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MEP Urges European Parliament To Reject E-Commerce Taxation Proposals

Ulrika Lomas, Tax-News.com, Brussels

15 December 2000


UK Liberal Democrat MEP Diana Wallis last night called on the European Parliament to reject the Commission's proposals for the imposition of VAT on e-commerce services supplied from outside the Union.

Ms Wallis, who is the Liberal Democrat's spokeswoman on the Internet, said the Commission's proposals were too complex and would be difficult to implement and enforce. Instead, European Liberal Democrats want the tax scrapped. "A tax on e-commerce does not encourage growth of trade over the Internet," said Wallis, "This proposal might on the face of it be about the taxation of non-EU business, but what it is actually about is how we encourage and nurture Europe's e-economy. It is a very fragile flower."

The European Commission published its proposals in the summer, and they have since been discussed several times by ministers with so far inconclusive results. As originally presented, they involved compulsory registration for any non-EU trader with EU turnover over 100,000 euros - but the trader could have chosen to register in any member state. The two flaws in this otherwise realistic proposal were that high-VAT countries were never going to agree to allow a low-VAT country to cream off the revenue, and/or that dividing the revenue among member states would be horrendously bureaucratic. That hasn't stopped the French from trying to come up with a compromise involving multiple registrations, or the Belgians from suggesting a formula for division of the loot.

Any chance that the proposals would ever come into force disappeared when the Nice summit last weekend retained the national veto over fiscal matters; so Ms Wallis is flogging a dead horse. Still, she is right about 'fragile flower': after all the high-minded euro-waffle from assorted EU leaders about creating a global e-commerce powerhouse etc etc ad infinitum, the reality is that both the member states and the EU itself are busy passing legislation which will assuredly drive e-commerce into the arms of the offshore jurisdictions that have liberal legal regimes and low taxation to boot.

The only EU country that seems to be going in the right direction is Ireland, and it will find it hard to differentiate itself sufficiently from its EU partners if it is shackled by too much central legislation like this week's decision by the Parliament to allow consumers to sue e-commerce suppliers in their home countries.

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