taxes should be paid in the countries where profits are generated.
The DSM will also take into account “sharing economy” platforms like AirBNB Inc., which in different tax jurisdictions has to collect some local taxes and a VAT tax in countries that tax electronically supplied services.
Ansip said that the obligation of businesses to stay abreast of regulations in 28 countries is particularly hard on start-ups.
“The sharing economy is here to stay and we have to create a level playing field, and of course everyone has to pay taxes and we have to take care about consumer protection issues, but to kill new innovative platforms, it’s not for me,” said Ansip.
Development of the DSM comes just as it faces the potential loss of one of its biggest proponents in the U.K.
“The U.K. has not only been one of the biggest advocates, the most passionate advocates of free trade, but one of the biggest drivers of the digital single market,” and it hasn’t changed its view that trade barriers need to come down, said Grech.
One area where the U.K. differed over the taxation aspects of the single market was over the VAT MOSS, given the country’s own simplified VAT regime.
Ansip said businesses trading below the U.K.’s VAT registration threshold of 82,000 pounds ($101,833) went from not having to declare their VAT revenues to having to “declare those revenues from the very first pound” when selling across borders.
“This news about Brexit wasn’t good because the U.K. was and still is one of those strongest supporters of the creation of a digital single market in the European Union,” said Ansip.
Ansip said negotiations will not occur until the U.K. invokes Article 50 of the Treaty on European Union.
According to the commission, one of the pillars for the DSM is to enable better access for consumers and business to online goods when currently only 15 percent of consumers shop online from another country and only 7 percent of online small and medium-sized enterprises sell cross-border.
This is due in part to the “obstacle and complexity of different VAT systems,” a burden the commission says it hopes to cut, with solutions such as “single interaction point, a common threshold, and simpler, single audits.”
As prime minister of Estonia from 2005 to 2014, Ansip said he supported creation of a DSM in the EU and was led to believe there would be one by 2015, though the first proposal didn’t emerge until December that year.
“We have to hurry up, but at the same time I would like to say we have to take also time for democracy,” Ansip said.
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