During the last year there has been a harsh debate on the topic of ‘’penalty taxes‘‘ for online trading. It has been suggested that additional taxes should be introduced for e-commerce.
What goes in favour of the proposed additional taxes?
Those in favour of this approach claim that online trade is the reason why city centres are becoming deserted. Shops are getting closed, so there is no reason for people to move into the city centres. Internet shopping is destroying the urban culture and the spirit of the community. This is particularly apparent in inner cities. Moreover, local shops cannot be competitive on the market since they also have to pay the city tax while online retailers have no such obligation and use local infrastructure for parcel deliveries. As a result, it has been suggested that online retailers pay additional taxes – 25% of the gross value of the product. The collected VAT would be redirected to local communities and invested into the development of town centres and attract more visitors.
Digitization as an alternative solution
The trade union is against this suggestion. They believe the reasons for such a disadvantaged position of the towns in the interior are high commercial rents, a lack of parking spaces in business centres and rigid bureaucracy. They think the appropriate solution would be digitization in order to stimulate local shops to build their own online network. This strategy has proven to be useful during the corona crisis when many shops would not have survived if they had not reoriented their business towards online sales. The development of online trade is inevitable and should not be financially burdened. Higher prices and more expensive orders would place an additional burden on those buyers who are dependent on online shopping due to physical, health or age-related restrictions.
The reasons why proponents of additional taxes strategy want to place an additional burden on online trade is the fact that non-EU based sellers tend to evade taxes, disrespect consumer rights and do not demonstrate responsibility for environmental issues. However, the trade union explains that most small and medium sized businesses in Germany pay taxes regularly and respect legal procedures related to consumer rights, recycling and packaging regulations.
VAT changes for e-commerce from 1 July 2021
Moreover, from 1 July new VAT changes for e-commerce in the EU will be introduced. One-Stop-Shop (OSS) is the platform that EU businesses can will be able to use to comply with VAT obligations. The existing distance selling selling thresholds will be abolished for separate EU countries and there will be a uniform distance selling threshold of 10,000 euros that will apply to all EU countries. Still the VAT will have to be paid in each EU country based on the principle of destination. Furthermore, if a company is based outside EU or does not have stock in one of the EU member states from 1 July 2021 Amazon/eBay/other online marketplaces are obliged to collect and remit VAT to the relevant authorities and and pay the net price to the sales partner. In this way a fair share of VAT between EU countries will be regulated, and protect the interest of EU sellers.
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