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The trouble with taxing e-commerce

  • EU VAT
  • 03 October 2017 | Jason Moore

The trouble with taxing e-commerce

Just as consumers’ appetite for easy and instant buying continues to grow, the business of e-commerce has evolved rapidly. So fast in fact, that regulators have struggled to keep pace with these advancements.

The taxation of e-commerce in particular has presented considerable challenges to governments and organisations around the world; as multiple regulatory obstacles have slowed the process of decision-making, most notably for those transactions taking place across borders.

Avalara’s Transactional Indirect Tax Summit in London this week will provide some much-needed clarity on this issue. Andy Hewitt, Head of Tax at online retail giant ASOS, will be outlining how global businesses can overcome the complexities surrounding tax on e-commerce.

Previously, concerns surrounding tax on e-commerce transactions have been centred on the potential constraints it can place on the growth and expansion intentions of those businesses operating online.

However, the unparalleled growth of e-commerce has meant that today, it has left stalwart traditional high-street stores in its wake. Convenience and speed are the key tenets of success for today’s new wave of online retailers, as consumers have become increasingly reliant on online purchases. The shift from traditional to online operations has undoubtedly changed consumers’ relationship with the buying and selling process.

This shift has also presented a multitude of new and previously unseen complexities, thanks to the variety of disparate VAT regulations and regimes in existence worldwide. For example, local legislation alone must be complied with in order to ensure that transactions are processed accurately.

Andy Hewitt’s session in particular will focus on providing both practical and comprehensive guidance to businesses attempting to navigate these challenges. Given the importance of business compliance with VAT restrictions, regulation can allow business leaders to focus on growing and expanding on a global scale.

The VAT implications for the provision of goods and services emerge as a result of three distinct types of transaction:

  • Supplies of physical goods to business or private consumers;
  • Supplies of intangible goods or services to business;
  • Supplies of intangible goods or services to private consumers.

The VAT legislation covering any of the categories that a given cross-border transaction may fall in, will fundamentally depend on whether the supply is of a good or a service. However, VAT is applied based on both the shipping and the delivery destination, and e-commerce transactions are no different. The complications that originate from each country will have set a different VAT rate to those goods and services both leaving, and arriving in the country.

With the UK set to leave the EU upon completion of the Brexit negotiations, and with a new agreement on the Customs Union being negotiated for the UK, this can – and should – result in the brokering of an agreement on a VAT settlement.

The EU as a bloc represents a group of nation states that enjoy beneficial VAT exemptions across borders, so, despite the UK’s future trading relationship with the EU remaining unclear, uncertainty still hangs over the next wave of growth of the e-commerce landscape.

You can find more information on how you can attend Transactional Indirect Tax Summit 2017 here.

 

 


Avalara Author
Jason Moore
Avalara Author Jason Moore
Avalara helps businesses of all sizes get tax compliance right. In partnership with leading ERP, accounting, ecommerce, and other financial management system providers, Avalara delivers cloud-based compliance solutions for various transaction taxes, including sales and use, VAT, excise, communications, and other indirect tax types. Headquartered in Seattle, Avalara has offices across the U.S. and around the world in the U.K., Belgium, Brazil, and India.