EU Tax On Internet Could Hurt US Tech Firms Says Lobby Group

by Mike Godfrey, Tax-News.com, Washington

26 June 2003

An organisation representing the US information technology industry has severely criticised the European Union's decision to impose VAT (Value Added Tax) on services provided via the internet saying such "protectionist" measures will have an adverse impact on hundreds of US based companies, according to an AFP report.

In comments prepared for a Senate hearing prior to the US/EU summit, Harris Miller, president of the Information Technology Association of America, said "European taxes and regulatory barriers that impair access to the marketplace for global companies are protectionism plain and simple. In a matter of days, US companies will be forced to comply with costly tax collection and reimbursement policies of 15 different EU nations, soon to rise to 25."

From July 1, the new EU rules will require web sites that provide services including software, music and film downloads, e-books, distance learning and consulting services to collect VAT from customers. The rules will also encompass pay-per-view television and radio, as well internet auction sites such as the highly successful eBay.

Miller, whose organisation represents around 400 technology-related businesses of varying sizes in the United States continued: "For small and medium US sellers, this onerous policy may force them to stop doing business with EU customers, one of the largest markets in the world. For large companies, fifteen new tax compliance procedures will narrow profits and eat into dollars that might otherwise be invested in research, new products and productivity enhancement."

Miller continued that his organisation will be closely monitoring the situation and spoke of the possibilty of raising the matter with the US Trade Representative with a view to lodging a complaint with the WTO (World Trade Organisation) on grounds of trade discrimination.

"In too many Internet policy areas, Europe is galloping backwards toward the 19th Century while the US creates an environment for the 21st," Miller observed. "On privacy, consumer protection, data retention and levies on IT hardware, the EU has adopted or is adopting policies that erode the hallmarks of free and open trade between the EU, the US and other global players," he warned.

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