Is the EU single market SME-friendly?

The European single market is supposed to be free from obstacles. People and goods, services and capital are to be treated equally - independent of which EU or ESS country they originate from. The single market is also a major reason why Swedish companies are generally very positive towards the EU.

But does the single market work as intended? Not without friction, says Anna-Lena Bohm, CEO of Uniguide AB, chair for the Confederation of Swedish Enterprise’s SME Committee and vice chair of BusinessEurope’s Entrepreneurship and SME Committee.

In the latter capacity she held a seminar on SME and digitalisation at the BusinessEurope conference on February 21 on the theme ”Is the EU single market SME-friendly? What does SMEs actually need?” Anna-Lena Bohm dedicated her address to a few important policy issues, such as VAT and geo-blocking.

EU as a whole is a product of its member countries, and they do not always agree on common rules and routines. This, of course, affects the workings of the single market.

VAT regulations in particular give many entrepreneurs a headache. Modern times brings modern products, and many fall somewhere in between a service and a product – or is, perhaps, both at once. Knowing which VAT rate to use is not always easy, especially for smaller companies.

The reason is that the member states controls their own taxes and VAT rates and so far there are no comprehensive proposals on joint regulation in that area.

• It needs to get easier for small and mid-sized companies to pay the right amount of VAT in the right way, no matter in which country within the single market they are doing business. Today it is nearly impossible for a company without a large number of employed experts to administrate all the different taxes and VAT rates. For example, it is often hard to know where in the EU the end consumer actually lives. Furthermore companies need to handle all the VAT rates for every single member country and market – over eighty, all in all! Together with new methods of payment like PayPal, which makes it harder to know where the customer is located, aggravating the sale process even further.

Geoblocking is a term used in e-commerce and refers to different techniques to prevent online sales in a certain geographical area. At present geoblocking is permitted but there is proposals to ban the practice within the EU. The idea that e-commerce should be open for all within the EU is a good one. But if a company has to sell their goods to anyone and everyone within the EU it also means it has to take in to consideration all the consumer protection laws and taxes rules in every single member state. To a larger corporation this is usually not a problem, but for smaller companies it makes for a heavy administrative burden.

• The purpose of the single market is excellent and there is a possibility for SME companies to reach 500 million consumers. But if the single market is to work as intended, the member states have to agree on simplifying and standardising rules and routines. If geoblocking is removed many small and mid-sized companies run the risk of hitting a wall of new regulations and it is hard – and expensive! - for smaller companies to keep track of all the different rules and laws of the member states in order to do the right thing.