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Tax Commissioner Defends Plans To Levy VAT On Digital Goods

Ulrika Lomas, Tax-news.com, Brussels

18 September 2000

In a speech delivered in the Hague, Netherlands, last week, European Taxation Commissioner Frits Bolkestein defended controversial plans by the European Commission to levy VAT on digital goods which would bring taxation of 'imports' of digital goods by consumers into line with the existing treatment for supplies within the EU.

Speaking at an e-commerce and taxation conference, Mr Bolkestein said that the proposals to impose VAT on products delivered electronically, which were first mooted in June, would "remove the competitive handicap currently affecting EU providers on both domestic and world markets". He also said they fully conformed with international principles agreed at the Organisation for Economic Co-operation and Development (OECD) ministerial conference in Ottawa, Canada in 1998.

Mr Bolkestein's determination to get legislation on the issue pushed through is clear. He stated: 'We cannot allow competitive distortions to persist, to the detriment of European based e-commerce.'

In addition, he raised the issue of how to reconcile existing tax systems with increasing globalisation, in particular relating to online trading: 'Rather than regarding issues raised by globalisation and e-commerce as a problem which threaten the fundamental integrity of existing tax systems, we should be looking at them as an opportunity and driving force to modernise these existing taxes and make them more efficient in practice. It is not just within the EU that tax administrations have to face the fact that many of the old and stabilised certainties no longer hold.'

Mr Bolkestein is well aware that e-commerce, in particular, has highlighted deficiencies in existing tax systems on a worldwide basis and forced administrations to consider long-overdue reform and simplification. He said: 'This is a process which is forcing tax administrations to look outside themselves. Their realisation that many of their problems can only be resolved by co-operating with each other can only be welcomed.'


The full text of Frits Bolkestein's speech can be found at http://europa.eu.int/rapid/start/cgi/guesten.ksh?p_action.gettxt=gt
&doc=SPEECH/00/303|0|RAPID&lg=EN

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