The European Consumer Center in Ireland has determined that Twitter has violated the EU VAT rules for fair business practices by not including VAT in its service subscription prices. During February and March, Twitter launched the paid Twitter Blue subscription service in Europe. The move is part of an effort to make the social network more lucrative.
However, it failed to comply with an important requirement regarding pricing – the EU countries mandate that the total price, advertised to customers, must include VAT, that adheres also to Twitter. In the US, taxes the practice is to add them to the displayed price only at the checkout, which might be the reason for the mistake.
The problem about monitoring transactions to ensure a proper tax collection
On a larger scale, monitoring transactions and collecting taxes with international services is an issue tax authorities face around the world. Efforts to “domesticate” the revenue from cross-border sales (which have become so prominent over the past couple of years due to the rise of social platforms and streaming services) have proven to be both a technological and legislative challenge.
One reasonable solution was proposed by Professor Ainsworth who says that currently available technological solutions, such as TaxCore®, could enable tax authorities to simply extend their regulations “to all nonresident suppliers (including suppliers of remote services)” – an approach he calls “fighting technology with technology” (Data First, Tax Next: How Fiji’s Technology Can Improve New Zealand’s ‘Netflix Tax’, Tax Notes, Volume 94, Number 2, April 8, 2019).
TaxCore® solution even enables the customers to perform a real-time receipt verification after the purchase. The verification allows them to also review all relevant receipt details, including a price specification of all charged items. Awareness of such powerful tools in the hands of both customers and tax authorities would make companies like Twitter think twice about how they communicate their prices and VAT collection.
