E-commerce imports into Europe: VAT and customs treatment

Main conclusions of the study:

This experimental study found that shipments sent via national postal operators resulted in a lack of payment of VAT and import duties to the national authorities for more than 60% of items purchased online. The study is based on a set of fully completed online purchases, leading to the actual shipment of circa 400 packages with content purchased from Canada, China, India, Japan and the US and imported into the EU. In contrast, shipments sent via private express carriers (e.g. FedEx, UPS) resulted in lack of payment of VAT and import duties only 1-2% of the time for similar imports.

The European Commission recently introduced a new customs code and issued its VAT action plan, including proposals to level the playing field between foreign and EU e-commerce traders and small and medium sized enterprises by having more stringent controls on VAT on imports.

If VAT and duties on online retail imports into Europe were to be charged correctly at official rates, this could generate 3 billion euros of public income. This figure is based on a total value of online retail (e-commerce of goods, not services) imports into the EU of 11 billion euros annually to which VAT and duties have to be applied. The experimental evidence in this study indicates that an estimated 1.7 billion euros are collected and it is the postal channel that is key driver for the remaining loss in public income of up to 1.3 billion euros per year.

The study involved approximately 400 shipments into the EU from Canada, China, India, Japan and the US (representing 42% of EU imports) to 7 of the largest EU markets: France, Germany, the Netherlands, Poland, Spain, Sweden and the UK (representing over 70% of EU GDP). Half of the set was shipped via postal operators and half by private express carriers.

The study is commissioned by UPS.

Please direct all enquiries on this study to Dr Bruno Basalisco