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Date
10 November 2015

Mishcon Thinks: E-Commerce and Regulation - Part 1

Partner and Head of the Betting & Gaming Group Susan Breen talks to Michael Hayman of Seven Hills about how regulation is affecting global e-commerce businesses.

Transcript

Mishcon Thinks

E-Commerce and Regulation

Michael Hayman MBE
Seven Hills

Susan Breen you are a partner in the Corporate Department, your expertise rests in International E-commerce business with a particular emphasis on betting and gaming.  Welcome.  Tell us a little bit about the scene.

Susan Breen
Partner

Thank you.  I am particularly focused on businesses that are consumer facing. So they are technology rich, data rich, they are International in focus and what we have seen particularly within the European market of late is a wealth, almost a tsunami of legislation that’s coming down from Europe that are affecting International businesses.

Michael Hayman MBE
Seven Hills

Right.  Is that in terms of consumer protection or is…?

Susan Breen
Partner

It’s right across the gamut of legislation.  So tax is a big issue because instead of harmonising regulations within Europe we are having independent countries look at their own tax dollars.  It’s about consumer protection so it’s around money laundering and anti-terrorism and it’s also about data protection.  They are the three big legislative movements that there are within Europe at the moment.

Michael Hayman MBE
Seven Hills

Right so this, this from a kind of management perspective, this gives a lot for these businesses to be thinking about?

Susan Breen
Partner

Well we’ve seen it before.  These are not new debates.  The financial services and the insurance industry have faced this problem.  The VAT issue is as much the design of Europe trying to make the playing field a little fairer when it comes to big business, for example, Apple and Google.  So they are trying to redistribute the tax take within Europe rather than in particular pockets.

Michael Hayman MBE
Seven Hills

Right so you have outlined VAT, money laundering and data is the three big areas.  What is it that these businesses should be starting to think about right now?  How should they be prepared to sort of interact with those challenges?

Susan Breen
Partner

Well I think there are two aspects and it may look particularly grim at the outset but there is a lot that these businesses can do.  The first is the cost of compliance and the second is just getting clarity around what the European Commission is saying.  So for example, the VAT directive which came in in January 2015 is really trying to as I said, level the playing field in relation to the tax take so historically a business would pay VAT based upon where it is incorporated or established and now we have new rules coming in saying we will charge the VAT by reference to where the consumer is located.

Michael Hayman MBE
Seven Hills

Right.

Susan Breen
Partner

It will force companies to think about where they are based but there is no way out of the fact that if they have customers in twenty eight European countries they are going to have to deal with the VAT take in each of those countries.

Michael Hayman MBE
Seven Hills

Right and you mentioned the cost of compliance.  Would you elaborate a little bit on that?

Susan Breen
Partner

Well I will give you a couple of examples.  The VAT regulations which came in in 2013 which were about the US attempt to increase the tax take of US citizens, they have said that in 2013 alone the cost to Britain of compliance there was upwards of a billion pounds.

Michael Hayman MBE
Seven Hills

Right.

Susan Breen
Partner

The insurance industry has already grappled with what is a standard rate and a VAT exempt supply and they have had their day in Court and been successful in a number of those cases.  We have now a situation where the gambling industry in particular has zero rated and standard rate supplies.  It is now going to be up to each country to determine whether they can exempt their own national legislation from particular VAT provisions.

Michael Hayman MBE
Seven Hills

Right.

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