Douglas Carswell

Brussels is strangling the digital economy

Europe needs to change, insists David Cameron. It has to become more competitive. We need to complete the Single Market, he tells us.

This sounds plausible. But take a look at what this actually means.

In the name of completing the single market in digital services, the EU has changed the rules on VAT.

Each time a business sells a digital good to a customer, VAT needs to be paid. Previously the amount of VAT in a transaction depended on the VAT rate where the business was based.

But, of course, VAT rates vary and businesses found it more advantageous to base themselves in low VAT member states. In other words there was tax competition.

For all Cameron's talk about competition and the EU, when faced with a bit of internal tax competition - which might actually make Europe as a whole more competitive - EU officials moved to stop it.

Since January, VAT is no longer calculated on where the business in any transaction is located, but the customer.

Now there are 27 different VAT jurisdictions across the EU. Businesses selling digital goods to customers in the 27 EU states have to calculate VAT, and process VAT payments to different tax authorities, 27 different ways.

Smaller firms cannot cope, even if big corporates get by. However much Cameron and co want to associate themselves with everything Tech City and digital, on their watch the digital economy has been massively disadvantaged by these EU rules. Many digital businesses around the world amply won't sell to the EU now.

Of course David Cameron is not stupid. He can of course by now see the damage. But he's powerless to change it. He can only offer empathy and words.

It's always like this with the EU. More Europe is supposed to make things new and bright and shiny. It's all meant to be the future, which only reactionary retros oppose.

But in reality the EU leaves us less able to face the challenges of the modern world.

Our digital economy would benefit from Brexit.

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