New research shows digitisation is widely supported, but legislative changes are not being prepared for
Despite the seismic changes set to reshape the VAT landscape over the next three years, new research reveals that the majority of businesses are unaware and unprepared to face them. Accordance VAT finds that some 78% of businesses are unaware of the upcoming EU Four VAT ‘Quick Fixes’ legislation, and less than half (48%) are ready to manage the changes they will bring. Similarly, despite 58% of financial decision makers believing their companies will be affected by Real Time Reporting (RTR) in the next two to three years, almost two in five (38%) state that their businesses are not prepared for the adoption of RTR in the EU.
These findings are contained in a whitepaper entitled ‘The Future of VAT’, released today by international VAT compliance and consultancy practice Accordance VAT. Alongside representative statistical information on the current positions and views of business, the whitepaper contains analysis and insight on the two major processes shaping the future of VAT – legislative change and digitisation.
Digitisation is a major EU objective and is already underway as national initiatives in several member states. Although there is widespread recognition of the impact of RTR, only one in 10 (10%) businesses is currently ready to manage the changes RTR will entail. Despite this, on the whole businesses were positive about digitisation, with three in five (61%) considering data transparency a bonus, and 57% asserting that RTR could generate overall better compliance. However, two in five (41%) of businesses are concerned about the risks involved in submitting inaccurate data and having less time to correct mistakes, and a majority (63%) believe that the complexity of systems poses a serious challenge.
In fact, Accordance finds that a majority of businesses are already acquainted with digital procedures, with 56% filing tax declarations through a RTR system in Europe, and 46% reporting use of an e-voicing solution.
The Future of VAT whitepaper encapsulates information on the EU legislative agenda, providing insight and guidance for businesses on the move towards harmonisation of the VAT system in the European Community. Key to these plans are the introduction of a data driven Mini One Stop Shop (MOSS) for B2C distance sales by 2021, followed by a B2B OSS for intra-EU supplies of goods in July 2022. Prior to this roll out and with the aim of simplifying some of the more complex aspects of VAT procedure, the EU is introducing a Four VAT ‘Quick Fixes’ programme in January 2020.
Rob Janering, Associate Director at Accordance VAT and author of the whitepaper, says: “We’re going to see unprecedented levels of change to the VAT landscape in the coming three years. All involved in finance must work hard to adapt, but there are rewards to be reaped too.”
“To make the most of these changes, the core steps for businesses on both sides of the channel are to plan early, to invest in technology, and to invest in human expertise. Those who prepare and adapt in advance are likely to enjoy improved compliance and better data transparency – key for effective businesses functioning and successful international trade.”
Interesting comparisons can be drawn between UK and EU based businesses in terms of awareness and preparation for legislative changes; the vast majority (86%) of UK businesses were not aware of the scheduled Four VAT ‘Quick Fixes’, compared to just over half (57%) of EU businesses. Preparedness for the Four ‘Quick Fixes’ reveals and inversion of figures between the UK and the mainland; 71% of EU businesses feel prepared, compared to 71% of UK businesses who report that they are unprepared.
Nick Hallam, Chairman of Accordance VAT, says “VAT is key to securing our shared future, and for it, businesses and governments alike must be ready for digitisation and the sweeping legislative changes shortly to come into force.”
“Our research shows that on the whole, businesses need to act to ready themselves for the future of VAT and the departure it signals from current practices. Far too many businesses are unprepared in the face of the changes to come – risking both their ability to comply and their bottom lines. Digitisation and EU-wide harmonisation of procedures offer internal benefits like improved productivity, accuracy and the reduction of risk. Crucially, improved compliance goes hand in hand with being a good tax citizen, and is fundamental to the future of the European social project and the services we have come to rely upon.”
Accordance VAT is holding a series of webinars to help inform and prepare businesses for the range of issues and legislation affecting VAT. The next session will consider the EU’s Four VAT ‘Quick Fixes’, and will be held on July 23rd. For more information, see here.
Dollar languishes near three-year lows as Fed’s Powell stokes reflation bets
By Kevin Buckland
TOKYO (Reuters) – The safe-haven U.S. dollar languished near three-year lows versus riskier currencies on Thursday as continued dovish signals from the Federal Reserve stoked reflation bets.
The greenback sank to a fresh low against the Australian dollar, and held near lows set overnight against its British, Canadian and New Zealand peers.
