Small businesses in the UK and across the European Union are being excluded from operating on a cross-border basis because the VAT system in the UK and other member states is so complicated, says the Association of Chartered Certified Accountants (ACCA).
To mark 40 years of VAT in the UK, ACCA has produced a report looking in-depth at the tax which points out that the various VAT rates and exclusions in each EU member state means that most small businesses are excluded from the single market by the complexities of accounting for VAT across what are soon to be 29 member states, as well as by the number of languages involved.
“VAT was supposed to be simple. In the UK alone it has become a complicated tax, but when you add in the various rates and exclusions that apply in the EU it becomes a maze,” Chas Roy-Chowdhury, ACCA head of taxation, said.
“The real losers in this are small businesses and consumers. Efforts to increase SME exports in the UK will always be stifled by the burden of the various VAT rates and exemptions across the EU. It is the most business-unfriendly tax there is, while consumers are forced to pay higher prices for the instances of double taxation.
“It is encouraging that the EU Commission is trying hard to get member states to focus serious attention on the problems that exist. The Commission is trying to make the necessary VAT information available over the internet in multiple languages so that SMEs can more readily assess whether it is viable for them to operate outside their own home market. However, more needs to be done to ensure VAT is not a bar to operating on a cross-border basis for smaller businesses.”