This legislation’s focus on big corporations means it has totally overlooked the discriminatory impacts on those with disabilities, on minority groups, on the charities that support them, and on other good causes. Damaging consequences extend to those living in rural areas across Europe and even to less economically developed countries far beyond the EU.
New digital technologies and business opportunities are proving invaluable for those working from home for a whole range of reasons. People who specifically benefit from being able to work at home include those with autism, agoraphobia, depression, social anxiety, long-term physical illnesses, and mobility issues. Such people can and do run successful businesses because they’re able to work on their own terms and for the hours that suit them, using IT and the internet. Many are otherwise unable to work.
People work from home for other equally vital reasons for society. Few families with young children can survive on a single wage, but childcare costs are prohibitive and spending years outside the work force can damage one’s future career prospects. By working online, stay-at-home mothers and fathers can continue to earn and develop their careers while looking after their children. Other people are caring for a chronically ill family member or friend, or for an elderly parent. If your spouse needs constant care, working online from home can keep you both afloat. Digital work also allows older people to continue working after retirement, to supplement a pension and to share the skills and experience gained from a lifetime’s work.
In so many instances, being able to work online from home lifts people out of benefits, improving quality of life for them and their families. Some will start enterprises that will become high-value businesses. Others will always remain trading below the UK VAT threshold but that’s still worth a tremendous amount on a personal level. It’s not just about financial independence but the increased confidence and self-respect that comes with it.
At least, that’s been the case up to 1st January 2015. Now all those people are faced with the substantial, up-front costs of VATMOSS compliance if they wish to trade outside the UK into Europe, or the loss of income that comes with geoblocking or paying marketplace fees which apply regardless of where their customers are. For those just starting out and those trading on a small scale, such increased expenses and/or lost revenue can be enough to shut down their businesses entirely and throw them back into the benefits system.
For those with visual impairments, the burdens of compliance are even greater and MOSS systems make little or no allowance for their particular needs. The entrepreneur who founded the not-for-profit enterprise Living Audio contacted us. He produces audiobooks to benefit blind and print-disabled readers.
“I am totally blind myself, and yes, I do have a guide dog! The new VAT rules have affected me, because I just don’t have the financial means, technical skills or infrastructure to implement the checks required to facilitate the new system. As our audiobooks are available for anyone to purchase no matter where they are from, I have had to block anyone from the other 27 member states from purchasing from our website. This is a real shame, as blind or print-disabled readers living in other EU countries will no longer be able to benefit from the service we offer.”
So the damaging effects cut both ways. Charities have also realised these new rules make direct sales of digital products highly problematic. As well as denying them a source of income, in many cases this also limits the potentially vital help they can offer in their own country and beyond.
The Science Fiction Foundation is a charitable association of writers, academics, critics. When Sir Terry Pratchett died, publishing an ebook edition of the Foundation’s book, ‘Terry Pratchett; Guilty of Literature’ was proposed with the bulk of the proceeds going to the Orangutan Foundation, in Terry’s memory. Contributors all agreed to give the Foundation electronic rights in their work for this edition. Science Fiction Foundation members volunteered to donate their time and skills to prepare the ebook.
Then one of the Committee members realised this ebook would come within the scope of the new EU digital VAT regulations, giving the Foundation the following choices –
• Spending several thousand pounds to set up a compliant shopping cart to make direct sales from their own website, for the sake of an unknown number of foreign sales unlikely to bring in enough revenue to justify those costs. Then incurring further administrative and accountancy costs to the subsequent VATMOSS returns.
• Selling via a third party platform (Amazon/Google Play/iTunes) and thus paying VAT at 20% even on UK sales plus a substantial commission (at least 30%), effectively reducing every sale/donation by around half its value.
• Offering direct sales only within the UK while blocking any customers from abroad, with the option of manually processing foreign orders via email, with the costs in time that would entail.
The Science Fiction Foundation concluded that none of these options would be acceptable to their trustees or supporters and with considerable regret, cancelled the project. Any small charity wishing to publish specialist books for a target audience will find themselves in the same position, with the same unpalatable choices.
For a charity looking to build an online community through sales of such books, offering information or support for those sharing a medical condition, selling through a 3rd party also diminishes vital direct contact between the charity and those it wishes to help.
Since these new regulations apply to anyone selling into the EU, the effect goes far beyond Europe. The digital revolution has seen less economically developed countries use computers of all shapes and sizes as well as wireless technology to overcome the limitations of outdated wired infrastructures, the logistical challenges of great distances and inadequate transportation links in non-industrialised countries. Innovators and entrepreneurs are using the online world to improve their own lives in every sphere, from fiction and the arts to technological advances built on their first-hand knowledge and practical experience of key issues.
Now, selling their digital creations and inventions into Europe means registering as a non-Union supplier with a member state’s MOSS system and creating a compliant website with all the costs that entails. Using a 3rd party marketplace simply isn’t an option for large parts of the world, either for buying or selling. Google, Amazon and Apple limit their operations to the most profitable regions as well as globally dominant languages. For those speaking so-called minority languages, which actually means tens of millions of people inside the EU as well as beyond, these new rules create such a massive barrier to entry for digital start-ups, that growth of online services and opportunities in their own language will be effectively stifled.
Then there are the endless phone calls that everyone in Europe seems to be making to their tax authorities since the start of the year, to clarify online guidance or to sort out some computer error. Making such calls from London is one thing. How much would spending hours calling a UK helpline cost from Lagos? Bank transfer costs for businesses outside the EU are yet another burden. A Malaysian entrepreneur who contacted us was facing £30 in bank charges to pay VAT owed of £1.80.
Once again, the damaging effects go both ways. With businesses in the EU opting to limit sales to their own countries, this will severely limit access to educational resources as well as the knowledge and skills-based information that have been proven to make a significant contribution to people improving their situation through their own efforts and reducing reliance on international aid.
In all these cases, introducing a limit for VAT liability on digital products, whether that’s through a threshold or an exemption for SMEs, would do away with destructive and discriminatory consequences of this legislation.
