Gaining insight and control in the digital age

Data is essential for an effective management framework
Multinational companies are increasingly adopting a robust indirect tax management framework that rests on three aspects of indirect taxes: operational, compliance and strategic. However, it is still common for each of these aspects to be isolated and managed in a vacuum.

The challenge of big data is also its opportunity. Harnessing the power of the information they hold, companies can dig deeper into their indirect tax profile and uncover hidden costs, risks and opportunities. Through effective harvesting and analysis of indirect tax data, however, management can bridge the gap between operations, compliance and strategy by gaining visibility, control and insight.
Managing indirect tax data is — and will continue to be — the key to aligning indirect taxes to the strategic goals of the business.

Gaining insight and control in the digital age

The European Commission announced its strategy for the EU Digital Single Market on 6 May 2015. The completion of the Digital Single Market is one of the ten polical priorities of the Juncker Commission. The strategy contains an important chapter on VAT, where the changes announced would bring simplicity, a level playing field and certainty for businesses.

One single electronic registration and payment mechanism for B2C supplies

Among other things, the Commission’s “communication” and its “staff working document” contemplate an extension of the currently applicable single electronic registration and payment mechanism for businesses supplying certain services to consumers in EU Member States. This system allows these businesses to account for their supplies to European consumers through an electronic portal in their “home” country or in their EU Member State of choice when they are non-EU businesses (i.e. the MOSS system).

Today, this system only allows reporting telecom, broadcasting and electronic services. The extension would encompass all cross border (intra-EU and third country) online sales of tangible goods to private consumers, as well as all cross-border B2C services. This proposal is in line with the recommendations of the Commission Expert Group on Taxation of the Digital Economy.

Proposals to adapt VAT legislation to the digital evolution?

Additionally, the European Commission intends to ensure a single market which is duly adapted to the digital evolution. The proposals put forward by the Commission include introducing a new common EU-wide simplification measure (a VAT threshold) to help small start-up e-commerce businesses (replacing the current distance selling thresholds), allowing for home country controls including a single audit of cross border businesses for VAT purposes, and removing the VAT exemption for the importation of small consignments from suppliers in third countries.

The strategy also proposes to look into the cost of cross-border deliveries and intends to remove any barriers which currently prevent businesses from undertaking cross-border trading, and a range of other “non-tax” issues that it considers may be obstacles to cross-border trading.

Once adopted, the proposals may have an important impact on your business, particularly if you operate in the digital economy. Although some of the proposals contained in the Commission’s publications may be relatively uncontroversial, others could prove to be contentious and gaining approval from all 28 Member States for the ideas outlined in the Commission’s papers may be difficult and time consuming. An important step in preparing these proposals will therefore be the review of the current regime for electronically supplied services and the MOSS, as well as the broader studies carried out by the European Commission in this field.