Directive will drive thousands of small traders out of business

Delivered by Margot Parker on 19 December 2014

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European Commission Vice-President Andrus Ansip,

Commissioner for the Digital Single Market,

Rue de la Loi 200,

1049 Brussels

Brussels, December 19th 2014

Dear Vice-President Ansip,

I remain concerned that the Commission still does not appear to grasp the damage it is about to inflict on small online businesses when the Supply of Digital Services Directive takes effect on January 1st, 2015. Read my news story here - Article

The European Commission says it policy is to look after businesses of all sizes. Critics of the Commission say it acts only in favour of the multinational corporations who pay skilful and expensive lobbyists to make EU regulations work to their benefit. What I am suggesting now is an opportunity for the Commission to demonstrate that it can act in the interests of small business with the equal vigour it shows in the interests of multinationals.

All over the EU, more than a million micro-businesses (companies with up to nine employees) and small and medium businesses which trade online will be caught by the new Directive. The numbers of such businesses will only grow as more people lose their traditional jobs and instead support themselves by setting up their own online businesses.

My own country, the United Kingdom, is a good example of this growth in small entrepreneurs, and a good gauge of the damage the directive will do. Just yesterday the Financial Times reported that of the 1.1m rise in UK employment between 2008 and the second quarter of 2014, 732,000 were self-employed. A study by the RSA Action and Research Centre, a think-tank in London, found that 600,000 micro-businesses were founded in that period and 95 per cent of those set up in the past ten years were one-person outfits.

Yet any of these new hundreds of thousands of entrepreneurs who trade online will be burdened by the new Directive which is aimed at multinational corporations such as Amazon.

The Directive will be no burden to Amazon, but it will drive thousands of small traders out of business.

The directive will force these early-stage businesses to charge Value Added Tax on their digital products. What they need is for the Commission to set a minimum level of sales turnover before they must register for VAT. There is at the moment no minimum level for registration for VAT because the level has been set at zero.

From the New Year, owners of small businesses must register for VAT not just in their own country but in all the other 27 member states. This will create a nightmare of expensive overheads and bureaucracy in several currencies. Yet this nightmare of regulation will render just tiny amounts of VAT.

The alternative for small businesses is to supply their digital products through one of the big selling platforms such as Amazon or Etsy -- although there is no certainty that such big corporate platforms will agree to offer products from a small seller.

This will increase prices the small businesses must charge. It will depress trade and growth. It will force some businesses to cease trading altogether.

But there is a solution. The Commission has already agreed with each member state the thresholds of sales turnover where a business has to register for VAT. It is only necessary to add these already-agreed thresholds to the new directive effective January 1st 2015.

It is only digital downloads that have their VAT threshold set at zero turnover, forcing even the smallest microbusinesses to register for VAT.

This is an urgent matter and on behalf of the million small businesses in Europe I am urging you to reconsider and make this Directive less damaging by using the solution I have suggested.


Margot Parker UKIP MEP

East Midlands Region

This letter was also sent to 

Vice-President J. Katainen

Commissioner P. Moscovici

Commissioner G.H. Oettinger

Commssioner E. Bienkowska




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