Kiri

Directive proposal VAT in the digital age Deemed supplier rule Bolt’s position October 2023 Bolt is the leading European urban mobility platform, founded in Estonia in 2013 and operating in 24 Member States. Bolt’s main service is the intermediation of ride-hailing rides operated by drivers, who can either be licensed under local PHV (private hire vehicle) regulations or “traditional” taxi drivers. Bolt is very concerned about the unintended consequences of a provision of the Proposal for a Council Directive amending Directive 2006/112/EC as regards VAT rules for the digital age, more specifically the provision inserting an article 28 a) in Directive 2006/112/EC (the “deemed supplier rule” in article 2 of the Proposal). The Commission argues that such a rule will solve VAT inequality. In fact, it will create VAT inequality in the passenger transport sector where before there was none. No VAT inequality in the passenger transport sector According to the Commission’s explanatory memorandum, “The passenger transport and accommodation sectors have been explicitly identified by the study as sectors in which VAT inequality is at its most apparent” and “These issues will be solved by introducing a deemed supplier model, by which platforms will account for the VAT on the underlying supply where no VAT is charged by the supplier, thereby ensuring equal treatment between the digital and off-line sectors of short-term accommodation rental and passenger transport.” Bolt strongly believes that for the passenger transport sector, such an assessment is unfounded. In the passenger transport sector, there is no unbalanced situation in which drivers working through digital platforms would be exempted from VAT, where those working through other means would be liable for VAT. In the EU, all passenger transport drivers are licensed professionals, whether they work on platforms or not. Both “traditional” taxi and ride-hailing drivers are regulated in all Member States where they exist. Whether drivers are liable for VAT has nothing to do with the fact they offer their rides offline or through a platform. This depends mainly on the level of their revenues and the VAT threshold set by each Member State. The directive proposal is therefore claiming to fix an issue which does not exist. Discrimination against digitally enabled transport booking Far from fixing an unbalanced situation, the proposed provision would actually create distortion and unfair competition between rides offered through digital means and those hailed in the street or booked by phone. It seems odd that European tax law would actively discriminate against transport booking services using digital technology competing against those which do not. This would go against the ambition of the EU to support the development of the digital sector in Europe and would harm digital transport booking services which allow tens of millions of European citizens to access transport services in a more efficient and safer way. An unlevel playing field would be created between the same services, depending on how they are booked. Indeed, the very same driver could be exempted from VAT when being street hailed or booked by phone (because his/her revenues would be below VAT threshold), while his/her ride would be subject to VAT when offered through a platform. In many Member States, one should bear in mind that drivers have the possibility to be booked by digital platforms or by offline means. Negative impact on drivers with low revenues The proposed provision could actually harm drivers who until now have been exempted from VAT by Member State tax rules because of their low revenues. In Estonia, this represents two thirds of the drivers operating on Bolt platform. The deemed supplier rule would lead in Estonia to a 10 million euro additional VAT to be charged with a negative impact on the drivers, the passengers and on Bolt. As most ride-hailing platforms operating in the EU are still striving to make their operations economically sustainable in the long run, the cost of the additional VAT could be compensated by an increase of the platforms’ commission on the price of the ride, leading to a decrease of the drivers’ earnings through platforms. Alternatively, it could lead to an increase in the price of rides offered by drivers whose revenues are under VAT thresholds, making them less competitive which goes against the purpose of exempting revenues below a certain threshold from VAT liability. European platforms will be harmed first The provision would mainly impact European passenger transport platforms, as they account for the vast majority of platforms operating in the EU. Not only do they represent most ride-hailing platforms in the EU, but the impact would be greater on them compared to large non-European actors as their smaller size means they would be less able to absorb the additional costs incurred and the loss of competitiveness. The proposed rule will indeed impose a huge and expensive compliance burden on European platforms, making it even more difficult for them to compete with global giants. Violation of VAT neutrality Normally VAT cost is borne only by the final consumer (passenger) and remains neutral at all stages of the value chain for a taxable person doing business. If an entrepreneur is non-VAT liable (below the registration threshold), he/she does not have the right to input VAT deduction but at the same time does not have to charge output VAT. The Directive proposal would lead to the fact that non-VAT liable drivers would likely have to bear the burden of VAT twice: -they will be charged VAT by the platform on the facilitation services (without right of VAT deduction) -and very likely, the additional VAT charged by the platform (as deemed supplier) on the ride, will be indirectly transferred