VAT aspects of cross-border e-commerce : options for modernisation : final report; Lot 1: Economic analysis of VAT aspects of e-commerce

Over the last five years, e-Commerce in Europe has grown by between 17% and 20% per year to become a key part of the digital economy and an important driver of economic growth. From 2009 to 2014, the contribution of e-Commerce to GDP has almost doubled. Recognising the importance of e-Commerce, the European Commission is committed to ensuring the free movement of goods and services and to ensuring that "individuals and businesses can seamlessly access and exercise online activities under conditions of fair competition" as set out in their Digital Single Market strategy. However concerns have been expressed by the Commission and other organisations, including business groups, that fragmentation and barriers continue to exist online, not least due to the burden associated with VAT compliance. The evidence presented in this report indicates that these concerns are justified, since the fixed costs associated with VAT compliance appear to represent a significant burden on firms, limiting the growth of cross-border e-Commerce in the EU. Moreover, non-compliance and VAT fraud continues to present a challenge to tax authorities across the EU.