Brussels, 31 May 2023
Subject: Urgent need to review the EU’s proposed VAT platform rules
To:
Swedish Presidency of the Council of the European Union; Spain, Belgium, Hungary
Cc:
EU Member States; Paolo Gentiloni, European Commissioner for Economy; Thierry Breton, European
Commissioner for Internal market; MEPs Olivier Chastel,
Lídia Pereira, Aurore Lalucq, Mikuláš Peksa, Andżelika
Anna Możdżanowska, Chris Macmanus
Dear Commissioners,
Dear Ministers,
Dear Members of the European Parliament,
As representatives of key sectors of the European economy, encompassing travel, tourism, technology,
and transportation, we are writing to you with regard to the European Commission’s proposal
on VAT in
the Digital Age (ViDA).
We acknowledge the ViDA package’s objective of revamping the current VAT
structure to align with the changing VAT landscape in the EU, but are concerned that several parts of the
proposal are likely to
compromise the competitiveness of the European economy and adversely affect
EU consumers
and smaller service providers (i.e. private individuals, enterprises operating under
simplified VAT and VAT-exempted enterprises) and small online travel companies.
We believe that the ViDA
provisions relating to the deemed supplier regime (DSR) are not fit for purpose
and violate the principles of VAT and channel neutrality and fairness.
Under the proposed DSR, online
platforms would be made responsible for collecting and remitting VAT for services (such as rental of short-
term accommodation or ride-hailing), which would otherwise be VAT-exempt.
A key policy objective set
forth for the ViDA package is a “level playing field for businesses, regardless of business model”.
We
believe the
deemed supplier regime stands in fundamental opposition to this aim.
If the DSR is
implemented, services provided on digital platforms would be
unfairly disadvantaged
vis-à-vis other sales
channels (i.e. offline economy or online mere advertising websites), which will disincentivise consumer
transparency, and distort competition in favour of larger and more traditional accommodation and
transport options.
Smallest and most vulnerable service providers will see their sales being subject to
VAT while in practice being deprived of their right to deduct VAT
on costs associated with the services
provided through online platforms. In the case of providers operating under simplified VAT schemes, this
is equivalent to double taxation and therefore contrary to fair competition. Hotels will gain even further
advantage with a lower effective VAT rate, while European ride-hailing platforms would be discriminated
against traditional street hailing. Moreover, smaller online travel companies providing ‘untaxed’
accommodation and transport services are unduly overburdened by the DSR. To note, 99% of travel
agents and tour operators are SMEs according to Eurostat data
1
.
The DSR would have an equally devastating impact on VAT-exempt individual property owners, who carry
out the activity of renting accommodation, as they would no longer be able to rely on such exemptions if
they offer their accommodation via a platform.
We strongly suggest further clarification of the scope of the DSR. It is not clear whether a ‘genuine’ travel
agent providing ‘untaxed’ accommodation and/or transport services included in a supply and falling under
the special scheme for tour operators should be taxed under the DSR or the special scheme rules.
For platforms and marketplaces, and particularly the smaller players and SMEs in Europe, the proposed
DSR would be
extremely burdensome to implement as it comes in addition to already adopted reporting
regimes (i.e. DAC-7, PSP CESOP reporting, 242a VAT reporting, and more).
As a result, prices would
increase for consumers and the offer of passenger transport and short-term rental accommodation would
be restricted, as smaller providers may exit the market. This will have long-term negative impacts on the
tourism and transport economy and the EU’s GDP. Several Member States have made the conscious
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Eurostat: Annual enterprise statistics by size class for special aggregates of activities (NACE Rev. 2)