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EU proposes Web tax
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June 8, 2000: 3:59 a.m. ET
Non-EU companies face imposition of VAT on software delivered online
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LONDON (CNNfn) - The European Union has proposed plans to force companies based outside the region to charge value-added (VAT) tax on services delivered over the Internet to customers in the 15-nation EU.
The European Commission, the executive arm of the European Union, said the proposals are designed to create a level playing field for the taxation of online purchases for goods such as music, videos and computer games.
The proposals drew an immediate protest from the United States. Stuart Eizenstat, the U.S. Treasury Department's deputy secretary, said the Clinton administration "has serious concerns with both the substance and process" of the plan.
"It appears that in practice, the value-added taxes applied to electronically delivered books and newspapers may be higher than those applied to sales of the same physical books and newspapers," Eizenstat said.
The Commission's proposals also cover pay-per-use radio and television broadcasts.
"The proposal would ensure that when these services were supplied for consumption in the EU, they were subject to EU VAT, and that when these services were...for consumption outside the EU, they were exempt from VAT," the Commission said.
Under current rules EU exporters of software and other services have to charge VAT on their products at European rates, placing them at a competitive disadvantage when they do business in the United States, where there are no taxes on such services.
Under the proposal, U.S. and other non-EU software suppliers with more than  100,000 ($95,800) of sales to private customers in the EU would also have to register for tax purposes in one EU country.
VAT rates in force in the 15-nation EU vary from country to country between 15 percent and 25 percent. Suppliers subject to the new VAT legislation would be able to choose their country of VAT registration. 
--from staff and wire reports
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