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"The representative of Estonia stated that the country's position has not changed, as there has been no change in the order of assessed supplier."
From the quoted text line, you can see how the ViDA negotiations went during the midsummer weekend ECOFIN meeting in Luxembourg. There was no agreement. Estonia repeated its "no" from the last meeting.
The renewal of the European VAT Directive, colloquially known as the VAT In The Digital Age (ViDA) proposal, is divided into three main areas: digital reporting and e-invoicing, VAT rules for the platform economy and the establishment of a single point of registration for VAT.
On the first and third areas, EU countries are in agreement. There is a consensus, and clear implementation plans are in place, but as long as the content of the second leg of the proposal package is not to Estonia's liking, the ViDA reform is blocked. The fact is that ViDA can only be voted on as a whole. It is not possible to approve this transformation in separate parts.
Rejected compromise
What the Baltic Member State objects to are the criteria established in the assessment of suppliers on digital platforms for travel and accommodation.
Estonia believes that small businesses below the VAT registration threshold should not be charged VAT, regardless of the type of service. They argue that the application of such a rule would burden small and medium-sized enterprises - and thus distort competition - and that it would particularly affect their domestic businesses of that size.
The negotiations that have taken place since the last meeting (14 May) therefore resulted in a compromise. In the assessment of the obligation to supply, the conditions set were relaxed. It was decided that countries would be allowed to choose whether or not to include small and medium-sized enterprises.
But that concession was not enough for a yes from Estonia.
Estonian turmoil
The opposition is based on a general Estonian concern that the proposed taxation is being imposed solely because the relevant activities are conducted on digital platforms. The perception is that a tax model of this kind risks pressuring these companies to provide their services in other ways. It would potentially create a shadow economy and the transparency offered by digital platforms would be lost.
During the meeting of finance ministers in Luxembourg, Estonia countered with a counter-proposal to make it optional for EU countries to introduce the developed VAT system for digital platform providers. According to Estonia, by allowing each country to decide for itself, it would mean better adaptation to domestic interests and circumstances.
But the counter-proposal was not approved either.
Is Hungary doing better?
With the European Commission's proposed upgrade of the VAT directive now falling by the wayside once again, there was no solution during Belgium's six-month EU presidency. Belgium has worked intensively to compromise on the content of the package that all EU countries would approve.
With Estonia's reiteration of its veto right, those hopes were dashed.
Now it will be during Hungary's presidency that the matter will be further discussed. Negotiations are due to resume at the next ECOFIN Council meeting, which is on July 14.
More articles on VAT In The Digital Age:
VAT in the digital age
No consensus on ViDA this time either
"Sweden is considered negative to ViDA - it's embarrassing"
GENA fears ViDA is losing its purpose
