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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."
I've been buying a lot online in the States lately because of the bonus I now get with the Euro being valued so high against the dollar. This will neatly compensate for the savings I make on the exchange rate.
However, there's nothing really new actually, because officially you were supposed to pay the VAT taxes when the product went through custom. The thing was, some packages would be intercepted in customs, and you'd get a bill for the VAT, and others wouldn't. Profit!
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"The chances of a demonic possession spreading are remote -- relax."
if I buy something from the US and have it shipped by air freight to me in the UK, then I am supposed to put my hand up and give Her Majesty's government the tax.
Back in reality, Customs can and do stop parcels and insist you tell them what's in it. However, they ignore most of the stuff for private citizens and only go after the stuff for companies.
This is a good demonstration of why Income Tax is a much better form of taxation than Sales Tax: it's easier to enforce local taxation that way.
J.
You're only jealous cos the little penguins are talking to me.
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.
The tax is paid on the service ebay provides, not the goods that it allows to be sold through it.
From my cold dead, er, wait . . .
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Give me Liberty or give me, er, hold on . .
If I had a hammer, I'd hammer, no, not that one . .
No taxation without representation! No tea for me!
Crap! Isn't there an old bumper-sticker worthy phrase for this nonsense?
Eve Fairbanks says I drive a hybrid!LOL
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?
This new taxation only concers eletronically transmitted goods. Like an MP3 file or a program. There is no change for physical goods, like books, DVDs or Computers. Those are still taxed when they come through customs.
Since non-physical, i.e. transmitted via the net, goods don`t go through customs, they have to find another way to tax it.
***Quis custodiet ipsos custodes***
>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
eBay have to charge VAT on their fees as paid by the seller, not the final item price as paid to seller by buyer.
You only pay the VAT once. As it stands now, you pay the tax free price to the retailer, then (supposedly) pay duty & VAT during import. Of course usually you don't do that because the package is just waved through (I've NEVER had to pay duty or VAT on any imports).
What will happen next month is that the VAT will be collected by the retailer, and they will be responsible for sending it to your government. The duty will still be chargeable on import (I assume), but you won't need to pay VAT twice.
---- Den ene knappen er powerknapp, den andre er Bender voice knapp "Bite My Shiny Metal Ass"
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.
AOL is one of the UK's largest ISPs. They got into the UK market early, at the time when most UK ISPs were small private companies, and have continued to be a major player in the UK market ever since.
But, because AOL UK is based outside the UK, AOL doesn't have to charge its customers VAT.
Good thing right? No. Bad thing. Very bad thing.
Whereas the UK-based companies, including almost all of the small private startups (many started by people who had previously run bulletin boards, etc), had to charge their customers VAT and then pass on that tax to the government, AOL used loopholes in the VAT legislation to avoid having to charge VAT yet it charged its customers the same amount that the tax-paying ISPs did.
In effect, AOL was able to charge its customers more for its services yet compete at the same level as everyone else - whereas the competition's prices included 17.5 percent VAT, AOL's prices included 17.5 percent extra profit.
Clearly, this has provided AOL with an artificial competitive advantage.
Breaking down the costs shows this more clearly:
AOL: £15.00/month charge, £15.00/month to AOL, £0.00 VAT to government.
UK-based ISP: £15.00/month charge, £12.76 to ISP, £2.24 VAT to government.
To make the same amount of money from each customer, the UK-based ISPs would have to charge £17.63 (£15.00 plus 17.5 percent).
Obviously, providing internet access costs money, and it's the difference between what you can charge and what it costs you that generates your profit. Well, in this case, it's like AOL has an extra £2.24 per customer for free. This isn't so much of a problem if operating costs are small, but it's a pretty big one when costs and charges are almost similar - and we all know just how cut-throat the ISP industry is don't we?
It's clearly ridiculous that two companies both providing the same service to the same customers in the same country should be effected by taxation so differently. And, of course, this point has been made by many within the UK internet community many times. However, until now, nothing's been done about it.
Some of the larger ISPs disadvantaged by this situation have threatened to take their operations overseas too, so as to put themselves in AOL's priviledged position, but this has never really been an option for the smaller guys that have been around from day one and that have hung on in there - relocating your business overseas isn't cheap and easy.
Even if AOL starts paying VAT now, the damage has already been done. Almost a decade of tax-free operation has allowed it to become one of the most dominant UK ISPs - all that extra cash has bought it a lot of extra TV and radio advertising as well as CDs.
I'm not in favour of taxation for taxation's sake but I am in favour of a level playing field. And, in AOL's case, the field's finally being levelled out.
"Accept that some days you are the pigeon, and some days you are the statue." - David Brent, Wernham Hogg
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...
Let me explain how this VAT thing works as i've read a few incorrect statements.
When you are an EU customer and are importing goods, or buying a service, from a company in another EU state you will have to pay the VAT to either your own state, if you have a VAT number (i.e. you a re a company or a professional), or to the state from which you're buying from.
Let me give a few examples:
Company A in IT buys from Company B in DE:
A pays the net price to B and IT VAT to the Italian state.
A, because is a company, will subtract the VAT payed from the amount it owes to the state.
Individual A in IT buys from Company B in DE:
A pays the net price + DE VAT to B.
B will in turn forward the DE VAT to their own state.
Now that's the situation in the EU. If you're buying from the USA the things are a little bit different:
Company A in IT buys from Company B in the USA:
A pays the net price to B and the IT VAT + customs to the Italian state.
Individual A in IT buys from Company B in the USA:
A pays the net price to B and should pay IT VAT + import tax to the Italian state.
What really happens is that, often, A will not pay the VAT nor the import tax because the package is not checked at the customs.
This is, however, illegal.
What is going to change:
This may seem strange, but is just a way to enforce the law which will, however, put some hassle to USA companies.
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.
If we in the UK (and I presume the rest of the EU) order from US companies we already have to pay VAT and other import duties at customs.
Just because it ships from the US retailer without paying that tax at, say $100, doesn't mean that is the end price for us the consumer. As well as paying your retailer in dollars I have to pay my customs in pounds. It's not a simpe one-click purchase and then delivered two weeks later.
This is a procedural change to close the loophole by which many packages get through without duty paid, and to stop the customs warehouses being clogged with unclaimed thinkgeek.com packages, and which will mean, hopefully, that my parcel doesn't wait in customs a week while I arrange to pay additional import fees.
Currently importing from a US retailer is not worth the hassle for me as a consumer. Perhaps this change will make those retailers more attractive to me.
erroneous: look me up in a dictionary
That's complete BS. All receipts that are to be kept in any kind of official records MUST have the VAT amount and precentage shown, so all the stores are obliged to write such a receipt if asked (due to which allmost all modern cash registers print it automatically).
I guess, it's also a question of what you are used to, but I really got irritated in most US shops due to the fact that the listed prices did not contain VAT. IMHO it's nice to know how much the thingy your are about to buy will eventually cost with out calculator..
"There is a terrorist behind every bush"
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