Monday, 16 February 2015

Why MPs should care about the impact of the new EU VAT rules

Short answer: because 2015 is an election year!

Long answer: We are already being bombarded with candidate flyers, despite being 3 months away from the day, but this made me think about MPs and how (or even if!) they take on board the worries of their constituents, especially if those concerns are at odds with the policies of the MPs political party.

I should say that whenever I have raised an issue with my MP (the LibDem's Tim Farron, Westmorland and Lonsdale ) he has always listened to what I had to say and raised the issue with the relevant dept. or minister on my behalf, so I have no complaints there. It was more an idle wondering, in the wake of the template letters in response to constituents writing to MPs about the EU VAT issue I wrote about yesterday,  as to whether MPs as a whole have really thought about the effect the new EU VAT rules are having, and what this means in terms of the social impact on the country.

Don't get me wrong, I am not saying that Britain will come to its knees because small businesses and sole traders have to register for VAT. What I am saying is that there are a lot of people who make a small but adequate income from doing what they do, whether it be selling mp3's of their music, downloadable ebooks, online magazines, creating apps for phones, writing software, doing a bit of website hosting or selling advert space on one to help defray the cost of their own website, licencing photos or graphics for use by others, or even creating patterns for crafters. Those folks may be full-time students earning a bit to help them through uni, they may be parents with young children to look after, they may be carers for elderly or disabled family members, they may be retired and doing something which helps out with the pension, or simply be using their skills to create a product that will never have a big demand but which fills a small niche market.

For whatever reason they are selling digital goods and services online, they are earning a small income, and for many of them that income may be the difference between not claiming benefits and being forced to do so to get by. 

So, if small digital product sellers are being forced out of business by the lack of a sensible threshold for cross-border sales, the country loses out. It loses people who are working and earning, and instead gains people who need to claim financial support benefits. Surely that cannot be a good thing for the UK?  The cost to the country of a population on benefits is surely much greater than the revenue that  would be lost by allowing a sensible cross-border sales threshold for VAT.

Over the past decade or so there has been a lot of encouragement for individuals to start their own businesses. We are told that the digital economy is growing. More and more shopping is being done online. A whole raft of public services are online. We have been encouraged to get online and do all sorts of stuff, and as a country we have done just that, with 89.90% of us with internet access. The latest figures from the Office of National Statistics (.pdf, 482kb) state that there are 4.6 million self-employed and sole traders in the UK. If even 10% of them are selling digital products (and the bottom line is, we simply don't know how many are yet!) that means almost half a million traders are affected by these awful, unworkable new rules. .

So we now have a whole sector of the business population who are being walloped by the EU or put out of business for doing just what our government has encouraged us to do. It's just plain wrong!.

Further reading: Heather Burns writes about web design law, strategy, and what matters to the profession

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