Catch up on stories from the past week (and beyond) at the Slashdot story archive

 



Forgot your password?
typodupeerror
Check out the new SourceForge HTML5 internet speed test! No Flash necessary and runs on all devices. ×
The Almighty Buck United States

U.S. E-Commerce Sites To Collect EU VAT 919

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."
This discussion has been archived. No new comments can be posted.

U.S. E-Commerce Sites To Collect EU VAT

Comments Filter:

    • 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?
      • Re:last week's news? (Score:5, Informative)

        by brain159 ( 113897 ) on Wednesday June 11, 2003 @06:12AM (#6169343) Journal
        eBay have to charge VAT on their fees as paid by the seller, not the final item price as paid to seller by buyer.
      • 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.

        This is true, the VAT is charged on the eBay fees, which are a service. You would be amazed, however, at the number of VAT-registered people who sell goods on eBay and charge VAT on all of them, even the second hand ones. This is technically known as fraud.

  • What will happen? (Score:4, Interesting)

    by jolyonr ( 560227 ) on Wednesday June 11, 2003 @05:51AM (#6169240) Homepage
    if companies in the US, especially small etailers, don't bother?
    • The U.N. Blue Helmet army will roll them.
    • Re:What will happen? (Score:5, Informative)

      by aug24 ( 38229 ) on Wednesday June 11, 2003 @05:56AM (#6169261) Homepage
      Pretty much what happens now:

      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.

      • by SkArcher ( 676201 ) on Wednesday June 11, 2003 @06:00AM (#6169286) Journal
        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)
        • Re:What will happen? (Score:3, Interesting)

          by aug24 ( 38229 )
          That's the theory, but I don't buy it.

          VAT was introduced as a temporary measure (a tax on luxuries) over two centuries ago to fund the Napoleonic War. We have little or no idea what people's spending patterns would be like if it had never existed.

          <an aside>:
          We only have VAT still because governments never remove taxation that is not being protested. So this temporary measure has been expanded till razor-blades and tampons are taxed as luxuries!

          Don't let me start on Inheritence Tax!
          </an a

          • by SkArcher ( 676201 )
            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 hi
          • Re:What will happen? (Score:4, Informative)

            by Ben Hutchings ( 4651 ) on Wednesday June 11, 2003 @06:28AM (#6169415) Homepage
            VAT was introduced as a
            temporary measure (a tax on luxuries) over two centuries ago to fund the Napoleonic War.

            That's income tax you're thinking of. VAT is a recent innovation.

      • Ah,

        but the issue here is digital downloads. I can sit here in the UK and pay online to renew my, um, website subscription and not have to pay any VAT. How are Customs and Excise going to know? Jolyon
        • Good point! You could even put in a US address and not care, given email is king.

          Personally I am amazed so many companies said OK. I prefer AOL's solution of moving to Lichstenstein!

          J.

      • 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.

        Unfortunately, that's not always the case. One of my friends found this out the hard way, when she ordered a whole load of cosmetics from a supplier in Australia, where they were selling considerably cheaper than the UK. She was told that what she was paying the supplier covered everything including charges for getti

    • I agree, what a damn hassle. This is one of the things that lobbyists against the taxation in the US complain about. It is very difficult to collect tax under 50+ different plans. Now, it looks like the world may want to add 100's of different expenses, which also add LOTS of man hours. (to the selling end and receiving end) Ultimately, I bet this generates little extra revenue due to the number of "collectors/enforcers" they have to hire in EACH country to make sure everyone is getting their fair share.
    • Nothing... (Score:3, Interesting)

      by Cpt_Corelli ( 307594 )

      I can see a lot of consumers picking stores they know won't collect the VAT. After all, those stores will have a 15% discount on their items compared to the stores that collect VAT.

      Living in Sweden (where VAT is a heft 25%) it has always been lucrative to order stuff on the internet from the US. I remember when buying a single CD from Amazon (inluding shipping) was cheaper and faster than ordering it from a local e-merchant.

      This is especially true for software where you can download the product immediat

      • Re:Nothing... (Score:3, Insightful)

        by kevin lyda ( 4803 ) *
        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
    • "if companies in the US, especially small etailers, don't bother?"

      Probably nothing, just so long as you never go to Europe.
    • by JaredOfEuropa ( 526365 ) on Wednesday June 11, 2003 @06:36AM (#6169465) Journal
      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?
  • by Max Romantschuk ( 132276 ) <max@romantschuk.fi> on Wednesday June 11, 2003 @05:52AM (#6169243) Homepage
    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?
    • 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.

