To ask the Chancellor of the Exchequer what steps his Department is taking to ensure that online purchases are taxed at the appropriate rate.
VAT on goods is generally payable at the rate of the location of the customer, and therefore applies equally to goods bought from UK companies and goods bought from abroad, and to goods bought from high street retailers and those bought online.
Under current EU rules supplies of digital or electronic services to non-business consumers are currently taxed where the supplier belongs. This means that if a company locates in a low VAT jurisdiction they will account for VAT at the rate in that country. Member states agreed to change the taxation of intra-EU business-to-consumer (B2C) supplies of telecommunications, broadcasting and e-services with effect from January 2015. From that date VAT on these services will be payable in the member state in which the customer is located rather than where the supplier is located.
This will prevent businesses from moving their operations to other member states to take advantage of lower VAT rates and will protect £5 billion in revenue each year.