VAT Modernization and Competition in the Cross-border Mail Market

such that they are defined as non-universal services.” 42 The application of the individuallynegotiated tariffs needs careful treatment not to thwart innovative pricing solutions and resultin changes in mailers’ behaviour and incentives to operate cost-efficiently. Changes inbehaviour would also result in transaction costs arising from a different mix of products andmail preparation; invoicing and collecting revenues, and most particularly in terms ofcollecting, processing, distribution and other operational processes.Besides these implications there is a long list of smaller practical considerations which arenonetheless important because with an eventual change of the cross-border VAT regime,there are new action points for each postal service provider that need to be dealt with. This islikely to have serious consequences and, among other things, posts will need to:∗ Assess which services are involved both in country of origin as country of destination;∗ Review these to establish the customer base and whether the customers involved canreclaim VAT or not. If they cannot this represents a real price increase for thesecustomers which could inevitably lead to a loss of volumes (of which many operatorscan do without in the current climate). This may require a review of prices(considering demand elasticities) for the relevant services;∗ Financial impacts should be evaluated including impact of input credits (VAT thatcan now be reclaimed on purchases, this will be complicated as many costs arecommon costs or very limited as most costs are related to labor);∗ Possibly have discussions with tax authorities;∗ Customers will need to be informed of changes, brochures and so on updated;∗ Systems will need to be reviewed as customers who are charged VAT will be entitledto invoices setting out the tax paid. This will be straightforward for centrally billeditems but what about services paid for with stamps, meter franks or PPIs;∗ Staff will need to be trained;∗ The receiving party has to understand whether a VAT exemption applies;∗ Tax needs to be calculated, paid, deductible taxes need to be reclaimed;∗ The application of the reverse charge system for cross-border mail depends on theability of the sending Operator to correctly apply it. The receiving Operator at the42 Walsh, Tim (2010), Payment Channels and the Reform of the European Union Postal VAT¸ 18th Rutgers Conference onPostal and Delivery Economics, 201028