      It was an EU directive that got passed into law over a year ago, that will be coming into effect at the end of the month. So there is no particularly good reason to run the story this week rather than last week or next week.

  • Darn (Score:5, Interesting)

    by YeeHaW_Jelte ( 451855 ) on Wednesday June 11, 2003 @05:53AM (#6169248) Homepage
    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!
    • Yup, did that when I got my Leatherman a few years back. In the UK, it was about £90 but it cost me about £55 from the US, including the added postage! And it went straight through customs without being checked :)
    • Re:Darn (Score:3, Insightful)

      by Guppy06 ( 410832 )
      "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."
      • Re:Darn (Score:3, Insightful)

        by RobinH ( 124750 )
        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
        • Re:Darn (Score:3, Informative)

          by Jon Chatow ( 25684 ) *

          Sorry, but that's not entirely true. The EU is funded from VAT, and it wants the money; whether the money comes from sales to local or foreign companies is very much a secondary concern. This will avoid a tax loophole, nothing more (that is, that customs don't have the man-power to manually check every single non-VAT-registered import shipment).

          Of course, on another note, VAT isn't a flat tax in many (most?) EU countries, but varies from product to product (for example, books in the UK are VAT-free, clothi

  • This is old news, but Ebay customers are *not* happy.

    I know a couple that have hiked postage costs to cover their extra expenditure, and it looks like ebid.com have recieved those customers that have abandoned ship. Customers are also angry that Ebay have claimed to have dropped other prices to compensate, when they blatantly haven't....

  • by adzoox ( 615327 ) * on Wednesday June 11, 2003 @05:54AM (#6169251) Journal
    A note to europeans about eBay:

    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.

  • Some companies have already found a way around this. For example, Play.com is located in Jersey, an island off the cost of the UK and France which is a tax haven. They can thus not pay any VAT, and still easily ship to the UK.

    MoJo
    • " Some companies have already found a way around this. For example, Play.com is located in Jersey, an island off the cost of the UK and France which is a tax haven. They can thus not pay any VAT, and still easily ship to the UK."

      Yes, the purchaser was always requiried to pay VAT, and this was done usually at their local post office, where they also pay any customs and duties. However, this law means that your Jersey-based company (as well as one based in New Jersey or anywhere else in the world) will hav
  • by Anonymous Coward on Wednesday June 11, 2003 @05:57AM (#6169267)
    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.
    • by magi ( 91730 ) on Wednesday June 11, 2003 @06:52AM (#6169563) Homepage Journal
      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.
    • If you are buying music CDs 25% cheaper than what the RIAA has determined to be the correct price for your country, you are obviously a pirate. At least one quarter of every CD you own is illegal. With the current strength of the Euro against the dollar it could be as much as one third of every CD. A RIAA audit compliance team will be dispatched to your home to calculate the damages you owe and to cut out the pirated portions of your CDs. You will be notified of the damages you owe us in our press relea
    • 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.

      That is the real point of this. If the governments in question were really interested in collecting taxes, they would be doing so at the customs level, improving oversight and checking of incoming packages. Something t
      • by aaarrrgggh ( 9205 ) on Wednesday June 11, 2003 @07:16AM (#6169710)
        All that having been said, I would prefer the elimination of income tax and capital gains tax in favor of a federal sales tax (even if said tax were 30%)...

        The whole problem with tax code is that there are special considerations to help stimulate the economy.

        If you tax sales rather than income, that has an unfair effect on people scraping to get by, while assisting people that save their money, not contributing back to the economy.

        Flat income taxes are the only way to go. In Hong Kong, you pay (IIRC) 15% flat tax on income. It really sucks your first year (when you effectively have to pay tax for two years with one check), but it's a great system. People are still afriad of Inland Revenue to some extent, but the tax dollars aren't wasted on a huge auditing system. Filling out your paperwork takes a couple minutes, then a half-hour in line if you need to file in person.

    • by csteinle ( 68146 ) on Wednesday June 11, 2003 @07:43AM (#6169919) Homepage
      Legally, you should be paying import tax on this at the moment - or at least that is the case in the UK. I understand that EU law is harmonised on this.

      There is an allowance of £18 (or £36 for "gifts"), but any package worth more than that is subject to both import duty and VAT at the point of entry to the EU. The importer (i.e. you) is responsible for paying this.

      The issue here is around services and products with no tangible substance. When do these enter the EU? The ruling basically means that sales of these items takes place within the EU, and therefore the vendor is liable. The other option would be to say the purchaser is importing the goods, and make them liable. Obviously, this would be much harder to actually collect on, as you have to rely on individuals to a) declare it, and b) know they need to declare it.

