Event gathers e-commerce and finance experts to discuss tax compliance, reconciliation and returns issues faced by e-commerce businesses within the EU
A recent roundtable event in Brighton hosted by international value-added tax (VAT) consultancy Accordance
covered some of the key challenges that e-commerce businesses face around cross-border trade.
The focus of the discussion centred on the issues and complexities relating to pan-European VAT compliance, supply chain management and engaging with consumers from a digital perspective.
The discussion was chaired by Nicholas Hallam, Accordance managing director, and attended by prominent experts specialising in European VAT, as well as broader tax and business related topics. They consisted of Eloise Walker, a partner in the corporate tax department at Pinsent Masons
, as well as financial journalist Jane Tchan and Martyn Gulliver, group VAT manager at sports and leisure retail brand owner The Pentland Group
Several members of the Accordance team, including head of consulting, Andy Spencer, were also in attendance. IMRG
, the UK's industry association for online retail, provided a series of responses to the discussion points in advance of the event.
Tax compliance tasks
The panel begun by discussing tax compliance in general and how it can be a huge issue for e-commerce businesses, due to their nature as digitally based entities with a greater potential for rapid international growth.
"These businesses quickly discover that they haven't got the right systems in place for tax compliance, as they didn't needed them [when they started out]," stated Andy Spencer from Accordance in regards to this challenge.
Martyn Gulliver from The Pentland Group pointed out that the issue centres on “reconciliation, picking up the information and getting the returns in on time”. The panel agreed that the sheer volume of information involved, when attempting to comply with tax regulations in a cross-border trading environment, was a key aspect of the challenges e-commerce businesses face. And IMRG stated: “We might expect to see a raft of changes come in as regulators try to get a grip on digital industries.”
The event's second discussion point focused on European VAT in particular and how differing VAT rates in Europe present a real challenge in regards to reporting and compliance. Anna Higgins, Accordance business development head, said some enterprises actually turn down opportunities to expand into certain EU member states where VAT rates are high, as it could “completely wipe out their bottom line”.
Place of supply rules
The forthcoming changes to the place of supply rules were covered, with the example of Amazon as a supplier of e-books from the low-rate nation of Luxembourg being used. EU member states are trying to “stop [companies of this nature] being creative about where to base their business [from a VAT cost perspective],” said Eloise Walker from Pinsent Masons.
Hallam suggested that this ‘creativity’ stems from the “conflict of interest” between member states' tax authorities and the businesses themselves, with businesses keen to enjoy low rates in nations such as Luxembourg and the authorities keen to maximise revenue from VAT from companies that should, by rights, be registered accountable in their home nation.
The discussion finally explored how digital e-commerce businesses could effectively connect on a personal level with customers across Europe, in addition to some of the challenges presented by so-called ‘omnichannel' customers.
Gulliver highlighted that this is becoming more challenging than ever before, with customers sometimes starting and finishing a sales process in different countries, on different devices, causing a headache for VAT reporting from a place of supply perspective.
The panel agreed that harmonised VAT rates in Europe would be the best solution although, due to conflicting interests among EU member states themselves about who gets what amount of VAT, it is not one likely to become possible any time soon.
IMRG's statement rounded off the event: "Creating a meaningful and relevant relationship with customers across all channels, including in-store, is where everyone wants to get to."