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U.S. E-Commerce Sites To Collect EU VAT
A concerned US-based e-commerce company with inter writes "While we have all been fighting the Internet sales tax battle here in the U.S., the European Union of 15 countries has recently required that all U.S. companies with web sales to EU citizens start collecting the value-added tax on July 1, 2003. The Washington Post has a good article about this. It seems Ebay, AOL, and others caved in on this without much complaint. Can U.S. Internet taxation be far behind if we have to start collecting and reporting 15 different VAT taxes? And sorry Mr. or Ms. EU Citizen, your website subscription now costs 15% to 25% more, starting July 1. Hope you like this added value."
Either I haven't been reading the news, or this hasn't made the news at all... I'm not outraged by the VAT thing, but I am a little disgruntled that I'm reading about this on Slashdot, and not in the local newspaper or on TV.
Anyone in Finland catch this on the news?
.: Max Romantschuk
How can you collect sales tax on a used item? The tax was already paid here by the original purchaser.
Most items I sell are used or "prepurchased" or involve a service. None of these items are taxable here and are considered sold at yard sale or at auction. Neither of which in my state are taxed. For some reason, some live (in person) auctioners charge tax here, but they aren't suppose to. They are told to by local governments who "slip it in"
Again, if something is used, taxes have already been paid and it's benefits to society have also created revenue generation, which in turn, is more tax collected. Say I buy a printer at retail. I pay the sales tax. Then, I use said printer to print my envelopes, receipts, business cards, correspondence, pictures to sell, etc etc - generating more income for my business. I have also used said printer purchase to make more money to spend and thus taxed, giving even more money to the government for the printer!
A lot of people that collect tax on eBay and especially Yahoo NEVER pay that back into the government. This is like the bogus people that collect tax at flea markets or for service calls.
I will hope that eBay will just add the VAT to the total bill so that we don't have to collect it and pay into some sort of escrow.
Yell & scream & rant & rave... it's no use... you need a shaaaave ~ Bugs Bunny
Living in sweden, the only reason that I buy stuff from Amazon is that (even including costs for transports), the books are like 10-15% cheaper, and that music cd:s are like 25% cheaper. If VAT is added, this price difference will be void, and thus I will simply stop buying stuff from USA. It will simply be faster, cheaper and more convenient to buy stuff locally. My suspicion is that this is also the reason why the EU wants to add this tax: It is a way to force citizens to buy stuff from the EU instead, thus supporting the local industry.
People in the UK (and presumably the rest of the EU) have always had to pay VAT on things they have physicially imported. Why should the internet be any different. VAT is an important component in the EU model of taxation and closing this loop hole can only be good for our public services like schools and hospitals. People always moan about taxes, it can't be that complicated to implement.
Struggling to find a day everyone can make? WhenShallWe.com
I have NEVER heard of an efficient Government,
especially ours in the US. A friend originally from Sweden said this SAME thing about US taxes so I
really don't believe you.
Also, if you live in Mass, you have an optional
higher tax rate which 300 or so actually paid
last year.
Why would you want to give your hard earned money to a government? Do you really trust them to know the best way to spend money? Are social programs a good use for your taxes? I, for one, resent paying 15% of my earnings (well company has to "pay" 1/2 of that) to a slush fund called social security which has a very low (1% or so) projected rate of return and has been raided by
the democrats for years to pay for welfare etc.
Like universal health care and education. I for one wouldn't mind paying higher taxes for this kinda stuff. I'm paying ~$950USD per month just for health insurance for my family. Go Sweden!
Arf!
When I order goods from the USA in future, I will have to pay:
In truth this sounds to me like an alternative method of adding a 15-25% Tarriff on non EU Goods and services and really should face reciprocal tarriffs from the USA etc.
Whatever happened to the British idea of Free Trade, looks like we've sold it down the sewer for a piece of the Euro pie :(
At least I won't have to charge these silly fees to my customers in other EU countries as I come under the UK Vat registration level at the moment.
Economic Left/Right: -0.62
Social Libertarian/Authoritarian: -3.69
Economically, however, Sales Tax (or VAT as its called here in the UK) is a vital tool for regulation of the economy, as lower Income Tax and higher VAT encourages people to save (especially in conjuction with a higher base rate of interest on borrowing to discourage people to take loans out and encourage them to keep money in bank accounts)
An infinite number of monkeys will eventually come up with the complete works of
I was under the impression that in the UK VAT is not applicable to second had goods. i.e. you buy a car from a guy down the road, you don't pay VAT on it.
So why would EBAY have to add VAT to second hand goods sold online?
And sorry Mr. or Ms. EU Citizen, your website subscription now costs 15% to 25% more, starting July 1. Hope you like this added value."
Assuming that governments have to collect taxes somehow, why is this a bad way to do it, as opposed to income or corporate tax?
