Two prominent European tax experts have produced an exhaustive report on the indirect taxation of e-commerce sales in Europe (ie VAT) which contrasts the European situation with that in the US, concluding that the EU is likely to succeed with its proposed imposition of VAT on imports of e-commerce services, and pointing out the benefits of a registration in Madeira (the EU's lowest-rate VAT jurisdiction).
Peter Jenkins, UK Head of Indirect Tax for Ernst and Young, and Tim D. Wilkie, Partner in Corporate & Treasury in Madeira have written:
'THE APPLICATION OF VAT TO E-COMMERCE IN THE EUROPEAN UNION
A commentary on the
EU DRAFT DIRECTIVE ON DIGITAL GOODS & SERVICES
Not surprisingly, the report reflects the gung-ho attitude of the EU towards tax ('if it moves we can tax it') rather than the cautious and forbearing attitude the US has so far displayed towards the taxation of e-commerce. The authors evidently believe that the difficulties surrounding e-commerce taxation are not only minor, but can be overcome by adjustment of the existing taxation regime. Most Americans tend to think that a new paradigm is required which will sweep away the existing basis of sales taxation. That reflects the hideous complication of the existing US sales tax regime, but it also seems to express a readiness to innovate which is not evident in the EU.
The problem with the EU's more restrictive and Colbertian attitude is that it may just not work. The report's authors believe that companies outside the EU need to try to hard to follow 'the rules' and not step out of line in the interests of their future reputation in the EU; it doesn't seem to occur to them that it may be the EU's consumers who will decide what happens, and that the EU will simply be left behind if it tries to apply outdated principles to e-commerce taxation.
Anyway, it's a good read. Find the full text in Tax-News Resources
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