Association Of Chartered Certified Accountants Says Tax Talks On E-Commerce In Europe Must Stop

by Amanda Banks, Tax-news.com, London

08 June 2001

The Association of Chartered Certified Accountants (ACCA) has urged the European Commission to remove tax on downloadable services for a transitional period which would put European companies on a par with their US counterparts, while discussions take place on how to establish a fairer system.

At present European-based companies must pay their domestic rate of VAT on downloadable electronic services but US companies pay neither VAT nor sales tax which enables them to provide cheaper services to customers.

In a statement released by ACCA this week, the association claimed that businesses in Europe continue to suffer an unfair disadvantage compared to competitors in the United States, because no progress has been made on proposals put forward a year ago which would have created a more level playing field on taxation of e-commerce.

Chas Roy-Chowdhury, ACCA's Head of Taxation, said: 'The time for talking about this issue is over. Brussels put proposals forward a year ago about how to resolve this distortion of competition, and still no progress has been made. It means that companies in the US, which pay no VAT on downloadable services, continue to enjoy considerable benefits.'

He added: 'Businesses in Europe must be able to compete on a level playing field globally and, until a final decision is taken, we urge the EU to suspend taxation on this area of e-commerce to ensure that they do not continue to be seriously disadvantaged.'

Just last month we pondered upon whether the British have spiked the EU's attempt to impose VAT on digital downloads originating outside the EU in response to US pressure, or because the Treasury thinks the directive is unworkable.

A European Federation of Accountants convention in Brussels recently heard Arthur Kerrigan, principal administrator of the EU Commission's Taxation Customs Union, admit that enforcement is a major and unsolved problem with the EU's proposals for taxing non-EU e-commerce suppliers. 'How does one make them register?' he asked, and what does one do if they don't? The remoteness was fundamental, he thought: only full co-operation between taxation authorities around the world might assist the EU in dealing with those who are non-compliant, but what were the chances of that?

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