Although many Americans give the impression that they think all taxes are evil, over here in Europe we quite like having things like free health care for everyone, tidy streets etc. We think that it makes for a fairer and more civilized society, even if it means that we are all a little poorer (in monetary terms) than you guys. Many of us find the attitude of some Americans - that taxes and social government are 'evil' - frankly a bit bizzare.
Although I guess it is understandable looking at the current state of politics in the USA. How is it that you guys no longer seem to be bothered about such essentials of democracy as transparency and avoiding rid of conflict of interest in your political leaders?
"However, there's nothing really new actually, because officially you were supposed to pay the VAT taxes when the product went through custom."
Where "you" means "customer." This is different because they're now requiring the shops to collect the tax at the POS.
At this point, I'm think it's easier to simply say "sorry, we don't sell to Europe" than it is to try to figure out "please add 20% for EU shipments."
And sorry Mr. or Ms. EU Citizen, your website subscription now costs 15% to 25% more, starting July 1. Hope you like this added value.
That 15% to 25% is a tax which (theoretically) will go to fund other services, just like any other tax.
I appreciate Slashdot doesn't pretend to be unbiased, but can we please keep the flamebait out of story submissions.
>Why would you want to give your hard earned money to a government? Because you want the government to be able to provide services to all citizens. That's what a social democracy is all about. I for one have just received my university degree and I still have money on my bank account because education is supported by the government here in Switzerland. Thank you society! Hrshgn
I know where it comes from (and yes, I am In favour of sanitary products and contraception being tax-free), but the fact remains that we either have this form of tax, or all the rest of the taxes go up. Or the funding for the Health Service, Schools and social care becomes worse, which i hope never happens, I do NOT want to see the lack of basic ammenities that the US is subjected to.
And this tax is a valid regulatory control, which is necessary for proper government.
But then again, I am in favour of higher income tax and differential taxation for the higher income bands, So my view is likly to get modded as troll by americans who think Sociataly responsible government is equivalent to communism, without understanding what Socialism and Communism actually are.
An infinite number of monkeys will eventually come up with the complete works of
I do not believe that Europeans generally dislike the governmental structure of the United States, but rather the policy of the government which is significantly more to the right on the political scale. The way I feel is, if we have to become a big federal country in order to stand up to the US (which I sadly feel is increasingly necessary, for many reasons), then so be it. There will be drawbacks as well but we will have to accept them as the alternative is worse. Small independant countries are shark meat in today's world.
As for socialism, well, the EU institutions as such and the treaties that founded them really are fairly liberal (in the non-American sense, where liberalism is considered freedom, etc).
I think your comparison with the USSR is quite a bit off. We're talking about old and stable democracies with market economies.
I know this is probably a vain hope, but I'd like to see some actual infomation on the regulations. I'm quite suspicious of the things the media are saying - they don't sound right at all. In particular, I don't see that the EU can require a body not actually trading in the EU to pay VAT. They could and can require their own citizens to pay/charge it, but I don't see they can require overseas entities to do so.
Note that both AOL and EBay actually operate and provide services in the EU, so bloody well should have been charging VAT in the first place. These are not US entities, they are EU entities owned by US entities, so are subject to EU law.
I can't see it affects small US businesses at all. Or Slashdot subscriptions. It's not up to you to pay EU taxes, though the people you sell to might have to.
Of course, it's possible the EU have taken a leaf out of the US book and decided to enact extra-territorial laws ("Don't trade with Cuba because we say so, or we'll break you.").
We Europeans simply don't care about the US, we don't spend out days wishing we were Americans, we don't envy the US, we are not always comparing ourselves to Americans, we don't think we have a lot to learn from America, America is on the periphery of our consciousness.
We organise things (like health care) the way we like them, and we organise things (like taxes) the way we like them.
We are big and economically powerful enough that major (and minor) American companies *have* to comply with our laws if they want to benefit from our large market.
And if Americans don't like it, don't like us, don't like the way we do things, don't like the EU, guess what? We don't care...
A very good question, especially since this tax concerns non-physical goods such as web subscriptions, downloaded music and software, etc, that cannot be taxed at the border. I see three possibilities:
1) The small retailers will not bother with the hassle and expense of collecting tax for a foreign nation. The EU will not bother going after these retailers either, and all will be well.
2) The EU will force all EU ISP's to block net access to the small retailers' sites.
3) The EU (perhaps even with help from the US) will try and make these retailers reject sales from the EU.
This sounds like an administrative nightmare. The beauty of the Internet is that I can sell goods to anyone in the world who wants them, with a minimum investment in a website and the means to process credit card payments. This requirement could spell the death of that idea, and I find it incredibly selfish of the EU. What if every country made this a requirement? As a small retailer, I would suddenly find I have to collect taxes for the EU, certain US states, Russia, the Ukraine, Zimbabwe, Thailand, Australia, Venezuela... imagine the nightmare of doing administration for all this. Are they somehow counting on no other country implementing a similar policy?
