The European Union encourages e-commerce: its goal is to ensure that businesses and consumers can buy and sell internationally on the internet as they do on their local markets. However, e-commerce is prone to irregularities concerning VAT (Value Added Tax) and customs duties. Such irregularities directly affect the Member States’ budgets and, indirectly, the European Union’s (by reducing the Member States’ customs duties and VAT-based contributions). While the single market abolished border controls for intra-EU trade between Member States, customs controls are still applied at the Union’s external borders, and all non-EU goods entering each Member State are subject to these. Services provided digitally from outside the EU represent a particular risk in this regard: such services do not physically cross any border and are not subject to the same controls as goods entering the EU. The ECA is currently conducting an audit on whether the EU is addressing effectively the challenges posed by e-commerce in terms of VAT and customs duties. In particular, we will examine the Commission’s regulatory and control framework for e-commerce and the cooperation between Member States to ensure the completeness of the collection of VAT and customs duties on ecommerce transactions. If you wish to contact the audit team, you may do so at the following email address: ECA-e-commerce-VAT-audit@eca.europa.eu.

Background paper: Collection of VAT and customs duties on cross-border e-commerce