Remember the VAT MOSS (Value-Added Tax Mini One-Stop Shop) mess? That was when new regulations intended to stop Amazon from evading the European equivalent of sales tax on e-books had the unintended consequence of making it more difficult to the point of impossibility for many small businesses (such as the Schlock Mercenary web store) to sell digital goods in the EU. The European Commission will be reconsidering the regulations at some point, but a new threat to international digital sales is looming.
It seems that a number of countries in other parts of the world have been looking at the European VAT MOSS implementation and thinking the idea looks pretty good to them. On TechCrunch, Hugo Grimston, CEO of UK e-commerce start-up Paddle.com, reports that many of countries are implementing their own VAT collection schemes to tax extraterritorial sellers on local sales. Most of these countries have very low ceilings where the tax would kick in—for example, in Iceland, any business that does at least $7,000 per year worth of sales—and require the services of local accountants as well.
Countries that have already launched or soon will launch these taxes include Switzerland, Singapore, Ghana, Madagascar, Norway, Iceland, Kenya, South Africa, Angola, Albania, South Korea, Japan, Switzerland, and Australia. Meanwhile, Canada, India, Indonesia, Israel, New Zealand, Russia, Thailand, and Turkey are considering the idea—and those are just the start.
It used to be that all an independent business had to do was put up a website with a “buy” button to sell digital goods to anywhere in the world. And, of course, some businesses in the US may decide to flout the laws and continue to do so, relying on the idea that the US government isn’t inclined to want to help send money overseas. But that’s a chancy strategy given that enforcement priorities could always shift, especially if treaty partners start complaining about it. Now, it seems, international digital business is only for those who can afford it, just like international physical-goods business.
Ironically, bureaucratic snarls concerning international taxes and tariffs are exactly the sort of thing that international treaties are theoretically meant to resolve. But given that this affects primarily small businesses, who don’t have the lobbying power to get their governments to change anything, I doubt anything would get done even if they tried to address them with treaties. We’ve already seen whose interests are protected and whose are dismissed in the Trans-Pacific Partnership, after all. Meanwhile, big businesses like Amazon will just shrug and hire more accountants.