If construction was anything like programming, an incorrectly fitted lock would bring down the entire building...
At this point, I'm think it's easier to simply say "sorry, we don't sell to Europe" than it is to try to figure out "please add 20% for EU shipments."
You think? In case nobody has noticed yet, the U.S. and the EU have been gearing up for a major trade war, and this is just the latest step. This is essentially the EU trying to stop its' citizens from buying U.S. products.
The last big thing was the war with Iraq. Before the war, a significant amount of Iraqi oil was purchased with Euros, and that meant the oil money was probably spent purchasing European products. After the war, the U.S. has control of the oil in Iraq, and most of the oil will be bought with U.S. dollars, meaning more Iraqi GDP will be spent in the U.S. instead of the EU. I'm not saying that was the ONLY reason for the war, but it was an interesting side effect.
Just don't expect economic relations to be too cozy between the U.S. and the EU anytime soon.
"I have never let my schooling interfere with my education." - Mark Twain
Assuming that governments have to collect taxes somehow, why is this a bad way to do it, as opposed to income or corporate tax?
Because in a fair tax, the rich pay either the same, or more than the poor. Income tax handles this -- either with a flat percent or with increasing brackets. The problem with sales tax is that while Mr. Millionaire might buy more things than you do, he doesn't buy *proportionally* more things -- a man can only drink so much beer, after all.
So as a total percentage of income, Mr, Millionaire pays *less* sales tax than you! Not very socially progressive, eh? Not surprisingly, the rich have always hated income tax and preferred sales tax for exactly this reason.
"why is this a bad way to do it, as opposed to income or corporate "
Because income tax is based on your ability to pay. It is graduated based on levels of income. Thus, the person who makes $1M per year pays a higher percentage of income than the person who makes $30K per year.
The funny part is stores in most of Europe can't display the VAT tax separately, because your government is afraid if you saw how much tax you paid every day on necessities, you'd rebel in 6 months.
But hey, you've got "free" health care. And like most of life, you get quality commensurate with what you paid.
Yes every government should have to let in foreign extremists that want to overthrow it!
That makes A LOT of sense!
The Value Added Taxation is a tax on the consumer: if the VAT is 20%, the consumer has to pay 20% more for the product - this way, who sells the good gets back the money he already paid.
What happened until is that, because USA companies didn't pay the VAT to EU tax offices, they could not charge the tax to the consumer. So, at the end, the european consumer didn't pay tax. Looks like unfair competition! If you want to enter the european market, you have to abide by the european rules!
-- Matteo
But where is the money really going? If we assume for a moment that you have a government who spends their collected taxes wisely (not always true, I'll admit), then that money gets put to good use.
Such taxes will be used to pay for health care (here in the UK we have a nationalised health service, paid for by taxes), transport infrastructure (roads, rail, air etc.), education (again, here in the UK, schooling is paid for by taxes, and university education is mostly paid for by taxes), police, ambulance, fire services etc. etc.
If EU citizens were shopping in the US via the web, because it is cheaper, those taxes wouldn't be being paid, and the services that rely on them would be underfunded.
I can only speak from a UK perspective on this, but while our education, health etc. services are free from many US-citizen's perspectives, they are terribly underfunded. General elections are usually fought on the basis of taxation, and the population votes for the party offering the lowest taxation (a simplification, but it's almost this simple) -- so there is little growth in the amount of money that can be spent on public services.
To put this in perspective, a few months ago I saw a news item announcing good news: NHS patients with a specific serious heart problem had their operation waiting times cut by 6 months: the waiting time for the surgery was now just 18 months. I ask those Americans reading this: would you buy health insurance that had an 18 month waiting list for major heart surgery?
If I was faced with the choice of being able to buy a DVD for £15 rather than £20, or having a health service that actually worked, guess which I'd opt for.
"The noble art of losing face will one day save the human race"---Hans Blix
Get the point? If EU doesn't get compliance otherwise, they have plenty of weapons to force the card associations to do the enforcement for them. Don't file EU VAT returns? Then no sales to European issued credit cards for you.
I'm not saying they will do this instantly, but it's a "simple" way of enforcing the VAT, and one I'm sure a lot of people is willing to make a lot of effort to ensure the EU doesn't feel compelled to take (I doubt the banks or card associations would be too happy about taking on that responsibility)
As a UK citizen (also a social democracy, at least by US perceptions) I really quite like Switzerland's model (far more democratic than the UK, which is still tied up with hundreds of years worth of elderly legislation and precident).
On the down side, don't they still have conscription in Switzerland?
I am very anti conscription (except in times of war where it comes essential for the survival of citizens of the state (and/or their civil rights), as in the two previous world wars).
