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Why is the European Union making changes to its VAT policies?

Items worth less than €22 have been free from VAT under an exemption known as the Low Value Consignment Relief (LVCR). The Low Value Consignment Relief (LVCR) was introduced as a way of removing from customs authorities in European Union member states the responsibility for checking the potential tax liability of high volumes of small packages which might generate little revenue.

Even so, various countries have claimed that the system has been abused by e-commerce operators in non-EU territories deliberately understating the value of small items being sent to consumers in Europe. Figures published by the European Union itself suggested that as much as €5 billion in VAT was being lost to tax authorities each year in such a fashion.

Starting July 1 2021, the exemption is being abolished.

At the same time the European union is adapting its VAT policies to the current dynamics of e-commerce.

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