Molly Scott Cato MEP has welcomed the announcement today that the EU Commission’s European Digital Single Market Strategy is planning to include a VAT exemption for small businesses. Hailing the announcement as a victory for small business, Dr Scott Cato said it follows several months of challenges to the Commission over new VAT rules which have hit many small businesses selling digital products across the EU .
The new VAT rules were introduced in January and were designed to prevent multinational corporations from avoiding tax on digital sales in other countries. However, the rules have had a devastating impact on micro-businesses. The changes have meant VAT on digital products sold in the EU is chargeable in the place of purchase rather than the place of supply. This means micro-businesses are obliged to collect VAT from up to 28 different EU states at 75 different rates. Green MEP Molly Scott Cato was the first politician to take up this issue and has lobbied for a small business exemption at EU and national level.
Speaking today in the European Commission, Vice President Andrus Ansip said he acknowledged the particular problems UK small businesses were facing with bureaucracy and said he would press for a €100,000 threshold, something previously rejected by member states including the UK. Dr Scott Cato welcomed this news, while remaining strongly critical of the failure of the Westminster parties to stand up for a small business threshold when the VAT rules were originally agreed. She said:
“I welcome the fact that the Commission looks set to follow our recommendation of an exemption for businesses with a turnover of less than €100,000 across the whole of Europe. I know from the many constituents who have contacted me that these rules have hit small businesses selling digital services online very hard. In future I would like to see policy-makers consult fully with the small business community before introducing policies that can so fundamentally affect their viability. I am also deeply concerned that the proposal comes too late for many businesses that have already closed down their digital operations in other countries as a result of the poorly thought through legislation.”
 Molly Scott Cato wrote to the Commission last week seeking clarification on whether and when the exemption would come into force.