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Press Release

Implement measures to prevent VAT losses in e-commerce as speedily as possible

The German SAI appreciates the measures adopted at EU level in December 2017 to ensure that tax revenue from online trading is collected in full. In the future, e-marketplaces will also have to share in the burden of responsibility. They will have the obligation to remit the VAT imposed on the non-EU based internet traders operating on their marketplaces to the tax authorities. In doing so, tax authorities will have appropriate means of inspection and enforcement to effectively impose their tax regime. However, the new EU regulations do not take effect until the beginning of 2021 and need to be transposed into national law beforehand. “That is why Germany should take national measures as speedily as possible already before 2021 in order to limit the scale of VAT losses for German tax authorities and significant distortions of competition at the expense of domestic traders”, said Kay Scheller, President of the German SAI. Holding e-marketplaces liable to remit VAT, a measure announced by the two government levels is considered an appropriate means for enforcing tax claims by the German SAI. As a supplementary measure to the liability rule, the SAI demands introducing a fiscal representative rule for non-EU businesses. That way, tax authorities would have a domestic professional contact.

Germany loses significant VAT revenue on consignments ordered over the internet. Tax authorities are not aware of the number of non-EU based traders selling their goods ordered on e-marketplaces in Germany. Usually, data are captured only on traders that register voluntarily for VAT or on whom inspection data is available. Thus, the tax authorities do not know the amount of the returns from online trading. Online traders known by the tax authority often undervalue their goods when importing them into the European Union, do not file  tax returns or simply do not pay VAT. As a result, Germany faces significant VAT losses. Also non-EU based traders that do not pay VAT gain a major competitive advantage over domestic traders.

Tax authorities have so far been largely powerless to put matters right. On the one hand, the tax authorities do not at all know against whom they should take steps in light of the high number of online traders operating in Germany. On the other hand, even if they know the traders they often cannot impose tax due since they do not possess effective means of enforcement against non-EU based traders.

In 2013 and 2015, the SAI already studied “the internet as a tax haven” and highlighted relevant shortcomings.

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