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EU Moves Towards E-Commerce Taxation

by Ulrika Lomas, Tax-News.com, Brussels

17 December 2001


According to an Associated Press report, the European Union is moving towards an agreement on e-commerce taxation after the sole opponent to the legislation, the United Kingdom, withdrew its opposition to a tax on video downloads and other digital products purchased and delivered via the internet.

Britain withdrew its opposition to the law following an agreement to revisit and streamline the legislation in three years time, but the agreement must be formally drafted and approved at a forthcoming meeting. EU member states will then have 18 months to incorporate the directive into national law.

However, despite the moratorium on internet taxation in the States, the implications of this European decision for US businesses could be huge, as they are by far the largest providers of the goods targeted by the new legislation.

In response to pressure from American lobbyists, the European Union has decided that non-EU businesses will only be obliged to register in one member state, as opposed to in all fifteen of them. That country will then collect the VAT on the purchases and remit it to the purchaser's country of residence. However, there are fears that this could cause complications in terms of additional administration and compliance, as VAT rates vary widely across Western Europe.


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