New VAT (sales tax) requirements were introduced in the European Union yesterday and they are very bad news for thousands of creative artists who sell their products direct to consumers electronically using the internet. Until now, although ebooks and other electronically delivered items such as songs, artwork, games etc, are subject to VAT, it was calculated based in the country of sale. In the UK this meant that as long as the amount of business fell below the £81k VAT threshold a business did not need to charge VAT on these items. It also meant that a business such as Amazon could base itself in Luxembourg and take advantage of charging 3% Vat rather than the higher rates of other countries (as much as 26% in some). Now, to stop the giants from such tactics, the VAT is calculated based on the purchasers country and not the sellers… and there is no minimum threshold in other EU member states.
I’ll use my own short story download business as an example. www.alfiedog.com sells individual short stories to download at just 39p a time. Previously, because our turnover is below the threshold we didn’t have to worry about VAT. Now if I sell a story a member state with a rate of VAT on ebooks of 25% I will need to account for VAT. As a small trader I can’t easily adjust my system to reflect the higher rate in each country and will therefore have to absorb the cost of 10p on that sale. When you think I only make 16p on a sale you will realise what a burden that is. On top of that I need to record the sales by country and account to Customs and Excise on a quarterly basis. Customs and Excise have set up a system called VAT MOSS to ‘help’ the whole thing has been nicknamed ‘VAT MESS’ for obvious reasons.
The Internet is not an outlet which it is easy to place boundaries on. Other countries are wanting to jump on the bandwagon. If they do it will put thousands of small traders out of business because it is impossible to comply.
We are campaigning to have the threshold that normally applies in the UK applied to this situation too. Without the internet will be a poorer place and instead of the changes effectively stopping the giants from current benefits they may have it will drive more business into their hands. Artists in many fields will suffer.
If any of you tweet, please send a tweet along these lines using the hashtag #VATMOSS or #VATMESS ‘Without the VAT threshold UK businesses will cease trading as a result of the VAT changes’
If you can help – please do – this is a nightmare for writers, artists, photographers, musicians to name but a few.