May 20, 2015
The power of eLearning has tripled in just four years. In 2015 this booming industry is tipped to expand to $107 billion in revenue, up from $35.6 billion in 2011.
Why is this happening? Here we outline five reasons as to why the eLearning industry is booming:
1. Cloud formation
The key catalyst for the eLearning boom has been the development of the Cloud. The Cloud has enabled the creation of multiple service-as-a-software (SaaS) business models that are perfect for the supply of eLearning courses. By using the SaaS model access to software and its functions are provided remotely via a web-based service. This simplifies the process for the end user who simply needs average internet access to consume the service.
2. Voracious venture capitalists
Access to capital is the lifeblood of any business so when venture capitalists get on board an industry it’s time to sit up and take note. According to a recent Docebo report there was some $6 billion of venture capital ploughed into the industry in recent years, with the report adding: “eLearning is being driven not only by startup dot-com entrepreneurs but also by big corporations, for-profit spin-off ventures, as well as big and small universities.”
The investment from venture capitalists has allowed entrepreneurs to concentrate on building great eLearning products with superb user interfaces and support backup – key elements of a great eLearning service that would not have been possible without significant capital investment.
3. Broadband boosts
All this data needs a secure and reliable infrastructure, that’s why governments across the globe have been revamping their telecommunications lines. Broadband speeds are now spoken about in 100GBs, rather than the 10GBs. The eLearning industry has benefitted as more and more consumers have better quality access and it has also enabled industry stakeholders to produce and supply radically improved services.
4. Yearning for self-improvement
People want to improve, and eLearning is the most convenient access available to most people to do so. All that is required is some motivation and internet access.
5. Reality bites during recession
There’s never a better time to reboot then when circumstances dictate that you must. The recent global recession was a reality check for millions of people around the world. Many turned to eLearning and online courses to upskill – or to learn completely new skills – so as to further their careers.
But…as the eLearning industry grows so too do its responsibilities
The eLearning industry relies on the use of electronic technology to supply teaching and learning courses primarily via the internet. And it is this type of service that governments across the globe are eyeing up for increased tax revenues.
Let’s take the EU’s new value-added-tax (VAT) legislation on the supply of digital services to EU consumers. The eLearning industry comes under the scope as these new rules, here’s some guidance on what type of services are within scope of the new rules:
The supply of distance teaching:
- Automated distance teaching dependent on the Internet or similar electronic network to function and the supply of which requires limited or no human intervention, including virtual classrooms, except where the Internet or similar electronic network is used as a tool simply for communication between the teacher and student;
- Workbooks completed by pupils online and marked automatically, without human intervention.
No human intervention, or without human intervention, is a phrase that appears regularly in the EU VAT legislation. Effectively, if there is any automated supply of an online class then that will be deemed as a service under the 2015 rules and thus subject to taxation based on where the consumer of the class is based. The supplier of the service, in turn, will have to prove this location by collecting two pieces of evidence and apply the correct VAT rate.
Companies that supply eLearning services will be affected. The location of the company is no longer relevant, these new VAT rules are only concerned with the location of the consumer.
The new rules apply to all eLearning services supplied as ebooks, MP3 audio files, PDFs, or recorded online courses.
The new rules do not apply to eLearning courses supplied in a live environment. This is because there is deemed to be sufficient human intervention in the supply of the service for it not to be classified as a digital service.
Got that? Recorded and pre-packaged material is under the scope of the new rules while live eLearning classes are not in scope.
Stakeholders in eLearning market segments need to realise their responsibilities when it comes to complying with the varied tax regions across the globe so that they correctly collect and account for tax on sales.
Taxamo content is created for guidance only, please consult your local tax advisor.