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EU’s Digital Single Market is taking shape

Eugene Eteris, European Studies Faculty, RSU, Riga, 07.05.2015.Print version
Digitisation has changed the European social and business environment. However, the EU internal market is not fully opened to the digital opportunities. Some changes are needed to support jobs and growth through digitalisation. Hence, the Commission approved the Digital Single Market strategy (DSM), which would provide adequate solutions for people and businesses.

The DSM’s idea, as underlined by the Commission vice-president Andrus Ansip, responsible for DSM development in Europe, is to provide people/customers with opportunities to "buy-like-at-home", and for businesses and companies to "sell-like-at-home".


Present problems

The Commissioner argued that only 38% of people feel confident buying online from another EU country. For example, he said, it’s almost impossible to buy a book online (an e-book); people don’t know how the system works, what consumers’ rights are, and how to enforce these rights.

 

Besides, only 7% of SMEs in the EU sell cross-border, it is simply too complicated and too expensive for them to adapt to 28 different sets of rules existing bin the EU.

 

Thus, EU-wide enforcement is necessary in a Digital Single Market. Since 2007, thanks to the Consumer Protection Cooperation (CPC) Regulation, there is a network of national enforcement authorities to enforce the main EU consumer laws across borders consistently. The CPC Regulation is now being assessed.

 

On the basis of the results, the Commission can propose improvements and assist the EU states in saving resources dedicated to enforcement. More cooperation among national enforcement authorities will enhance their capacity to act across borders to tackle widespread infringements on online markets. This will increase legal certainty for businesses and reduce possible litigation costs. In addition, by coordinating actions and pooling resources, national administrations will avoid duplicating efforts. 


Shopping online

Presently, as A. Ansip acknowledged, only 15% of consumers shop online from another EU country; it is not surprising as the delivery charge is often higher than the actual price of the product.

 

The Commission intends to adopt measures, which will address frequent complaints by e-retailers and consumers concerning a lack of transparency (in the available delivery options and conditions); the excessive costs of shipments (especially of small parcels sent by SMEs); the lack of interoperability between the different operators typically involved in a cross-border shipment (resulting in the absence of affordable track-and-trace solutions); the lack of convenience for the final consumer (not being offered last-mile delivery or convenient return options).

 

These issues have already been identified in a Green Paper in 2012, followed up by a Roadmap in December 2013. The postal operators in some EU states have committed themselves to introduce a number of improvements in the area of quality of services (e.g. track-and-trace services for small parcels sent across borders, easy return procedures, etc).

 

The focus of the future EU measures on parcels is, however, on problems not addressed by the postal industry's own commitments initiative. This includes excessive prices and insufficient regulatory oversight. With this in mind, the Commission has launched a public consultation (on May 6, 2015) to collect views from all the interested parties on the main issues and possible areas for improvement.


Delivery issues

Recent studies confirm that the cost of delivery is still an obstacle to shopping cross-border. Shipping costs is the most common reason (57%) in Europe for not completing an online purchase. Over 60% of companies that are willing to sell online say that too high delivery costs are a problem (see the newly released Eurobarometer on e-commerce).

 

Tariffs for cross-border small parcel delivery charged by postal operators are often two to five times higher than domestic prices.

 

The Commissioner provided an example: it costs €32.40 to send a 2kg parcel from Belgium to Austria, which is over five times the price of €6.40 within Belgium. From Austria to Belgium it costs €14.40 – over three times the price of €4.50 within Austria.

 

Thus, competition appears to be the most appropriate and effective way of addressing today's concerns in terms of affordability.

 

However, for such competition to unfold in a fair and efficient manner, all market participants – retailers, delivery operators as well as consumers – need to enjoy a certain degree of price transparency. Price regulation is only a means of last resort, where competition does not bring satisfactory results, and is not considered at this stage. Close monitoring is essential in order to identify and address any market failures. The Commission will review the situation within the coming two years.


The taxation issues in the DSM

The Commission will make legislative proposals in 2016 to reduce the administrative burden on businesses arising from different VAT regimes including:

 

- Extending the current single electronic registration and payment mechanism to cross-border online sales of physical goods.

