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It's time for a super interesting guest blog post from our Team Captain, Becka!
Last month, Becka travelled to Brussels with Etsy to discuss VAT and has kindly written up and shared her experiences with us all!
At the end of September I was lucky enough to receive an email from Angela Steen, the EU Policy Director for Etsy. I’d been chosen to fly out to Brussels to discuss VAT and microbusinesses with policy makers within the EU Parliament.
Initially I was a bit daunted. Did I know enough about VAT? Did I understand the EU and how it all worked properly? Was it relevant for me to be involved, as a UK seller, given the Brexit situation?
Angela put my mind at rest with several phonecalls, and explained that there would be three other sellers from Europe present, and our presence was to give policy makers a chance to discuss how new policy would affect tiny businesses. Often policy is made considering SMEs (small and medium enterprises), but an SME can consist of up to 250 employees – a huge jump from the one-person kitchen table businesses which make up most of Etsy’s 1.6 million sellers worldwide.
Flying out to Brussels on Monday 17th October was pretty exciting; I arrived quite late into Charlesroi Airport and found my way to the bus which took me into the centre of Brussels. Fortunately I discovered that my Uber app worked fine, and within a matter of minutes I was in a taxi on my way to the hotel; the Thon EU, an eco-hotel in the centre of the European Quarter. Shortly afterwards I was showered and in bed, ready for an early start the next morning!
On the Tuesday I had a free morning, and I decided I’d make the most of it. I had some breakfast and then set off to explore Brussels. I made my way to Mannekin Pis, the famous little boy statue, and on my way browsed in the windows of the plentiful chocolate shops, making a mental note of where I wanted to stop later. From here I walked the short distance to the stunning Grand Place, and admired the ornate gold buildings and the town hall. I stopped for a coffee in the stunning Galeries St Hubert and did a spot of people watching. I then wandered back to the hotel via the Cathedral of St Michael and St Gudula.
In the lobby I met with the other Etsy sellers who had just arrived and who would be joining us on our trip. Nafsika is an Athens-based jeweller – who I had already met at an Etsy Captain’s Summit in Amsterdam. Timea is a Hungarian vintage seller, based in Berlin. Pasi and Susan are jewellers based in a small town in Finland. We also met with Angela from Etsy, and we all went for lunch in the hotel while we got to know each other a bit better.
Our first meeting was in the European Commission, a short (but rainy) walk from the hotel. We met with three policy-makers who were working on a new directive concerning VAT for online sales. Currently there is a threshold for each member state – in the UK until a company has a turnover of over £83K they do not need to register for VAT. I was surprised to learn that the threshold varies greatly from country to country. Greece’s threshold is currently zero, so poor Nafsika has to pay 24% VAT on every single sale she makes.
To give a little background, in January 2015 a new law was introduced which meant that VAT is chargeable on all digital sales within the EU, with a zero threshold (including digital sales to your own home country), and the VAT is chargeable based on the country of purchase – eg if I sell a PDF download to Germany then I’d have to charge 19% VAT, but if it was sold to someone in France the VAT rate is 21%. The law also stipulated that the sales platform (ie Etsy) was responsible for collecting and paying this VAT to the relevant member state.
The directive we were discussing – which has not yet been written into a paper - concerned rolling out this scheme to all physical sales, meaning that there would be a VAT threshold of zero for all sales via a platform like Etsy.
We all voiced our concerns about this – as, for many microbusinesses, losing around 20% or our income to VAT would be financially crippling. The commissioners were very formal, and did not seem to understand that putting our prices up by 20% would not be a solution in a global marketplace, as this would make our products appeal much less appealing to the customer. They did explain that direct sales – for instance selling directly through our own websites – would be subject to a threshold (substantially more than zero), but sales made through a platform would be affected, and the platform would be responsible for collecting and paying the VAT on our behalves.
This all came as a bit of a surprise to all of us – and is concerning to say the least. For businesses that are already extremely small scale, for some Etsy sellers a hobby or part-time venture, it becomes less and less viable to make a profit.
Angela had explained to us that the European Commission are responsible for writing regulations and directives that are then taken to parliament, discussed (with input from lobbyists or “think tanks”) and then they go on to be passed – or not – by the Member States.
So, our next stop was an economics think tank called Bruegel. The two men we met here were friendly, extremely empathetic and understanding, and seemed genuinely interested in the issues we were discussing. They asked a lot of questions about it all, and explained that they were hosting an event about VAT the following week. We all felt a lot more positive coming away from this meeting.
This concluded our day of meetings – and we spent the evening eating Belgian food, drinking Belgian beer and buying lots of Belgian chocolate! We talked a lot about Etsy and our lives in our respective countries. I felt humbled by everyone’s fluent English – and extremely embarrassed that my command of French only really extends to a mumbled “merci” or “Excusez-moi”!
The following morning we had a bit more free time, so Nafsika and I ventured to the Museum of Comic Book Art. It was great, lots of Smurfs and Tin Tin, and was a welcome break from thinking about VAT! I came away feeling really inspired and looking forward to doing a bit of drawing when I get home.
Timea and Angela had been to visit a Danish MEP in the European Parliament in the morning, so we met up at lunchtime (for some traditional frites and mayonnaise), and then got a taxi together to meet with the Member States. We had a meeting with both the Maltese and Slovakian Permanent Representatives for the EU. They are the people who will be responsible – along with representatives from the rest of the 28 member states – for finally passing any new legislation about e-commerce. They were approachable, receptive to what we had to say, and seemed interested in hearing from us. They also told us that this would be a lengthy process and would likely take a few years for any new legislation to be passed – which set our minds at rest a bit. It struck me that with Brexit likely to be happening within this timeframe it may not affect UK sellers; however I still feel very strongly that it should not happen for other EU sellers, and worries me what impact it would have on platforms like Etsy.
After this final meeting we all started to make our way to our respective flights – Nafsika and I managed to sample some more Belgian delicacies – waffles, and buy some more chocolate, of course!
On my flight back I reflected on the trip and realised how very lucky I had been to be selected to see a tiny glimpse inside the workings of the EU. I’m so grateful to Etsy for giving me this opportunity, and love that their business ethos allows grassroots sellers to connect directly with top-level policy-makers – it’s so important! The EU Parliament is a fascinating – if complex and beurocratic – place, and I feel really privileged to have been able to learn and experience so much. It’s certainly a whole world apart from folding cheesy wrapping paper and stuffing envelopes!
Angela has advised that she will keep us all posted; the final directive from the European Commission should be due out in December, and it will be interesting to see what happens for the future of e-commerce and micro businesses.