Category Archives: Research and Planning

What is the Digital Single Market?


The EU have announced plans today to create a Digital Single Market. The idea is to create a level playing field across the EU for online businesses. Their aim is to make it easier for both businesses and consumers to buy and sell in other EU countries.

The EU point out that while 44% of consumers in the EU made an online purchase in 2014 only 15% made an online purchase from another EU country and only 7% of SMEs in the EU do cross-border sales. They claim that by removing barriers to online sales an extra €415 billion in growth could be added to the EU economy.

The new EU proposals could be especially significant for the UK which has one of the most developed ecommerce markets in the EU (and the world). Up to date and reliable stats on the size of the UK ecommerce market are hard to come by. Probably the best official stats on ecommerce available are from 2012 which showed UK ecommerce sales to be worth £492 billion with that figure likely to be significantly higher today. Online sales in the UK now account for around 15% of all spending, compared with an EU average of 8% and figures as low as 2.5% and 3.5% in Italy and Spain. UK business are therefore well placed to take advantage of an EU Digital Single Market.

The EU have proposed 16 different measures to create the digital single market. They include:

  • Harmonising rules on customer protections such as the right to return goods across the EU so consumers get the same experience wherever they buy from.
  • Reducing the cost of parcel delivery which is identified by both businesses and consumers as the biggest barrier to cross-border sales.
  • Making business offer the same prices to digital consumers regardless of what country they are in.
  • Updating copyright laws so that films, music, games and other digital products bought in one country can be more easily moved to, and used in, any other EU country.
  • Improving internet speeds and boosting security and data protection measures to make buying online quicker and safer.

 

Bashing Google

The EU has already launched an investigation into alleged antitrust violations by Google. The new Digital Single Market initiative looks set to double-down on this making reference to “the non-transparency of search results” and “relationships between platforms and suppliers and the promotion of their own services to the disadvantage of competitors”.

Basically this comes down to the EU not liking the way Google promote their own price comparison services (Google Shopping) at the top of search results. The EU alleges that this draws consumers to websites who pay Google and away from those who don’t, creating an unfair market place.

Alongside the Digital Single Market initiative the EU have announced a separate antitrust investigation into the ecommerce sector. They are fairly vague on who this is likely to target but given that Google are already targeting Google they are likely to fall under this investigation as well.

 

VATMOSS/VATMESS

In January this year a new regime was introduced known as VATMOSS (quickly dubbed VATMESS by its opponents). Originally brought in to target the likes of Amazon this EU initiative was designed to make it harder for big online companies to avoid paying taxes. Companies like Amazon had for a number of years based their EU sales in places such as Luxemburg and Jersey where there was either no VAT or very low VAT to pay on sales. This meant that they could undercut businesses selling in other parts of the EU by as much as 20%. The VATMOSS rule change meant that VAT would now be payable in the country where a purchase was made, not where it was sold from, removing the advantage of businesses based in Luxemburg and Jersey. Unfortunately this initiative also meant that thousands of tiny micro-businesses which had previously operated under the VAT threshold would now also need to register for VAT and deal with the additional paperwork and costs this entails. This caused an outcry from many small traders who claimed it could make their businesses so unprofitable that they would have to close down.

Number 8 of the 16 Digital Single Market proposals is:

to reduce the administrative burden businesses face from differentVATregimes: so that sellers of physical goods to other countries also benefit from single electronic registration and payment; and with a common VAT threshold to help smaller start-ups selling online.

This essentially sounds like the VATMOSS scheme that so many small traders were opposed to. VATMOSS stands for VAT Mini One Stop Shop. The UK government claims that “By using the VAT MOSS scheme, you won’t have to register for VAT in every EU member state where you make digital service supplies to consumers.”

So one of the EU’s proposals to create a Digital Single Market sounds very similar to another proposal which many small online traders say is damaging their business or forcing them to close down.

 

When will this happen?

As you can see from the timeline below the EU targets on delivering the Digital Single Market are pretty ambitious with most of the changes due to happen within the next year.

Digital Single Market Timeline

 

 

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