Friday, March 20, 2015

#VATMESS 2015 - Urgent: Write to your finance minister!

#VATMESS
I realised that I had completely forgotten to share the letter I sent to the MEPs for my area. You can see it below. I've had a few replies, ranging between concerned and wanting to do something, to 'MEPs don't make EU policy so we can't do anything, really' to a reply from a UKIP chap who seemed more interested in slagging off the EU to send a constructive reply. Ah well, the point of the 'exercise' is less to get a reply from these busy people, but to point out to them that the new EU VAT law is crushing people's businesses.

Now, something may be happening which is hopefully a step in the right direction. The UK PM, David Cameron, will be discussing this issue with the president of the EU Commission. Which is really great news. But it is so very important to let the ministers and MEPs etc know that this is an issue they need to take seriously. They need to hear from us. The people who are affected by this, the sellers of digital goods, whatever their form may be: PDF patterns, classes, web hosting, music etc etc.

If you follow the link above, you will find the info for writing to the finance minister of your country. They all need to know that this is a serious issue. As I've said before, you may think that one email doesn't make a difference, but it really does. And if it's dozens or hundreds (even thousands) of emails, they will have to listen.

Even if you are not directly affected by the EU VAT law, as a business, you may be affected as a customer. You may find yourself with a limited availability in new knitting patterns or music from independent artists. Write to the minister in your country and tell them that this is appalling.

Here's that link again. Please write to the finance minister in your country. Get your friends to do it too. Pass the link around on Twitter and Facebook. Take a stand for yourself or the small businesses and independent designers that you love. We need your help.

You are welcome to use my letter to the MEPs as a kinda of template. Of course, you'll want to be make sure to tell them about the report that shows the impact of the new VAT law. You can find it here. Download it and send it to your finance minister. Or pass on the link to it.

Here's the letter I previously sent to MEPs:

Dear MEP,
I am writing to you regarding the EU VAT digital supply change which has come into effect on January 1, 2015. This is not just an urgent matter, but a matter of emergency.

I have a small business where I sell embroidery patterns and other, mostly digital, products designed by myself. I was shocked when I heard about the new legislation at the end of November and I was horrified to discover how it would impact my business.

Because I only heard about it before the legislation was to come into effect, I had no choice but to shut down my business on December 31. Otherwise I might risk selling to EU customers before being able to comply with the legislation.
I have reopened my business. And I am not the only one. I know of dozens of small, micro, businesses like myself have decided to close to temporarily, or indefinitely.

And we are not alone. An estimated 230,000 small businesses are affected by this - not 34,000 as HMRC had estimated because they didn't even realise that small businesses like mine existed.

I am all for the reason behind the legislation, to stop large internet corporations from avoiding tax by basing themselves in countries where the VAT rate is low. However, the new changes will have a disproportionate, for many people a devastating, effect on their business. A minimum threshold is urgently needed for micro businesses.

Some are run by single parents, either as their sole income or as a supplement to a low paying job. Some are run by people who are disabled and not able to have a 'proper' job, but they have created their own job from their kitchen table. Others run their small business while taking care of children.

For small businesses like myself who do not have the time, skill or financial resources to comply with the changes we are left with essentially five options, all of which are bad:
1) Stop trading all together.
2) Continue like nothing has changed and risk being prosecuted for ignoring the law. In any of the 28 countries where we have customers.
3) Block sales to other EU countries.
4) Register voluntarily for VAT in the UK and sign up for VATMOSS.
5) Find a third party platform which can take care of VAT for us. This will of course come at a cost to us. On top of that they customer will be charged a higher price when VAT is added.

Option 1) If your business is your only income, this means you will need to find another job. If you can. Maybe you live in an area with few opportunities or you are physically unable to take on a job outside the home.

Option 2) Putting yourself at risk of prosecution is not a good option.

Option 3) It may not be legal to block sales of this type of goods as they are classed as services. So you'd basically be breaking the law if you pick this option.

Option 4) As most micro businesses are well below the UK threshold of £81,000 before registering for VAT is mandatory, this adds a lot of extra work. Which will most likely be disproportionate with the amount of VAT you would have to pay to any EU country.

Option 5) The majority of this type of business relies on low cost options to process payments for their digital products. This may be as simple as a Paypal 'buy now' button or a plug-in for their blog. This gives them maximum flexibility without having to pay a middleman up to 50% of the income of their products.

The time and cost involved if you want to keep your businesses open and comply with the legislation are just one aspect. To calculate and show the customer the correct price is complicated and not entirely reliable. Especially for small businesses who do not have the sophisticated technology that the big companies have.

Supposedly this new law will “...create a level playing field for UK businesses by removing the current competitive advantage of EU member states with lower rates of VAT.” That may be for the big companies who have not been taking advantage of tax havens.
But the effect of the law on micro businesses is not a level playing field. It is the complete opposite. It feels like we are being trampled underfoot on this level playing field.

We may be small but we are part of the economy, too. The jobs we have created for
ourselves leave jobs for other people. Some are even able to employ one or two other people. We don't have to claim jobseeker's allowance. The income we make is mostly being spent in our local area. We are creating economic growth.

Consider the consequences if the majority of these small businesses disappear because they are unable to cope with the new VAT law. Please also consider the consequences if this law will apply to physical goods from 2016. Then many more small businesses will be effected.

Instead of encouraging creativity and entrepreneurial spirit, because it severely limits what one person can handle on their own, this law is threatening the very business of people who are trying to create something new. People should be encouraged to create something new, not face a brick wall when they try.

I ask you to urge the EU to re-consider this law. I ask you to urge the EU to create minimum threshold that will remove this unfair burden on the smallest businesses. We need your help.

I look forward to hearing from you.
Kind regards,
Carina Envoldsen-Harris

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