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Letter to President Juncker: VAT and small firms

Rue Wiertz

B-1047 Brussels

24th March 2015

Dear President Juncker,

We are writing to you to express concern over the impact that the recent changes to EU VAT rules for digital services are having on micro-businesses in our countries across Europe.

These changes were agreed by EU member states in 2008 with the aim of creating a level playing field and preventing large companies from gaining a competitive advantage by basing themselves in countries with lower VAT rates. However, six years ago, few could have predicted the dramatic rise in the number of micro-businesses across Europe selling digital services online.

For these small traders, selling everything from e-books to knitting patterns, the new VAT rules have created a significant administrative burden that discourages them from selling their services to customers elsewhere in the EU. Paying VAT rates for 28 different EU countries is complex, time-consuming and requires changes to website design and pricing that risk driving potential customers elsewhere. In particular, the obligation to record and provide evidence for the location of each customer is a huge obstacle for very small businesses. As a result, while small digital firms now face a level playing field, it is one obstructed by mounds of bureaucracy. The unintended effect of this is to strengthen the position of the large companies which already dominate the online marketplace.

This is particularly important because it risks stifling the small digital firms that are central to the EU's economic future. Europe is a world leader in the digital economy, with app developers in the EU accounting for 43% of global revenue in this sector. This is one of the key areas where the EU continues to punch well above its weight and where millions of jobs are set to be created in the coming years.

Through introducing legislation to create a genuine Digital Single Market, the European Commission can help these firms to succeed and expand. However, the Commission must also consider whether existing EU legislation - in particular the recently implemented VAT rules - is fit-for-purpose and will allow the digital economy to thrive. The EU must establish common rules for the digital single market to function, but these must not result in overly burdening start-ups and micro-businesses and putting them out of business.

We call on you to urgently consider measures to address the impact this legislation is having on Europe's smallest firms. Europe can only build the digital giants of tomorrow if it nurtures the small companies of today.

Yours sincerely,

Guy Verhofstadt MEP (Belgium)

Catherine Bearder MEP (UK)

Petras Auštrevičius (Lithuania) 
Beatriz Becerra MEP (Spain)

Izaskun Bilbao MEP (Spain)

Enrique Calvet Chambon MEP (Spain)

Dita Charanzová MEP (Czech Republic)

Martina Dlabajová MEP (Czech Republic)

José Faria MEP (Portugal)

Fredrick Federley MEP (Sweden)

Juan Carlos Girauta Vidal MEP (Spain)

Sylvie Goulard MEP (France)

Antanas Guoga MEP (Lithuania)

Marian Harkin MEP (Ireland)

Kaja Kallas MEP (Estonia)

Fernando Maura Barandiarán MEP (Spain) 
Louis Michel MEP (Belgium)

Ulrike Müller MEP (Germany)

Javier Nart MEP (Spain)

Cora Van Nieuwenhuizen MEP (Netherlands)

Urmas Paet MEP (Estonia)

Maite Pagazaurtundúa MEP (Spain)

Morten Helveg Petersen MEP (Denmark)

Jens Rohde MEP (Denmark)

Marietje Schaake MEP (Netherlands)

Pavel Telička MEP (Czech Republic)

Nils Torvalds MEP (Finland)

Ramon Tremosa MEP (Spain)

Viktor Uspaskich (Lithuania)

Ivo Vajgl MEP (Slovenia)

Sophie in 't Veld MEP (Netherlands)

Renate Weber MEP (Romania)

Cecilia Wikström MEP (Sweden)

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