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EU
taxman causes VAT headaches outside Europe
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| The VATman cometh |
Paris,
2 July 2003 - As the European Union this week started imposing
value-added tax on electronic products and services supplied by non-EU
firms, many small companies outside Europe fear that the levy will compromise
their ability to serve EU consumers.
The main worries are
the administrative headaches and extra costs that non-EU companies will
have to bear in complying with differing VAT rates, depending on the country
where their customer is located. Another concern is possible exposure
to double taxation in the country of origin and the country of destination.
While the purpose
of the directive is to enable European online firms to compete on a level
playing field with non-EU companies, business representatives predict
the opposite effect for thousands of small non-EU companies that lack
the resources to set up shop inside the EU.
Products affected
by the directive include downloadable software, database access, distance
learning materials, e-books, music and the like. Previously, non-EU companies
supplying these items to EU customers were not subject to VAT in the EU
- and EU companies saw this as an unfair competitive advantage.
Unless a non-EU company
establishes a physical presence in an EU country, it will now have to
levy VAT at the rate applicable in the country where the consumer is located.
VAT rates charged in EU countries range from 13% to 25%.
ICC e-commerce specialist
Ayesha Hassan said: "The root of the problem is the extra burden
imposed on non-EU firms of verifying customer location, retaining the
data of transactions for 10 years and making it available to authorities
in so many different tax authorities."
Speaking for the International
Chamber of Commerce (ICC), Talal Abu-Ghazaleh said: "Tax policy reforms
should not create new distortions in the marketplace, nor should they
discourage innovation and the growth of e-commerce. A global perspective
is required when addressing this subject, since electronic commerce cuts
across national boundaries to a greater degree than other forms of business."
Mr Abu-Ghazaleh, a
Jordanian businessman who chairs ICC's Commission on E-Business, IT and
Telecoms, added: "The EU authorities seem to be disregarding the
fact that most firms that will be affected by the new requirements lack
the technical means to comply with 15 - soon to be 25 - different tax
regimes."
For further information,
please contact Maria Farrell, Commission
on E-Business, IT and Telecoms in Paris. Tel: + 33 (0)1
49 53 28 07 or email: Click here to send a mailClick here to send a mail
ICC's
Commission on E-Business, IT and Telecoms
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