Not least because it's horribly inefficient and the resultant conscripts are worse than useless in performing actual modern military duties (which is not just my opinion, but one backed by the military intelligence community, and a topic previously covered by Janes) but also because I don't think the state should arbitrarily order people around (as I believe the state should serve the people, not the other way round).
Unlike JFK I think people should always question "what the state can do for them" rather than ask "What can I do for the state?" (the state should always have justify it's existence and every tax is levies and spends on bureaucracy and every individual it employs or gives money to for any service or goods, or whenever it asks it's citizens to give up their time or put themselves at risk.
Assuming it's still active are there any plans to abolish conscription in Switzerland (as it has been - or is being - in the rest of Europe)?
Unlike my dense-brained nation of nine-year-olds, Europe understands that they don't get clean, safe streets and a decent society for free.
3. U.S. States begin requiring collection of state sales tax by Euro companies. EU decides this is actually all too difficult and anti-trade, and backs off.
Napster-to-go says "Fill and refill your compatible MP3 player", which is a lie. It's not MP3. It's WMA with DRM.
Well done - you are alright Jack, and obviously couldn't give a sh*t about anyone else.
The fact that it has worked so well for you will brighten up the lives of homeless and poor people everywhere who, many through no fault of their own, don't have a pot to p*ss in.
let me get this straight. the swedish vat is 25%. the price of the widget in sweden with vat is SEK 620. the price in america w/o any tax is SEK 350. if the price in america were to have swedish vat on it, it would cost SEK 437.50.
so that means that even with vat, the makers of the widget are jacking the price up about 42%.
sorry to muddle the discussion with silly things like math, but i guess i'd just wonder why you aren't more annoyed at american companies ripping you off then at the rate your gov't charges for vat.
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Then I remembered: no VAT on books in the UK. Since almost all my US-based online spending has been on US editions of books not published/out of print in the UK, I started smiling again.
...of course, the occasional region one DVD has wound up in the book parcel, in spite of them (supposedly) not being playable here.
For instance, I know I don't pay anything towards machines for killing.
Really? Sweden does not have an Air Force? A Navy? An Army? Does not Sweden produce a very capable set of fighter jets, SAABs?
Does not Sweden still cling to the archaic concept of a draft ?
Are Swedish military personnel not currently deployed to such places as Afghanistan and Kosovo?
Thus in Sweden, I can live almost as well by not working as working.
IOW, an apparently otherwise intelligent young male, can live as a leech on the ass of everyone else, contributing nada. And brag about it.
The only reason you don't pay anything towards a military is because you don't have a job, and thus pay no taxes.
Yeah...that sounds like my kind of paradise.
I get free medical care.
"Free", only because you are a leech with no job, and pay no taxes.
And my country is free of racial tension because we have strictly limited immigration from trouble makers.
IOW...instead of allowing immigration, and possibly helping some poor slob who wants a better life, you selfishly keep your 'paradise' for yourselves. Must maintain that Nordic racial purity. Keep out anyone you don't like the looks of.
The unfair trade advantage comes from the fact that the U.S. government does not require EU-based company X selling digital goods to collect and remit state sales tax to the State of California finance department when a kid in San Francisco buys a copy of Opera.
As it stands, when I buy online from an EU company, I either pay no sales tax, or the VAT is pocketed by the government in which the company is based. That's hardly what I call fair.
Nonetheless, what surprises the hell out of me is that, given most EU countries' base income tax rates, not to mention the EU's execrable record of fiscal discipline, nobody even questions the idea of charging 15%-20% VAT in the first place!
It makes me shudder.
Cole's Law: Thinly sliced cabbage
"If I, a European Citizen, buy a product from your US based company, then that's a trade. Your company is trading in the EU."
I see it as you came to the USA to buy something.
USA base website
USA based vendor
Basically this is a tax on large multimational corporations. So that makes small companies more competitive. What's not to like?
AOL, eBay, etc have to comply because they have operations in the EU. Small companies, located entirely in the US can safely ignore anything the EU says because their laws don't leave their borders any more than a US law can apply to a company in the EU.
This is just a larger version of the fun we get inside the US with sales tax. Buy from a small outfit and you don't pay sales tax unless you are unlucky enough to be in the same state. Which, btw, is why so many mailorder/online retailers avoid establishing operations in high population states.
Democrat delenda est
TO TAX every entity making buisness within their border. Why is this SOOO diffcult to uednrstand ? Repeat after me. Internet sales are not different than normal one. The electronic medium doesn't make it something special. An e-tailer selling electronic goods is *doing* buiness in the country where the item is sold, not where the sale is. The same way a catalogue entity selling in the EU from sweden isn't submited to Sweden law but the law and VAT of the final country. Heck it even hold for US entity selling with EU (VAT should be payed at country entry) that you dislike it doesn't make it more your point of view correct.
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