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Cristina TrentaAssociate Professor in Tax Law
Rethinking EU VAT for p2p distributionRecent developments in the digital economy
Tax System Integrity in a Digital AgeInternational Conference on Tax AdministrationUniversity of New South Wales - April 5-6 2018
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This talk investigates the most recent developments in the field of European VAT in
connection to the digital economy and specifically to the treatment and fiscal
consequences of peer-to-peer technologies, consumer-to-consumer models, and barter
transactions as free supplies
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The aim is to understand if, and how,progress has been made in the field, and to
analyze the most recent legislative developments. Both practical and theoretical
concerns are discussed
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Taxation and what was initially simply callede-commerce have a long history in EU VAT that
goes all the way back to 1997
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In October 2013, the European Commission established the Commission High Level Expert
Group on Taxation of the Digital Economy
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At the international level, the OECDhas introduced their Base Erosion and Profit
Shifting (BEPS) project
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The place of supply for e-services is derived according to the destination principle, and
services are taxed for VAT purposes in the place where they are consumed
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A new VAT Directive, 2017/2455, was pushed forth December 5 2017 to amend Directive
2006/112/EC and Directive 2009/132/EC in respect to the handling of VAT obligations for
supplies of services and distance sales of goods
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This still leaves new models such as peer-to-peer or barter-like transactions largely
unregulated: the latest changes to EU VAT Directive 2017/2455 that consider the digital economy do not include any specific provisions
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P2P is a communication protocol, a technology, the support layer for new business models, and
an indication of a vast societal change
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CLIENT-SERVER MODEL
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P2P MODEL
NO EASILY DETERMINABLE ORIGIN AND DESTINATION
PROSUMERS BOTH UPLOAD AND DOWNLOAD (C2C)
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CLIENT-SERVER TRANSACTION
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P2P TRANSACTION
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CLIENT-SERVER TRANSACTIONS
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P2P TRANSACTIONS
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Content is more and more often produced by users, collaboratively, online and anonymously, resulting in greater volumes of information that live in a number of legal, and fiscal, grey areas
[OECD/G20, Addressing the Tax Challenges of the Digital Economy, Action 1 - 2015 Final Report Base Erosion and Profit Shifting Project]
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Online platforms built around content creationand sharing come in many shapes and sizesand continue to change at a rather fast pace
[COM 288 - Online Platforms and the Digital Single Market. Opportunities and Challenges for Europe. May 2016]
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The European Data Protection Working Party considers social networks such as Facebook or
Snapchat collaboration platforms and the EU Commission states that supplies provided by
means of collaborative platforms are in principle VAT-taxable transactions
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Consumer-to-consumer (C2C) transactions are becoming more and more common. This type of e-commerce comes in several forms, including P2P systems that allow users to share files
[OECD/G20, Addressing the Tax Challenges of the Digital Economy, Action 1 - 2015 Final Report Base Erosion and Profit Shifting Project]
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The EU Commission maintains that these new supplies provided through or by means of
collaborative platforms are in principle subject to VAT, and that supplies that are provided through
the platforms by their users are in principle VAT-taxable transactions
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The OECD BEPS report states that C2C transactions are a defining characteristic of
the digital economy
OECD/G20, Addressing the Tax Challenges of the Digital Economy, Action 1. 2015, para. 4.2.1.3, p. 56.
