MEPs plan clampdown on online platforms to close €5bn VAT gap

European lawmakers are set to tighten rules for large online platforms such as Amazon and eBay to recover billions in lost VAT from sales through their sites

The proposed rules will overhaul the outdated 2006 VAT Directive to reflect the growth in online shopping and digital commerce and were pushed through the European parliament by Ondřej Kovařík (Renew, CZ).

They are designed to help member states recover around €5bn (£4.28bn) in tax revenues lost in the e-commerce sector every year - a figure expected to rise to €7bn by 2020. In 2017, unpaid VAT due from all economic sectors in the EU was calculated at around €137bn.

The measures are designed to close loopholes that reduce the VAT collected by EU member states and will now be put out to consultation.

The directive put to the vote on Thursday supplements the general provisions laid down in the VAT e-commerce directive, approved in 2017 and due to enter into force in 2021.

It details how online platforms such as Amazon, eBay or Alibaba will be responsible for collecting VAT on sales to EU consumers.

From 2021, online platforms will have to keep records of all sales made across EU member states so that national tax authorities can calculate how much VAT is due, even when sellers from outside the EU have not complied with paying the VAT.

‘Currently, it is difficult for member states to obtain the VAT due on goods sold from outside the EU if the seller does not properly declare these sales’, MEPs said.

MEPs have agreed on the changes to the Commission proposal put forward by member states to clarify which member state will be administratively competent for a specific sale, and when an online platform is to be considered as having a role in a sale, and therefore ultimately responsible for ensuring the VAT is collected.

Ondřej Kovařík MEP said: ‘We need a VAT regime which is fit for the digital age. Modernising the e-commerce rules will simplify VAT procedures across the single market. This Directive will also contribute to closing existing loopholes that hinder VAT collection.

‘These new measures are a good example of rules that are fit for the digital age and which will benefit particularly smaller enterprises which aim to do business across the EU.

The European Council will now need to adopt the final position on this directive and it will be consulted at parliamentary level.

The OECD has estimated that around 67% of e-commerce supplies of goods are made via digital platforms, and the vast majority of these only through the three biggest platforms.

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