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."

Comments

Well, will only make me stop shop

[Anonymous Coward]

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.

Re:Well, will only make me stop shop

[magi]

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.

That's very much the reason, just add the word fairly to supporting. Just like all American companies have to pay VAT for the stuff they sell, all domestic European companies have to pay VAT when they sell online services. As these American companies apparently do not, they would have a clear unfair advantage in competition.

It would be rather idiotic to support the competitiveness of foreign companies with tax-free status, while taxing domestic companies. The situation would, of course, be different if online services had a tax exemption status also in Europe.

The case is somewhat similar as the hormone beef quarrel. European farms are forbidden by law to use hormones to beef up the beef. American farms are not. Therefore, if hormone beef imports from America are allowed, they have an unfair advantage over domestic producers, and the actual result is that consumers get the unwanted hormone beef on their tables anyhow, regardless of the laws that intended to prevent that in the first place. That's why they have changed the target of prohibition from production to selling and importing. USA of course doesn't like that.

Damn Euros!

[GMontag]

From my cold dead, er, wait . . .

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?

VAT

[pubjames]

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?

Only for digital (non-physical) goods

[mocm]

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.

Actually, we don't care...

[Anonymous Coward]

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...

The whole thing explained

[azummo]

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:

• - For EU companies: Little or nothing.
• - For USA companies: They will have to collect VAT tax from the UE citizens and forward it to the EU.
• - For EU individuals: They will have to pay the taxes because the law will be enforced at the point of origin.
• - The market: EU companies will gain the advantage they had lost due to unfair practices of the UE citizens (or customs offices).

This may seem strange, but is just a way to enforce the law which will, however, put some hassle to USA companies.

Why is tax bad?

[CompVisGuy]

OK, nobody likes to pay more for the same goods. Nobody likes the idea that their hard-earned cash is going to the government.

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.