to them, if not absorbed by the passenger (an increase of rides’ prices). Bolt therefore calls for the removal of passenger transport from the legislative provision as it will create distortion when there was none and discriminate against digital services. Equally important, it will mainly hit European actors and could eventually harm the drivers who have the lowest revenues. Saatja: "MKM info" Saaja: "MKM info" Teema: FW: Follow-up PWD and ViDA Kuupäev: 2024-04-29 11:01 From: Aurélien Pozzana <[email protected] <mailto:[email protected]> > Sent: Thursday, October 26, 2023 9:10 PM To: Sandra Särav <[email protected] <mailto:[email protected]> > Cc: Henri Arras <[email protected] <mailto:[email protected]> > Subject: Follow-up PWD and ViDA Hi Sandra, A quick update to let you know that JK's meetings with both the Minister of Economy and the Minister of Finance went well. To follow up on these meetings, you will find attached: 1- Platform Work Directive - a draft letter we hope the Estonian Government could sign and encourage other "allied" Member States to so as well, with the aim of asking the Spanish Presidency to stick to the agreement adopted in June within the Council - a doc for you which explains where the negotiations stand and the related issues 2- ViDA (VAT in the Digital Age) package - a position paper from Bolt highlighting why the deemed supplier provision would lead to discrimination against digital platforms, especially in the Estonian context where two thirds of the drivers are under the national VAT threshold - suggested amendments which we strongly hope Estonia could table in the next discussions within the Council Let me know if you wish to discuss this further. Kind regards, Aurélien Aurélien Pozzana Senior Head of Public Policy | Western Europe & EU (+33) 6 23 87 24 62 [email protected] <mailto:[email protected]> blog.bolt.eu <http://blog.bolt.eu> <https://bolt.eu/> Ensuring that the Platform Work Directive Delivers for All Dear Minster Diaz, We, the ministers of labor of +++ EU Member states , are writing to express reservations about the direction of negotiations on the proposal for Improving Working Conditions in Platform Work. We remain committed to ensuring the fair and just treatment of platform workers across the European Union, striking a balance between protecting workers and providing legal certainty for the platforms they work through, and protecting the principle of subsidiarity. To that end, our governments have reservations about the compromises being proposed in the current negotiations. We believe these go far beyond the mandate given for negotiations. We would like to stress that recent proposals from the Parliament on the presumption and rebuttal process (Article 4), do not meaningfully move towards the Council position on any of the key areas; criteria and thresholds for triggering the presumption; the rebuttal taking place based solely on national law; the prerogative of Member States to apply a suspensive effect; and the application of the presumption during tax, criminal and social security proceedings. We recall that the General approach of 6th June, which was the result of detailed deliberations and agreed in the spirit of compromise. However, proposed Parliament compromises would severely interfere with our national competences, procedures and definitions in the field of labour relations. We would like to urge your Council Presidency to remain within the clearly defined red lines set out in the General Approach. Furthermore, we seek clarity on how the final Directive will affect our national laws. Many provisions, as discussed in this negotiation, without clearly defined derogations may lead to more uncertainty and unintended consequences. It is essential that the final Directive does not undermine positive reforms we have achieved on the ground, including effective social dialogue and better cooperation on tax and law enforcement issues. Lastly, we would like to emphasize the need to ensure a more transparent use of algorithms in the platform economy. Consent-based processing, as opposed to a blanket ban on certain systems, as advocated by the European Parliament, can provide platform workers with more transparency and control over their data, without unnecessary burden. In conclusion, we strongly believe that the Platform Work Directive must be carefully crafted to strike the right balance between protecting workers and supporting the digital economy. We request that the Council Presidency takes our concerns and inquiries into consideration and seeks legal guidance to ensure that the final agreement aligns with the values and interests of EU Member States. We look forward to your response and continued cooperation to address these critical issues. Thank you for your attention to these matters. Minister of Labour Estonia Minister of Labour France Minister of Labour Lithuania Minister of Labour Greece Minister of Labour Latvia Minister of Labour Czech Republic Minister of Labour Slovakia Minister of Labour Hungary Minister of Labour Sweden Minister of Labour Austria PWD update October 2023 Key points: ● Several provisions go significantly beyond the political agreement reached by Member States at Council in June. The current compromise would effectively automatically reclassify all platform workers as employees, which is the opposite of the previous political agreement. ● Several provisions can blunt the effect of national employment laws and customs on the application of the directive. Meanwhile, exceptions on where the directive does not apply for social, tax, law enforcement issues are not clearly defined. Our main asks are that: ● The Council negotiators stay within the limits outlined by June’s general approach. The final Directive should neither lead to automatic reclassification of all