Fed Chair Powell reiterated on Wednesday that the central bank wouldn’t adjust policy until the economy is clearly improving, and will look through any near-term spike in inflation. The remarks to the House of Representatives Committee on Financial Services mirrored his testimony before the Senate the day before.
“Powell made it very clear that the improvement in the economic outlook thus far will not instigate the Fed to tighten monetary policy,” National Australia Bank foreign exchange strategist Rodrigo Cattrill wrote in a client note.
“The punch bowl ain’t going anywhere anytime soon and the policy backdrop should remain supportive for risk assets for some time.”
Easy financial conditions, the promise of fiscal stimulus and an accelerating COVID-19 vaccine rollout have driven money into what’s come to be known as the reflation trade, refering to bets on an upswing in economic activity and prices.
Commodity-linked currencies are placed to benefit from a pick-up in global trade, while investors have also cheered Britain’s progress in recovering from the coronavirus pandemic.
Australia’s dollar rose 0.1% to $0.79717 on Thursday in Asia after earlier touching a fresh three-year high of $0.7975.
The New Zealand and Canadian dollars traded just off Wednesday’s multi-year highs.
Sterling was little changed at $1.4143 after pushing to the cusp of $1.43 overnight for the first time since April 2018.
The euro traded near the top of its recent range at $1.2168, near the almost one-month high of $1.2180 touched earlier this week.
The dollar strengthened though against other traditional safe haven currencies, rising 0.1% to 105.94 yen for a third day of gains. It held near the three-month high of 90.945 Swiss francs reached overnight.
(Reporting by Kevin Buckland; Editing by Lincoln Feast.)
How the Brexit Agreement Failed the Financial Services Sector
By Steve Taklalsingh, MD UK Business, Amaiz
Over the Valentine’s weekend, it was announced that during January, the first month that the new Brexit-related changes came into force, Amsterdam overtook London as the largest financial trading centre in Europe. Approximately €9.2bn (£8.1bn) worth of shares were traded on Amsterdam’s exchanges each day in January, against €8.6bn in London. How did that happen and why is Brexit to blame?
The Brexit deal for the Financial Sector
The Christmas Eve Brexit agreement delivered an unfair market for UK companies in the Financial Services Sector. The deal meant we were left in a situation where EU-based banks wanting to buy European shares cannot trade via London. EU shares that were previously traded in the UK have moved to the EU on advice of the European regulator. In addition, EU FinTech companies can operate in the UK but, as ‘equivalence’ (agreeing to recognise each other’s regulations) has not been agreed, our FinTech companies cannot now operate in the EU. You can already see evidence of EU companies, particularly those based in Amsterdam and Germany, eyeing up the UK market.
As a sector we’ve never been shy of boasting about our 12% contribution to the UK’s GDP. FinTech, in particular, has been a UK success story. This vibrant scene is looked on with some envy and I’m very proud to be part of it. Internationally, having a foothold in this market, and a London address, was the aspiration of financial services companies who wanted to be taken seriously, but not anymore.
Action to solve the market distortion
The Bank of England chief Andrew Bailey has warned that there are signs that the EU plans to cut off the UK from its financial markets and has urged them not to do so. The indications are that the Government is aware of the ‘problem’ but doesn’t appear to see the clear urgency in resolving it. It has been reported that there are ongoing talks to harmonise rules over financial regulations (equivalence) and that they’re working towards a March deadline.
Number 10 has said they are open to discussions on the equivalence issue and claims that the Government has ‘supplied the necessary paperwork’ and boasts of the UK’s strong regulatory system. It lays the fault of delay firmly at the doorstep of the EU: “Fragmentation of share trading across financial centres is in no one’s interest.” I’m disappointed that they’re not, in public, recognising the seriousness of the situation.
Research on the impact of Brexit
At Amaiz we have worked hard to understand the implications of Brexit. At the beginning of December we carried out research which focussed on the impact on financial services. The report, Brexit Brink: Are British SMEs about to fall off the edge of Europe – or building new bridges? is based on a survey of SMEs across the UK and you can download it free from www.https://journal.amaiz.com/amaiz-guide/. Our findings gave us valuable insight into the deal that was needed for Financial Services.
Most companies had been preparing for Brexit for some years. Whilst there were some that hoped and campaigned for the referendum result to be overturned, that seemed unlikely. The results of our research in December showed that people were as ready as they could be:
- Nearly half (49.2%) of company decision makers had reviewed new regulations set to take force on 1 January 2021 (if there was a no deal Brexit) and made changes to ensure their companies would meet them.
