Europe Plans to Collect Tax on Some Internet Transactions

[/ dave /]

http://www.nytimes.com/library/tech/00/03/biztech/articles/02tax.html

FRANKFURT, March 1 -- Testing the ability to enforce national tax laws in
cyberspace, the European Commission is planning to collect sales taxes
on music and software delivered over the World Wide Web. 

Though not yet complete, the proposals would
eliminate what European officials view as a big
loophole that benefits American companies.

(...)

Under proposals developed by the European
Commission in Brussels, companies would have to
collect what is known as a value-added tax, a type of
sales tax, on products they sell and distribute over the Internet. 

At issue are products like computer software, music and videos that can be
turned into digital code and downloaded by customers anywhere. 

Value-added taxes are a major source of revenue for most European
governments, and tax rates vary by country from about 12 percent to more than
20 percent. 

When it comes to physical goods, like books or clothes, the taxes have been
collected by stores and mail-order companies or by customs officials if the
products were to be shipped across national boundaries. 

In those transactions, the tax rate is based on the rate of the country
where the
product originated. 

But "virtual" products defy that system, because they can be sent just
as easily
from the United States or an off-shore tax haven like the Cayman Islands
as they
can from a local store in France. 

European officials say that this gives American software companies an unfair
advantage over European competitors. They are also worried that online vendors
of all types will shift growing volumes of sales from sources outside the
European system for tax collection. 

Under proposals that officials are debating in Brussels, products sold
in digital
form would be taxed based on the rate in the customer's country, meaning that
companies operating in the United States would have to collect the taxes
on all
sales to European customers.

(...)

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/  dave  /