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But EU VAT law does not provide guidanceas for how to draw a distinction between
what we could call peer or amateur providers and professional service providers
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Problems may arise in respect to the qualification of participants as taxable persons
in respect to the assessment of economic activities being carried on, or in the existence of a direct link between the supplies and the
remuneration in kind
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The digital economy very often generates value in barter fashion, and barter
transactions in the digital economy are not considered relevant and are not taxed under
existing VAT rules
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[Case 89/81, Staatssecretaris van Financien v Hong Kong Trade Development Council]
the economic activities of taxable persons (...)if they are free of charge in all cases
they do not fall within the system of VAT
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[Case C‑283/12, Serebryannay vek EOOD v Direktor na Direktsia ‘Obzhalvane i upravlenie na izpalnenieto’]
barter contracts, under which the consideration is by definition in kind, and
transactions for which the consideration is in money are, economically and commercially
speaking, two identical situations
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[Case C‑174/08, NCC Construction Danmark A/S v Skatteministeriet]
the general principle of equal treatment, of which the principle of fiscal neutrality is a particular expression (...) requires similar
situations not to be treated differently unless differentiation is objectively justified
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The OECD BEPS project and the Expert Groupdo not suggest concrete tax measures to address
the taxation aspects of multi-sided market models in the digital economy
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Traditional VAT rules are factuallyinadequate to explain and regulate phenomena
such as co-production or peer-to-peer
[Bacache, M.,et al, Taxation and the digital economy: A survey of theoretical models. Technical report, Paris School of Economics - Trenta, C., Rethinking EU VAT for P2P distribution, Wolter Kluwer]
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The creation of platform-wide value throughuser-generated content remains untaxed and
the current state of the conversation on taxation of the digital economy unsatisfactory
[Bacache, M.,et al, ibidem. Crémer, J., Taxing network externalities, Toulouse School of Economics, 2015]
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Directive 2017/2455 has now amended Directive 2006/112/EC in respect to the handling of VAT obligations for supplies of
services and distance sales of goods
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New art. 242A entering into effect Jan 1 2021
[Directive 2017/2455]
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Where a taxable person facilitates, through the use of an electronic interface such as a market place, platform,
portal or similar means, the supply of goods or services to a non-taxable person within the Community (…) the
taxable person who facilitates the supply shall be obliged to keep records of those supplies. Those records shall be sufficiently detailed to enable the tax authorities of the
Member States where those supplies are taxable to verify that VAT has been accounted for correctly
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How different is the profile of an interneteconomic operators from traditional ones?
[Perset, K., The economic and social role of Internet intermediaries, OECD Digital Economy Papers, no. 171, OECD publishing 2010]
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We face problems when trying to categorizethem satisfactorily and unequivocally
[Perset, K., The economic and social role of Internet intermediaries, OECD Digital Economy Papers, no. 171, OECD publishing 2010]
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Operators are potentially playing multiple and sometimes competing roles in a transaction, and
often human intervention is replaced by algorithmic match-making and disintermediation
[Perset, K., The economic and social role of Internet intermediaries, OECD Digital Economy Papers, no. 171, OECD publishing 2010]
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Identifying who falls inside and who falls outside of the definition of taxable person who facilitates
transactions by means of a platform,and has to bear the VAT duties thereof, remains an
unclear process
[Perset, K., The economic and social role of Internet intermediaries, OECD Digital Economy Papers, no. 171, OECD publishing 2010]
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Member States shall not impose a general obligation on providers, when providing the services covered by Articles 12, 13 and 14, to monitor the information which they transmit or store, nor a general obligation actively to seek facts or circumstances indicating illegal activity
Where a taxable person facilitates, through the use of an electronic interface such as a marketplace, platform, portal or similar means, the supply of goods or services to a non-taxable person within the Community (...) the taxable person who facilitates the supply shall be obliged to keep records of those supplies
[Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services]
Art. 242AArt. 15
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Art. 15 (…) prohibits national authorities from adopting measures which would require a hosting service provider to carry out general monitoring of the information that it
stores (...) In that regard, the Court has already ruled that that prohibition applies in particular to national measures which would require an intermediary provider, such as a hosting service provider, to actively monitor all the data
of each of its customers
[ECJ Case C-360/10,Netlog]
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Lack of coordination between the general EU legislative framework on e-commerce and the EU
VAT Directive regulating e-services
[Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services]
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Exemption from liability for intermediaries as information society service providers
[Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services]
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Due to the variety of possibletransactions all assessments must be
performed on a case-by-case basis
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Categorization is in itself a major problem
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As is the risk of distortion of competition through the non-taxation of certain supplies
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Thank [email protected]