European Plan to Tax E-Commerce Raises Red Flag From U.S. Industry
Washington, D.C., June 24, 2003 – The European Union’s imminent application of value-added tax to electronic commerce may place heavy burdens on American companies and put them at a competitive disadvantage in the expanding EU marketplace, an EDS Corp. executive told a Congressional panel today.
Testifying before the Senate Foreign Relations Committee’s Subcommittee on European Affairs, Karen Myers, director of tax and trade policy with EDS, said that, while not opposed to the application of VAT to electronically delivered goods and services from abroad, U.S. industry believed the EU’s approach would place unfair obligations on non-EU companies.
“In trying to level the playing field, the European Commission has created a trading environment that discriminates against U.S. and other non-EU businesses,” stated Ms. Myers, who testified on behalf of the United States Council for International Business (USCIB), a leading pro-trade group.
The EU directive on the application of value-added tax to electronically delivered goods and services takes effect July 1. For the first time, EU member states will be obliged to apply their VATs to e-commerce transactions between non-EU firms and EU consumers. Accordingly, non-EU companies will be required to register with EU authorities and to levy, collect and remit the VAT tax applicable in the customer’s place of residence. EU companies will be allowed to asses VAT at the rate of the member state in which they are based.
USCIB believes such disparate tax treatment between EU and non-EU firms will distort the EU market and create a discriminatory environment for non-EU companies, according to Ms. Myers, and may contravene World Trade Organization rules on liberalization of services trade.
Ms. Myers said USCIB “is deeply concerned that the requirement for non-EU firms to collect VAT based on the location of their EU customers ignores the fact that most firms lack the technical means of verifying this information in a cost-effective manner.” She added that the EU directive also gives member states too much leeway in defining just what constitute electronically delivered services. What’s more, a number of EU members still have not put in place implementing legislation just days before the directive is to take effect.
For the full text of the testimony, click here.
Based in New York City, USCIB promotes an open system of global commerce. Its membership includes some 300 leading U.S. companies, professional services firms and associations whose combined annual revenues exceed $3 trillion. As American affiliate of the leading international business and employers organizations, USCIB provides business views to policy makers and regulatory authorities worldwide and works to facilitate international trade.
Contact:
Jonathan Huneke, VP Communications, USCIB
(212) 703-5043 or jhuneke@uscib.org
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