This part of the Study on VAT in the Digital Age, prepared for the European Commission, Directorate General for Taxation and Customs Union (DG TAXUD), focuses on the VAT treatment of the platform economy.
It aims to:
- (i) provide an estimate of the size of the platform economy in the EU,
- (ii) analyse the VAT aspects related thereto, including an evaluation of the impact of the differences between the national VAT measures and guidelines, and
- (iii) conduct the analysis of costs, benefits, opportunities and risks in respect of possible future changes, including the underlying problem definition and identification of policy options.
The Study finds that there were over 1,500 digital platforms with a significant presence in the EU27 in 2019, generating about EUR 67 billion of revenue. The scale of the platform economy has increased at a very fast pace for the last years. The growing scale, multi-sided nature, complexity and variation of business models within the platform economy create challenges for VAT rules, which are insufficiently clear and harmonized. Moreover, by bringing new economic operators into the tax systems, the growth of the platform economy hinders the enforcement of VAT compliance.
The Study assesses a number of policy options encompassing:
- (i) the clarification of VAT rules regarding the nature of the platform’s facilitation and the providers’ status;
- (ii) the streamlining of record-keeping obligations; and
- (iii) a structural change to the VAT treatment, consisting in the introduction of a deemed supplier role for digital platforms.
The simplifications and streamlining of VAT procedures would have a clear positive impact on economic operators by reducing administrative burdens, legal uncertainties and regulatory fragmentation.
The introduction of the deemed supplier role would, on top of that, increase VAT revenue, both directly via an increase in the effective rate, and indirectly – via an increase in compliance. A deemed supplier role tailored to specific services that are often provided by non-taxable persons or SMEs in the accommodation and transportation sectors would have low administrative costs, while increasing VAT revenue. The deemed supplier rule would also rebalance the competition conditions between traditional and platform-based distribution channels, by eliminating the tax-induced advantage for occasional and very small suppliers operating via platforms. The broadest scope of the deemed supplier regime, including sectors other than transport and accommodation, would bring significant increase in VAT revenue. This increase in revenue would however be cushioned, as a broad regime would also create distortions and disincentivise the use of platforms in certain sectors, i.e. where the deemed supplier regime would result in the higher VAT costs for transactions carried out by small-scale and occasional providers.
Source op.europa.eu
