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It's not easy by any means but neither would I call it a huge, overcomplicated mistake. Even the new rules for digital services are overdramatized – it's really

It's not easy by any means but neither would I call it a huge, overcomplicated mistake. Even the new rules for digital services are overdramatized – it's really just as simple as charging a different VAT rate per country and submitting a single quarterly VAT return for the entire EU. For most people, if their web store and accounting software doesn't already take care of this, it will soon enough. Also, every EU member state already had VAT and already had differing rates and rules before joining the EU, so the complexity was already there.

blibble 10y ago
the UK did not have VAT prior to joining the EU VATmoss has been disastrous for small online UK businesses. UK businesses do not have to register for VAT until their turnover exceeds a figure (£80,000 odd). with VATmoss: if they have any EU customers they must either VAT register in the UK (which adds 20% to their UK prices), OR register and fill out VAT returns for each member state they have customers in, which is not really feasible I have simply stopped selling to EU customers... "single market", yeah right. The EU commission's answer to this has been "we know this is a problem for small businesses. we'll sort it out when we discuss it in 2019"... not good enough. all this bureaucracy was an attempt to try and get Amazon to pay their fair share of VAT... to hell with the small businesses
- stdbrouw 10y ago
  > if they have any EU customers they must either VAT register in the UK (which adds 20% to their UK prices) While I'm sympathetic to the fact that this will increase your administrative burdens, in terms of your bottom line this really won't make much of a difference, because once you register for VAT you can also deduct it for all the costs you make – you only pay tax on the value you add, hence the name. Thanks for the correction re: the UK not having VAT before joining the union, didn't know that.
  - blibble 10y ago
    the variable costs for digital services are essentially zero (make once, sell many times), so having an extra 20% tax makes a phenomenal difference to either profit or competitiveness
    - stdbrouw 10y ago
      The VAT for all costs you incur can be deducted, regardless of whether they're fixed or variable. If you're operating at a loss or if you do a lot of business with places where you don't have to charge VAT, it's not impossible to have VAT owed to you rather than the other way around. Might it affect your profitability? Definitely possible. But it won't eat up 20% of your revenue or require you to charge 20% more to break even.
      - blibble 10y ago
        no VAT: - £10,000 to produce a infinitely reproducible widget -> costs of £10,000 - sell 5,000 times for £10 -> income £50,000 profit of £40,000 with VAT: - £10,000 to produce a infinitely reproducible widget, all allowable, 20% VAT back -> costs of £8,000 - sell 5,000 times for £10 - (approx) £2 VAT -> income of £40,000 now I have a profit of £32,000 instead if I'm selling mostly domestically the logical conclusion is to no longer sell to non-domestic EU customers
        toyg 10y ago
        The misrepresentation in your calculation is that with VAT you really sell a widget for £12; if you're selling to businesses, they recoup those £2 so they don't care, and if you're selling to consumers all your competitors also factor in the same tax in their prices so again nobody cares. At that point, 5000 widgets at 10 net = 50000 - 8000 net costs = 42000 -> as a business, if your costs include VAT, you're actually better off by opting in. Sure, you feel the pain when you first transition (which is why you should have started with it right away), the first couple of years the taxman will be greedy, and vatmoss is a clusterfuck in its own right, but vat as a concept is actually extremely business-friendly. (I say that as someone who hates it for the regressive flat-tax on the poor that it actually is; I'd be happy to lose it tomorrow in exchange for higher corporation tax, but that won't make you any happier...)

blibble 10y ago

the UK did not have VAT prior to joining the EU VATmoss has been disastrous for small online UK businesses. UK businesses do not have to register for VAT until their turnover exceeds a figure (£80,000 odd). with VATmoss: if they have any EU customers they must either VAT register in the UK (which adds 20% to their UK prices), OR register and fill out VAT returns for each member state they have customers in, which is not really feasible I have simply stopped selling to EU customers... "single market", yeah right. The EU commission's answer to this has been "we know this is a problem for small businesses. we'll sort it out when we discuss it in 2019"... not good enough. all this bureaucracy was an attempt to try and get Amazon to pay their fair share of VAT... to hell with the small businesses

stdbrouw 10y ago
> if they have any EU customers they must either VAT register in the UK (which adds 20% to their UK prices) While I'm sympathetic to the fact that this will increase your administrative burdens, in terms of your bottom line this really won't make much of a difference, because once you register for VAT you can also deduct it for all the costs you make – you only pay tax on the value you add, hence the name. Thanks for the correction re: the UK not having VAT before joining the union, didn't know that.
- blibble 10y ago
  the variable costs for digital services are essentially zero (make once, sell many times), so having an extra 20% tax makes a phenomenal difference to either profit or competitiveness
  - stdbrouw 10y ago
    The VAT for all costs you incur can be deducted, regardless of whether they're fixed or variable. If you're operating at a loss or if you do a lot of business with places where you don't have to charge VAT, it's not impossible to have VAT owed to you rather than the other way around. Might it affect your profitability? Definitely possible. But it won't eat up 20% of your revenue or require you to charge 20% more to break even.
    - blibble 10y ago
      no VAT: - £10,000 to produce a infinitely reproducible widget -> costs of £10,000 - sell 5,000 times for £10 -> income £50,000 profit of £40,000 with VAT: - £10,000 to produce a infinitely reproducible widget, all allowable, 20% VAT back -> costs of £8,000 - sell 5,000 times for £10 - (approx) £2 VAT -> income of £40,000 now I have a profit of £32,000 instead if I'm selling mostly domestically the logical conclusion is to no longer sell to non-domestic EU customers
      - toyg 10y ago
        The misrepresentation in your calculation is that with VAT you really sell a widget for £12; if you're selling to businesses, they recoup those £2 so they don't care, and if you're selling to consumers all your competitors also factor in the same tax in their prices so again nobody cares. At that point, 5000 widgets at 10 net = 50000 - 8000 net costs = 42000 -> as a business, if your costs include VAT, you're actually better off by opting in. Sure, you feel the pain when you first transition (which is why you should have started with it right away), the first couple of years the taxman will be greedy, and vatmoss is a clusterfuck in its own right, but vat as a concept is actually extremely business-friendly. (I say that as someone who hates it for the regressive flat-tax on the poor that it actually is; I'd be happy to lose it tomorrow in exchange for higher corporation tax, but that won't make you any happier...)