More regulation begets more regulation. You can't expect bureaucrats who have been given authority over something to sit back and decide when they're done regulating.
I wouldn't totally blame the bureaucrats here, either. They're sort of like sysadmins: people only pay attention to them when something bad is happening, and that attention is rarely positive. Whereas when things are going well, nobody says, "Thank goodness for the bureaucrats that keep things running smoothly."
Their incentives are mostly toward over-regulating. If they over-regulate, they mainly harm invisible potential improvements. Whereas if they under-regulate, the big, obvious failures mean they get in a lot of hot water.
VAT MOSS did not only harm invisible potential improvements. It makes thousands of small business economically unviable.
Same will be true for the new Oettinger law.
To be honest, VAT MOSS was introduced because large (American) companies were gaming the system by routing sales through Luxembourg to avoid significant amounts of VAT.
It is nothing more than a counter tax avoidance measure.
That does not make this stupid law any better.
They could have forced Luxembourg to adapt there laws to a more common standard.
They could have made an exemption for small amounts.
The EU generally doesn't involve itself in the running of individual member states. They create directives that need to be translated to local law, but member states are free to do so as they wish within a certain framework.
As far as I know, they don't force minimum tax rates - that's a freedom of a member state. That's also why you pay 33% corporate tax in Belgium and 5% in Malta.
It is nothing more than a counter tax avoidance measure.
Unfortunately, it is something more than a counter tax avoidance measure, because it has caused vast collateral damage. It's a huge administrative burden that literally makes many micro-businesses unviable, and it imposes prohibitive overheads on slightly larger businesses that are just getting going.
To add insult to injury, it's also impossible in practice to comply with the rules fully even if you make a good faith effort, unless you have a specialist VAT accountant's level understanding of each EU member state's tax system. Obviously no business except for large multinationals actually has this level of understanding available to it.
What is particularly appalling in this case is that the authorities who spent all that time working on the new rules didn't even realise all those smaller businesses existed until the very end. A huge campaign against the new measures was started with just weeks to go. Most of the authorities across all levels of government pointed to years of discussions, said they consulted earlier, and asked why the small businesses didn't say anything before. It didn't even occur to them that the microbusinesses didn't know, because no-one had thought to contact them, unlike larger businesses with well-established VAT management, and because someone running a £500/year side business from their kitchen table to fund their kids' christmas presents might not be following the intricate details of EU tax negotiations.
The icing on the cake is the often dysfunctional systems put in place to administer the new systems, which have made it very clear that even the national tax authorities often don't know what they're doing. Case in point: Multiple national tax authorities have already sent waves of wildly incorrect and extremely hostile demands for payment of supposedly unpaid VAT to small businesses in other countries.
Imagine how you'd feel if you spent a year building up a side business, then one morning you woke up to a demand for over a million Euros, far more money than you'd ever made in your year of trading, saying if you didn't pay faster than you could sensibly get legal or tax advice then you'd be taken to court without further notice, inevitably killing your business.
This is the reality when the EU gets to play with legal and tax rules but the people making the rules fail to understand the basic nature of how those rules will affect smaller businesses or individual citizens who aren't over there playing the games with the politicians. It's a scary prospect, and the way forward some of the EU bureaucrats see for the Internet and for intellectual property as we're discussing today seems many times worse than the short-sightedness they showed with the VAT mess a year ago.
To be honest VAT MOSS was introduced just for the the sake of introducing it, large retailers will find a way to avoid paying taxes small businesses wont.
Germany has already made statements that it will not allow other EU members to audit and collect VAT from German companies.
I'm happy that the response to this has finally changed I got downvoted to hell when commenting on the VAT changes when news just started breaking out almost 2 years ago saying that it will kill small businesses and now after the changes were implemented people actually started to see that it have.
The system completely ignores deferential VAT rates for different items in different countries, it forces businesses to register for VAT regardless if they are VAT exempt (e.g. small businesses in the UK with under 100K in yearly revenue) and it forces them to implement a "reliable system to verify the actual point of consumption of your goods and services" without actually putting in criteria on what is reliable or how you should verify the source of consumption if the first place.
"If I use a German bank card to order and item from the UK to Spain where should the VAT be collected?"
To this date I haven't received an actual consistent answer or even a consistent thought process to evaluate this.
And this is the most simple scenario which can be easily made more complicated like ordering an item from Germany with German payment details to be shipped to Spain from the UK, ordering an item with German payment details from the UK while you are in Spain, ordering an item from the UK with German payment details while you are in the airport in Norway, or doing the same while you are outside of the EU completely.
And these aren't complicated scenarios they things happen all the time the amount of times I had to order something I need from Amazon in the EU to myself while being in another country is ridiculous sometimes I'll order something from Amazon UK to my UK home while I'm away, sometimes I'll order from Amazon to be delivered to some country in the EU, some time if I'll need something down the line in the trip I might order it from country a to country c while being in country b.
And while Amazon could easily deal with this because they have an army of lawyers and tax advisers that will find them all the loopholes and legal justifications to continue to do what ever the frack they want, normal businesses won't be able to coupe with these types of decisions.
So far this seems to actually benefit Amazon the most because all of the people that I know that operated their own online stores for various goods and services have actually moved their store exclusively to Amazon and the likes even when they can charge a commission in the double digits just because it was the only way for them to be able to "ignore" the new tax regulations.
I had to stop working on a website which was soon to launch when I learned about VAT MOSS. Although, I was thinking whether a faucet-style (india/russia/romania workers) website could pay people $N per email to send the digital good/service manually. Then that should bypass the VAT MOSS legislation, right? Although, they do have plans to apply VAT MOSS to physical goods/services in 2016. It's a pain in the ass.
