Accordance hosted a roundtable event last week in Brighton organised with the aim of discussing and debating some of the key challenges that e-commerce businesses face around cross-border trade. The focus of the discussion centred on the issues and complexities relating to pan-European VAT compliance, supply chain management and engaging with consumers from a digital perspective.
The discussion was chaired by Accordance managing director Nicholas Hallam and was attended by prominent experts specialising in European VAT, as well as broader tax and business related topics. They consisted of Eloise Walker, a partner in the corporate tax department at Pinsent Masons, as well as financial journalist Jane Tchan and Martyn Gulliver, group VAT manager at The Pentland Group. Several members of the Accordance team, including head of consulting Andy Spencer, were also in attendance. IMRG, the UK’s industry association for online retail, provided a series of responses to the discussion points in advance of the event.
The panel begun by discussing tax compliance in general and how it can be a huge issue for e-commerce businesses, due to their nature as digitally-based entities with a greater potential for rapid growth. “These businesses quickly discover that they haven’t got the right systems in place for tax compliance as they haven’t needed them (when they started out),” stated Spencer in regards to this challenge. Gulliver was keen to point out that the issue centres on “reconciliation, picking up the information and getting the returns in on time.” The panel agreed that the sheer volume of information involved when attempting to comply with tax regulations in a cross-border trading environment was a key aspect of the challenge e-commerce businesses face. IMRG stated that “we might expect to see a raft of changes come in as regulators try to get a grip on digital industries.”
The event’s second discussion point focused on European VAT in particular and how differing VAT rates in Europe present a real challenge in regards to reporting and compliance. Accordance business development head Anna Higgins gave the example of certain enterprises that actually turn down opportunities to expand into certain EU member states where VAT rates are high, as it could “completely wipe out their bottom line.”
The forthcoming changes to the place of supply rules were discussed, with the example of Amazon as a supplier of e-books from the low-rate nation of Luxembourg being used. EU member states are trying to “stop (companies of this nature) being creative about where to base their business (from a VAT cost perspective),” stated Walker. Hallam pointed out that this is because of the “conflict of interest” between the member states’ tax authorities and the businesses themselves, with businesses keen to enjoy low rates in nations such as Luxembourg and the authorities keen to maximise revenue from VAT from companies that should by rights be registered accountable in their home nation.
The final topic of discussion explored how digital e-commerce businesses could effectively connect on a personal level with customers across Europe, in addition to some of the challenges presented by so-called ‘omni-channel’ customers. Martyn Gulliver highlighted that this is becoming more challenging than ever before, with customers sometimes starting and finishing a sales process in different countries, on different devices, causing a headache for VAT reporting from a place of supply perspective. The panel were in agreement that harmonised VAT rates in Europe would be the best solution, although due to conflicting interests amongst EU member states themselves about who gets what amount of VAT, it is not a situation likely to be reached any time soon. IMRG’s statement rounded off the event, adding “creating a meaningful and relevant relationship with customers across all channels, including in-store, is where everyone wants to get to.”