- Introducing a common EU-wide simplification measure – VAT threshold – to help small start-up e-commerce businesses.

- Allowing for home country controls including a single audit of cross-border businesses for VAT purposes.

- Removing the VAT exemption for the importation of small consignments from suppliers in third countries.


These measures will bring certain benefits to businesses; the following benefits are already suggested by the Commission: 


- Simplicity: a business only has to deal with one tax administration which in itself is a significant simplification.  

- A level playing field: there will be no difference in VAT rates between goods ordered from websites in third countries, other EU states or domestically.

- Certainty: clear rules allow business to plan for engaging in cross-border e-commerce; furthermore the same rules will apply for goods and services.

 

These suggestions, which were originally to facilitate trade, have turned into an expensive tax subsidy in favour of imports to the disadvantage of domestic and intra-EU sales. It does not benefit small operators but big market players.

 

It has been estimated that distortions resulting from this exemption cost EU business a turnover of up to €4.5 billion annually. With the introduction of a single electronic registration and payment mechanism, this exemption will also no longer be needed, as VAT could be accounted for at an earlier stage than customs clearance, by exporters or carriers.


DSM’s impact on job creation

Digital agenda is a driver for growth; however, growth always comes with employment. It is estimated that the Internet had created 2.6 jobs for every one that was replaced by technology. Digitalisation transforms industries and new occupations, e.g. app developers are emerging. DSM also transforms the working conditions: for ICT professionals, the latest forecast estimates up to 825,000 unfilled vacancies by 2020 if no decisive action is taken for training.

 

This is why digital skills are essential to benefit from the opportunities offered by new technologies.

 

While this is mainly the responsibility of the EU states, the Commission will support their efforts and will address digital skills as part of its future initiatives on skills and training. In parallel, the Commission invites the social partners to include the relevant elements of the Digital Single Market in their social dialogue at EU level.

 

Note: all above references are from the Commission’s MEMO/15/4920 on Q&A on DSM. 


Companies to scale-up through DSM

The DSM agenda suggested by the Commission will contain 3 pillars of targeted and balanced initiatives, which form an interlinked package.

 

·         The first pillar aims to remove existing barriers. For that, the Commission:

= will propose simple and effective cross-border contract rules with reinforced consumer protection cooperation;

= present an initiative on parcel delivery to improve price transparency;

= launch a comprehensive review preparing for legal changes to tackle unjustified geo-blocking, together with a competition inquiry into online trading;

= modernize copyright rules, to help creators and content industry, consumers and innovators, to adapt to a fast evolving environment.

= present an initiative to reduce the burden on SMEs that comes from the different VAT regimes across Europe.

 

·         For the DSM to work properly, the second pillar of the DSM focuses on high-quality infrastructure, which has to function smoothly across all of Europe.

The Commission will create the right and fair conditions in the underlying environment in the member states.

·         The third pillar is about the European digital economy and society. Digitising industry is vital for maintaining growth. Supporting startups ensures jobs and business innovation.

Data gives huge potential for productivity and competitiveness across all economic sectors.

The Commission will propose both initiatives on the free flow of data and a plan for integrated standardisation across sectors, to accelerate the roll-out of essential services (transport, energy and health).

 

The Commission also intends to promote e-government, to help to modernise public administrations and to achieve interoperable public services between the EU states as vast majority of the EU members have asked for the DSM’s further development.

 

The present DSM strategy reflects their contributions, and those of the European Parliament's main political groups.

 

All these initiatives must be implemented in a coordinated way for the DSM to become reality, to bring tangible benefits, create jobs and growth, underlined the Commission vice-president arguing that this strategy has been just a starting point, not the finishing-line.

 

Main reference: Statement by Vice-President Andrus Ansip at the press conference on the adoption of the Digital Single Market Strategy SPEECH/15/4926, 6 May 2015, in:

http://europa.eu/rapid/press-release_SPEECH-15-4926_en.htm?locale=en


Reference on Q&A on DSM in:

http://europa.eu/rapid/press-release_MEMO-15-4920_en.htm?locale=en






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