"VAT is an EU tax - some of the revenue from VAT is regarded by the EU as part of its 'own resources' and goes directly to the EU rather than to the Member State – this explains why they are so keen on this harmonisation and so indifferent to the plight of small businesses,"wrties UKIP MEP Margot Parker in a letter to constituents about VAT.
•We are aware of the problem with VAT MOSS and UKIP has delivered a Written Parliamentary Question to the EU Commission on this matter, we hope to have a reply before Christmas. We suspect in practice that where internet sales of the type caught by the new rules form a part of a small business the only solution, to avoid the need for their whole business to collect VAT, is to incorporate a separate company to conduct the VAT MOSS related internet business – far from ideal.
The EU Commission is the only body that can initiate new EU laws, begin repeal of or start any amendment to EU laws, or negotiate trade agreements. The EU Commissioners are not elected, but appointed. MPs and MEPs have no binding way to force the Commission to do anything it doesn't want to do. So, once an EU law passes there is nothing a voter or a MP or even a MEP can do to change it. EU Commissioners are required by Treaty to ignore national interest and to act only in the interests of the EU as a whole. In a normal democracy, if you don't like a law or a set of politicians, every 5 years or so everyone gets to vote for someone else who can change the law. This doesn't happen in the EU because the elected MEPs don't have those powers.
The administrative cost on small businesses of this change to VAT is significant because, as a direct result of these rules, they will have to:
1. Invoice for VAT (or possibly not depending on the different rules in different jurisdictions)
2. Collect two pieces of non-conflicting information to prove the location of the consumer
(apparently the Commission wrongly assumed that everyone uses 'gateways' to collect this)
3. Store that information on an EU server for 10 years.
4. Implement Data Protection rules and register with the Data Protection Commissioner in each jurisdiction (the regulations for which are lengthy and complex).
5. Create a separate legal entity and register that for VAT MOSS if they don't want to lose their UK VAT threshold.
6. Complete returns quarterly under penalty of all 28 jurisdictions potentially.
7. Be ready for audits from potentially 28 jurisdictions (we believe the EU Commission are trying to encourage some countries to join one audit, but it's not binding on them - unlike everything on us).
In this context it is worth remembering that VAT is an EU tax - some of the revenue from VAT is regarded by the EU as part of its 'own resources' and goes directly to the EU rather than to the Member State – this explains why they are so keen on this harmonisation and so indifferent to the plight of small businesses. In much of the rest of Europe VAT is charged on everything, and at a higher rate than in the UK. The loss of UK control is so great that even the Chancellor, George Osborne, must ask permission from the EU Commission if he wishes to reduce the VAT rate on a particular item.
The EU is trying to reduce tax competition between Member States so that it can maximise its income from 'own resources'. Transparent tax competition is what keeps countries 'honest' in their public finances – see more on this (and the EU proposals for a common consolidated corporate tax) written by Steven Woolfe MEP.
VAT is such a complex tax that it is expensive to comply with, UKIP would like to simplify the entire tax system – making compliance cheaper and avoidance less tempting.
You may have had an opportunity to read more about the problem in the Mail on Sunday.
The only way in which we can stop this type of bureaucratic meddling in our affairs, or have any real opportunity of reversing it if it occurs, is to leave the EU and prevent them from using HMRC to collect foreign taxes, after all the UK is more than a star on someone else's flag.