VAT Modernization and Competition in the Cross-border Mail Market

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Exhibit 5: Definition of the USOUSO definitionSingle PieceMailBulk MailParcels Non-CounterDirect MailMail PreparationComplementaryServicesOtherUSO definitionThe Dutch postal VAT exemption is retained for all single piece (non-bulk) mail services. InGermany, the scope is slightly different, covering all mail services provided by universalservice providers suited to private households. The German definition makes a clearreference to the receiving party, very contrary to Austria. The Austrian definition extends toall C2C mail posted in (street) pillar boxes or accepted over the counter.Exhibit 6: Examples USO and VAT Complications in Cross-border MarketCountry ACountry BClearanceSortingOffice ofExchangeTransportOffice ofExchangeSortingDeliveryOfficeDeliveryBulk Mail – Country of Origin: NetherlandsBulk Mail – Country of Origin: FranceDestination BelgiumDestination BelgiumNo VAT ExemptionVAT ExemptionBulk Mail – Country of Origin: BelgiumBulk Mail – Country of Origin: BelgiumDestination GermanyDestination FranceNo VAT ExemptionVAT ExemptionBulk Mail – Country of Origin: Belgium (non USP) Destination France No VAT ExemptionSingle Piece – Country of Origin: AustriaSingle Piece – Country of Origin: AustriaParcel 20kg – Country of Origin: SpainParcel 20kg – Country of Origin: ItalyDestination SwedenDestination NetherlandsDestination DenmarkDestination DenmarkNo VAT ExemptionVAT ExemptionNo VAT ExemptionVAT ExemptiondssIn the Netherlands, Spain and Luxembourg the universal postal service includes parcels up to10 kg in weight, both regular and certified. In countries such as Austria, Denmark, Italy,France and the United Kingdom, this threshold is raised to 20 kg. In France, however, onlypostal packages weighing up to 20 kg, sent singly to the public as ordinary or registered itemsand excluding postal services provided to businesses under contracts covering multiple itemsare considered universal service. 30 Meanwhile in Germany, “in practice, the tax exemptionappears to be applied only to DPAG’s [Deutsche Post] over-the-counter parcels; VAT is30 IPC Regulatory Portal – Country Pages France and Contrat Service Public 2008 – 201220
outinely charged for bulk parcels from commercial senders.” 31 Deutsche Post and TNTapply a different weight-step for applying VAT exemptions to intra-EU parcel delivery. TNTis required to charge VAT from 20 kilograms parcel services, whereas Deutsche Post chargesfrom 10 kilograms. 32The list of number of different USO product combinations can go on endlessly, meanwhileleaving serious problems for the implementation of DG TAXUD if their viewpoints were tobe accepted. The receiving operator will face the task of identifying which item falls withinthe sending countries’ scope of USO products. In many cases, the operations staff will not beable to identify in each case whether a certain mail item in their inbound stream falls underthe definition of 'universal service' in the sending country. 33 According to the PostalDirective, inbound cross-border postal services qualify as a universal service in thedestination country, in line with ECJ jurisprudence, this service should remain VAT exempt.3.3 Impact on the Cross-border MarketThe possible implementation of the proposed VAT would lead to foregone revenue and areduction in the service quality in the cross-border market. It would damage cross-border e-commerce by creating more uncertainty and higher tariffs further impeding the completion ofthe internal market. Finally it would lead to discrimination between DOs and betweencustomers and could incentivize the rerouting of mail activities. The 1994 Resolution takesanother interesting consideration which is to “ensure that the needs of users, includingconsumers, the interests of postal sector employees as well as the contribution of the postalsector to economic, cultural and social development in the Community are taken intoaccount, when regulating this sector.” 343.3.1 Impact on Quality of Service31 Quote from: WIK , The impact of abolishing the VAT exemption for postal services provided by Deutsche Post AG, November2005. However no VAT indicated on intra-EU B2X parcels < 10kg:http://www.dhl.de/en/paket/geschaeftskunden/gewerbekunden/internationaler-versand.html consulted on 13 October 2010;32 C2X market: TNT: http://www.tntpost.nl/voorthuis/pakketten/via-postkantoor/pakket-buitenland/internationaal-pakket-pluseuropa/wat-kost-het.aspx#;Deutsche Post: http://www.dhl.de/en/paket/privatkunden/international/paket.html consulted on 13October 201033 When in the sending country, certain letters do not fall under the USO, as it is the case in some countries when they havebeen inserted directly in the sorting centre. Letters posted at a post office and letters inserted in a sorting centre will look thesame, but will require in the receiving country a different VAT treatment, according to the Commission’s interpretation.34 Council Resolution of 7 February 1994 on the development of Community postal services21
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Page 3 and 4: a de facto universal service obliga
Page 5 and 6: apid growth of specialized services
Page 9 and 10: Provider (USP) so that the services
Page 11 and 12: the removal of the VAT exemption co
Page 13 and 14: Although TNT lost its case, the Cou
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Page 23: Commissioner Mr. Barnier in his spe
Page 27 and 28: In the situation that cross-border
Page 29 and 30: level of Operations and Accounting
Page 31 and 32: of the described complications in t

VAT Modernization and Competition in the Cross-border Mail Market

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