Estonia vetoes EU plan to add VAT on digital platforms
Estonia vetoed a plan to introduce VAT on services such as Bolt and Airbnb in the European Union on Tuesday . Finance ministers discussed the idea but all member states must agree to change the law.
The EU plans to digitalize invoicing for value-added tax (VAT), and make platform services register to pay the levy to ensure the sharing economy pays its fair share of tax, Euro News reported.
The proposals could have pushed up the cost of online rental and ridesharing by as much as 25 percent, it wrote.
The Ministry of Finance said it does not make the tax system fairer.
"So we would tax services on the basis of whether they are provided through a platform or not. By offering the same service without the mediation of the platform, there is no VAT obligation up to €40,000," said Minister of Finance Mart Võrklaev (Reform). "This distorts competition and puts those private individuals and small businesses who offer their services through platforms at a disadvantage. Ultimately, it is the consumer who pays the entire cost."
The majority of those operating through such platforms in Estonia have a turnover of less than €40,000, meaning they do not need to pay VAT.
The minister said the directive would be a double blow for them because VAT would be added and they would not be entitled to deduct the input VAT incurred.
The government believes this is a tax on small and medium-sized enterprises.
"As a compromise, we can only support such a solution if it is voluntary for countries, so that it does not impose additional costs and administrative burdens on those who do not wish to tax their small businesses and individuals unfairly.," said Võrklaev.
From this year onwards, platforms are obliged to share the information with the tax authorities. The Ministry of Finance believes there is no real need to collect tax through the platform, as the tax authorities can already see whether someone is evading VAT liability on the basis of the information they receive.
Bolt does not support the changes either, saying many taxi drivers are small businesses and they do not have to pay VAT.
Euro News reported EU politicians hope to find an agreement by the end of June.
Estonia has no objections to the other two parts of the package, which include digital reporting and VAT registration in one place.
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Editor: Karin Koppel, Helen Wright