platform workers, nor ban the use of algorithms in platform work. ● Allied Member States should encourage the Spanish Council Presidency not to seek a new negotiating mandate at the meeting of 27/10 when Member State ambassadors to the EU will meet (COREPER) to discuss the file. ● Proper legal advice is taken at every stage of this process to clarify the effect of compromise provisions on existing national laws. Clear, written guidance by the Council’s and the Commission’s legal service can ensure a workable Directive that does not erode national laws and competences, or overwhelm local and national enforcement. Spain - which has the Council rotating Presidency until the end of 2023 - is pushing EU countries to accept a system leading to automatic reclassification. This clearly exceeds the limits of the mandate agreed in June by Member States within the Council. The recent “compromise” put forward by the European Parliament and warmly received by the Council Presidency, goes beyond the well defined objective to keep self-employment a viable option: ● In practice, any ride-hailing driver or delivery courier who works through a platform that uses a rating system, enables payments, or insists on appropriate standards would be considered as an employee under the Directive. ● The ‘indicators’ currently discussed are designed in a way that makes it practically impossible for workers to remain self employed. A more balanced approach is possible through the criteria agreed upon in the Council’s text (requiring 3/7 criteria, an examination of the facts and suspensive effect). ● This change of employment status would not only be automatic, but also apply on tax, social security and law enforcement issues. This would erode the procedural autonomy of Member State Courts, cause significant administrative burdens and prolong cases by reforming largely irrelevant points of law.  ● Platforms cannot rebut the presumption unless they show that the same criteria (which are impossible not to meet) do not apply. And so, even if a platform worker is legally self employed under national laws, the presumption automatically becomes reclassification. ● This effective reclassification could happen without a complaint from the person in question. A Trade Union, or a labour inspector could trigger the presumption independently, as it has happened in countries where such a system exists. This goes beyond the Council’s position which aimed to protect genuine self-employment. Therefore, the Council Presidency should stay within clearly defined red lines. The current compromise can both undermine clearly defined national competences, and erode well-functioning existing laws ● Council Presidency and Parliament both want to require national labour authorities to apply the presumption, removing their discretionary power (as defined in the Council text) to not apply it when it is clear that national law does not indicate the existence of an employment relationship. ● Council Presidency and Parliament both want the presumption to apply automatically when a person or a trade union launches a proceeding, without reference either to criteria, Member State law or the facts of the case. ● Council Presidency and Parliament want to set arbitrary deadlines for rebutting the presumption in EU law, bypassing the procedural autonomy of Member State courts and creating a significant administrative burden on national legal systems. ● Council Presidency and Parliament want the rebuttal to require that the conditions for the presumption are not met, making the entire process determined by European rather than national employment criteria. ● In addition, existing laws protecting passengers and drivers, and improving working conditions by promoting collective agreements between platforms and workers are in peril, as the derogations separating them from the effect of the directive may be sacrificed for the sake of a compromise. ● Even so, many of the recitals which protect national competences still remain open to legal interpretation, within a highly litigious process. Meanwhile the Commission avoids providing reassurances that national sectoral legislation will not need to change following the adoption of the directive. Member States need legal certainty on how the current text will interplay with national laws, and legal reassurances that they can continue to exercise their competence. The Council Presidency should ask for clear written guidance from the Council’s legal service, or the Commission on that matter. A blanket ban on data processing will make the platform economy less transparent and less safe ● Leveraging data is part of the platform economy and the future of work. According to the Council’s political agreement in June, all platform workers should have the right to put  their data to use. Consent-based processing, in accordance with the GDPR, can ensure more trust and transparency. ● The Council Presidency is ready to compromise with the Parliament, accepting a blanket ban on automated systems, without taking into account national specificities. Definitions on what constitutes automated decision making will be set at an EU level, and are currently broad and open to interpretation. ● The unintended consequence is that several innovative features increasing trust within the platform economy would no longer be possible. This ranges from data-driven fraud prevention to an expedited handling of a workers complaint. Even safety features, such as sharing audio recordings to protect both drivers and passengers would be a thing of the past. The final rules on Algorithmic Transparency should remain proportionate and ultimately serve to improve transparency, safety and trust in the platform economy. Rules on algorithms should be consistent with existing and upcoming rules on platforms, trade