The subject of value-added taxation is complicated. Certainly in domestic concerns, but massively so in international commerce.

Value-added taxes, or VAT, are taxes that are based on consumption and targeted at end-consumers.

VAT hasn’t been applied in practice for very long, despite its enormous success.

How did this tax come about?

Here are the top three reasons why international business is so difficult:

  1. Despite efforts to harmonize, such as those made by the European Union, large discrepancies across countries still exist. Various tax rates, deadlines, and reporting processes can rapidly become confusing, particularly for small businesses lacking the resources of a full-time accounts payable department.
  2. Keeping track of new regulations takes time and expertise. The EU court of justice and commission, as well as every national and local body, are all concerned about the changing regulatory landscape.
  3. On a regular basis, new restrictions cause confusion. Uncertainties arise when new laws and regulations are introduced, notwithstanding all available sources, such as taxation levels and precedents.

Since its inception, the VAT world has been in continuous motion, with no sign of a return to normalcy anytime soon. International harmonization efforts, with fraud prevention as one of the key aims, are currently the main engine of development. However, one goal is to make it easier for businesses to do business across borders.

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