EU Digital VAT Plans Dubbed 'Tax Dodgers' Charter'

by Robert Lee, Tax-News.com, London

05 March 2002

Plans ro impose VAT on the sale of digital products recently agreed upon by the European Union have been condemned by a former Lord Commissioner of the UK Treasury, it emerged on Friday

Labour MP, Graham Allen rubbished the plans, which require offshore and overseas companies to collect and forward VAT on digital products sold to EU citizens, condemning them as 'a tax dodgers' charter'.

However, speaking to UK accounting magazine, Accountancy Age, a Customs Official expressed confidence in the agreement reached by the EU, saying that the revenue authorities expect to be able to collect the tax in at least 80% of cases.

He explained that non-EU businesses will be required to register with the tax authority of a European Union member state, which will then administer the process, and pass the sales tax on to the country in which the purchaser of the digital goods is resident.

'The law will make it clear that if you want to do business within the EU you will have to comply with EU tax law,' the Customs spokesman added.

The new rules were put in place to alleviate the current trade distortion whereby companies based in EU member states are required to levy VAT on the sale of digital products, but overseas suppliers are permitted to export software and related products into European member states tax free.

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