secrets, and artificial intelligence. ViDA - Deemed supplier amendments proposals RECITALS Current Text Amendment (23) It is therefore necessary to lay down rules to address the distortions of competition in the short-term accommodation rental and passenger transport sectors by changing the role that platforms play in the collection of VAT (becoming the ‘deemed supplier’). Under this model, platforms should be required to charge VAT where VAT is due but the underlying supplier does not charge it because they are, for example, a natural person or a taxable person using the special scheme for small enterprises. (23) It is therefore necessary to lay down rules to address the distortions of competition where such distortions exists in the short-term accommodation rental and passenger transport sectors while avoiding the creation of new distortions, by changing the role that platforms play in the collection of VAT (becoming the ‘deemed supplier’). Under this model, platforms should be required to charge VAT where VAT is due but the underlying supplier does not charge it because they are, for example, a natural person or a taxable person using the special scheme for small enterprises. In the case of passenger transport services, where a similar passenger transport service not facilitated through an electronic interface, and provided by an underlying supplier using the special scheme for small enterprises is not subject to VAT, the deemed supplier rule shall not apply. Justification The only instance where professional licensed ride-hailing drivers do not already pay VAT is where they are subject to the special scheme for SMEs. Neither they, nor their competitors cease to be SMEs because they use a platform to find customers, and so this exemption ensures that VAT is not charged on a ride where its direct substitute (a taxi or private hire vehicle sourced in an offline environment) would not be subject to VAT, while leaving in place requirements for platforms to collect and remit VAT on rides that are already VAT-able. OPTION 1 - Excluding Professional Licensed Drivers Implementing Regulation (EU) No 282/2011 Current Text Amendment Article 9b 2. Article 28a of Directive 2006/112/EC shall not apply to a taxable person who only provides any of the following: [...] Article 9b 2. Article 28a of Directive 2006/112/EC shall not apply to a taxable person who only provides any of the following: [...] (e) services facilitating the provision of passenger transport services by taxable persons duly licensed to provide such services under Member State law. Justification The only instance where professional licensed ride-hailing drivers do not already pay VAT is where they are subject to the special scheme for SMEs. Neither they, nor their competitors cease to be SMEs because they use an online platform to find customers, and so this exemption ensures that VAT is not charged on a ride where its direct substitute (a taxi or private hire vehicle sourced in an offline environment) would not be subject to VAT, while leaving in place requirements for platforms to collect and submit VAT on rides that are already VAT-able. OPTION 2 Directive Current Text Amendment Article 28a ‘Article 28a - insert at the end [...] Member States shall exempt passenger transport services referred to in the first paragraph where the person providing the underlying service is subject to the special scheme under Sections 1 and 2 of Chapter 1 of Title XII of Directive 2006/112/EC and the exemption will not lead to a distortion of competition. Justification In the European Union, all passenger transport drivers are licensed professionals, whether they work through platforms or not. Both “traditional” taxi and ride-hailing drivers are regulated in all Member States where they exist. Whether drivers are liable for VAT is not related to the fact they offer their rides offline or through a platform. This depends mainly on the level of their revenues and the VAT threshold set by each Member State. Member States should have the flexibility to exempt passenger transport services where their supply through digital means does not lead to a distortion of competition vis-à-vis &quot;traditional” taxi services hailed in the street or booked by phone. For example, in a number of Member States where the VAT threshold is considerably higher than the national average income, the revenues of most professional drivers falls below it. The Directive needs to ensure that tax law will not actively discriminate against transport booking services using digital technology. OPTION 3 - Adapting the transposition and application dates Directive European Commission’s proposal Amendment Article 5 Transposition [...] 2. Member States shall adopt and publish, by 31 December 2024, the laws, regulations and administrative provisions necessary to comply with Article 2 of this Directive. They shall apply those provisions from 1 January 2025. When Member States adopt those provisions, they shall contain a reference to this Directive or be accompanied by such a reference on the occasion of their official publication. Member States shall determine how such reference is to be made. Article 5 Transposition [...] 2. Member States shall adopt and publish, by 31 December 202 4 6 , the laws, regulations and administrative provisions necessary to comply with Article 2 of this Directive. They shall apply those provisions from 1 January 202 5 7 . When Member States adopt those provisions, they shall contain a reference to this Directive or be accompanied by such a reference on the occasion of their official publication. Member States shall determine how such reference is to be made. Justification Changing the date of application to 1 January 2027 will ensure that platforms have enough time to adapt to the new regulatory framework.