- Only 17% of companies said they had failed to prepare.
The changes that company leaders believed would have the most impact were those to regulations (37.4% of respondents said this was a concern), increased costs of doing business (37.2%), and reduced access to suppliers (35.5%). Overall, 57% of companies believed that Brexit would have a negative impact on their business, and some (6.6%) believed it would destroy their business.
The research found that larger companies were more prepared for Brexit than smaller ones. That’s likely to due to their ability to devote resources to solving the challenges Brexit presents. Those employing between 1 and 10 people were most concerned about increased costs (45.7%) and those with between 11 and 50 employees about taxes and VAT (41.3%).
Larger companies in Financial Services prepared for Brexit by registering companies and offices within the EU so that they could continue trading there. This acted as a fail-safe solution that avoided issues, whether a deal was struck or not, and whatever the nature of that deal. Smaller companies don’t have the resources to do this; they could not open another office on the off chance that they would need it, so Brexit put them in a more vulnerable position.
Impact on the economy
Of course, Brexit came at a time when we were all trying to manage the devastating impact of the pandemic. The FCA (Financial Conduct Authority) and FSB (Federation of Small Business) both published figures in January that show the terrible impact of the pandemic on SMEs in the UK. The FCA found that 59% of smaller financial firms expected that their profits would take a hit this year. The FSB found that nearly 5% of smaller companies expect to be forced to close within 12 months, the largest proportion in the history of the Small Business Index and would mean that 295,000 companies will close this year.
A plea to the Government
The Government has worked hard to find ways to help small businesses survive the pandemic in order to save jobs. The economy is experiencing an unprecedented recession, with all hopes laid on a swift bounce back as soon as lock down ends. Until then we are in ‘war’ mode. However, helping businesses survive is not just about handing out cash. What the Financial Services Sector urgently needs is a fair regulatory framework and marketplace in which UK business can operate. Instead, the Government has allowed distortions that continue to damage one of the country’s key sectors – one that can drive us out of recession – and appear laid back about resolving the situation!
Bitcoin tumbles 17% as doubts grow over valuations
By Tom Wilson and Tom Westbrook
LONDON/SINGAPORE (Reuters) – Bitcoin tumbled 17% on Tuesday, sparking a sell-off across cryptocurrency markets as investors grew nervous at sky-high valuations and leveraged players took profit.
The world’s biggest cryptocurrency suffered its biggest daily drop in a month, falling as low $45,000. Bitcoin was last down 11.3% at 0939 GMT.
The drop extended a slump of nearly a fifth from a record high of $58,354 hit on Sunday – though bitcoin remains up around 60% for the year.
“The kinds of rallies we’ve been seeing aren’t sustainable and just invite pullbacks like this,” said Craig Erlam, senior market analyst at OANDA.
Ether, the world’s second largest cryptocurrency by market capitalisation that often moves in tandem with bitcoin, also dropped more than 17% and last bought $1,461, down almost 30% from last week’s record peak.
Cryptocurrency markets have been running hot this year as big money managers and companies begin to take the emerging asset class seriously, piling money into the sector and driving confidence among small-time speculators.
A $1.5 billion investment in the crytocurrency by electric carmaker Tesla this month has helped vault bitcoin above $50,000 but may now lead to pressure on the company’s stock price as it has become sensitive to movements in bitcoin.
Rising government bond yields over recent days have hit riskier assets, spilling over into leveraged bitcoin markets, said Richard Galvin of crypto fund Digital Asset Capital Management.
“Markets were quite hit from a leverage perspective so that didn’t help,” he added.
U.S. Treasury Secretary Janet Yellen, who has flagged the need to regulate cryptocurrencies more closely, also said on Monday that bitcoin is extremely inefficient at conducting transactions and is a highly speculative asset.
Critics say the cryptocurrency’s high volatility is among reasons that it has so far failed to gain widespread traction as a means of payment.
Analysts said key price levels have played a large part in determining the direction of crypto markets.
“Because we’re so lacking in fundamentals, it’s the big figures that have proved to be support and resistance points,” said Michael McCarthy, chief strategist at brokerage CMC Markets in Sydney.
“$50,000, $40,000 and $30,000 are the key chart levels at the moment. If we see it heading through $50,000, selling could accelerate.”
(Reporting by Tom Westbrook; Editing by Jacqueline Wong and Nick Macfie)
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