The new rules, which came into effect in January this year, mean that small businesses in the UK now have to pay VAT for their sales of digital products such as apps and online training courses to customers in other EU countries. Businesses with sales below £81,000 per year were previously exempt from paying VAT - but that exemption has now been removed despite the then UK Labour government arguing for it to be retained.
The rules have a good purpose- to prevent big companies from fiddling tax by basing themselves in tax havens - but implementation by both the European Commission and HMRC has been poor.
At a conference in Dublin last week, and in a letter to me before the summer, the European Commission indicated that they would be looking to reintroduce a threshold to protect small and micro businesses, but that this will not happen until late 2016. I have twice written to the Commission to demand an explanation of what businesses are supposed to do between now and the reintroduction of the threshold.
It is disgraceful that the Commission accepts there are problems but refuses to do anything about it. Many businesses have already been forced to close or wasted huge amounts of money on a system that may end up being scrapped. Many more are under threat of closing or facing prosecution for not complying with a temporary system.
In addition to scrapping the rules, they must also simplify the legislation so that any communications with businesses must be from their home tax authority, and not potentially from 27 other administrations.
In the time between now and the re-introduction of a tax threshold we risk losing innovative start-up businesses and causing unnecessary increased unemployment and hardship at a time when economies are only beginning to show signs of economic recovery. The digital single market could be dead before it has even really begun.