      It's all about levelling the playing field between EU and non-EU vendors. Previously, we had the perverse situation of EU vendors having to pay more tax on sales in their home market than non-EU vendors.
  • by levell ( 538346 ) on Wednesday June 11, 2003 @05:57AM (#6169268) Homepage
    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.
  • Mr. or Ms. EU Citizen, your website subscription now costs 15% to 25% more, starting July 1. Hope you like this added value.

    Allways should have done, legally speaking, and products allways do as well. To get around it you simply need to set up a stateside bank account and a remailer address with a friend. No Problem.
  • Simple Greed (Score:2, Insightful)

    by valisk ( 622262 ) *
    So let me get this straight

    When I order goods from the USA in future, I will have to pay:

    • Import Duty
    • Import VAT
    • Member State VAT

    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 count

    • Whatever happened to the British idea of Free Trade[?]

      Umm, I thought the British idea of free trade was removing all of the resources of a colony for free, until the colonists revolt and become allies?
    • Re:Simple Greed (Score:5, Insightful)

      by radish ( 98371 ) on Wednesday June 11, 2003 @06:13AM (#6169346) Homepage
      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.
    • 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.

      Seeing as UK companies have to add VAT, isn't this actually making things fairer in the UK? Otherwise non-UK companies would have a bit benefit over UK based companies, which of course is not in our interests.
  • Why collect here (Score:3, Interesting)

    by uspsguy ( 541171 ) on Wednesday June 11, 2003 @06:00AM (#6169284) Homepage
    I've got to wonder why a US company would collect EU taxes. Wouldn't the destination country just do it when the merchandise is picked up?
  • 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

    Did you need another reason to keep your money in your pocket? Now you have one.

    How can this behoove (sp?) the US? Isn't everyone complaining about the economy? Isn't foreign purchases a great way to get much needed dollars?
    And doesn't the US regularly ignore the demands of the rest of the world anyway? (last sentence not meant as a troll)
    • And doesn't the US regularly ignore the demands of the rest of the world anyway?

      Don't monkey with our finest tradition!
    • by vidarh ( 309115 )
      How does EU citizens pay for online goods from US companies? By credit card. Who issues them the credit cards? Their local, EU based bank licensed by the local government. Who will likely get pressured into ensuring card associations (Visa, Mastercard) require their US merchants to comply with EU VAT regulation to do business? The EU banks...

      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 re

  • Damn Euros! (Score:5, Funny)

    by GMontag ( 42283 ) <gmontagNO@SPAMguymontag.com> on Wednesday June 11, 2003 @06:01AM (#6169293) Homepage Journal
    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?
  • Doesn't this give companies with EU offices a competitive advantage?

    If you're based in the US, you have to manage 15 different tax rates, and do 15 times as much paperwork. If you're based in the EU, you can use your local rate, and do it once instead of 15 times.

    • by JanMark ( 547992 )
      > you have to manage 15 different tax rates,

      Actually it is worse! In my country, The Netherlands, there are two tarifs, a low and a high. Low tarifs (6%) are for food, drinks, books and some services. High tarifs (19.5%) are for other goods. (There is also a third tarif, but that is for construction, so not likely to be applicable.)

      Other EU countries have two or three tarifs, so it can be hard. Not all goods fall under the same tarif in every country, so it will be hard to know what VAT (btw BTW is th
    • Doesn't this give companies with EU offices a competitive advantage?

      The situation before - where an EU based company would have to charge VAT but a US based one wouldn't, was biased towards US based companies. This way is fairer.

      Besides, this only applies to big companies that are likely to have offices based in the EU anyway.
  • VAT (Score:5, Insightful)

    by pubjames ( 468013 ) on Wednesday June 11, 2003 @06:03AM (#6169300)
    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?
    • Re:VAT (Score:5, Interesting)

      by GothChip ( 123005 ) on Wednesday June 11, 2003 @06:33AM (#6169440) Homepage
      Because we also pay Income tax.

      I don't mind the idea of paying tax. It's just the idea of paying tax when you earn it, paying tax when you spend it and paying tax when you even save it.

      Why can't we just get taxed once.

      But the most evil tax has to be inheritance tax. Even when you die you end up paying tax.
    • by Jonathan ( 5011 ) on Wednesday June 11, 2003 @06:49AM (#6169544) Homepage
      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.
    • Re:VAT (Score:3, Insightful)

      by Surak ( 18578 ) *
      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.

      I find it frankly a bit bizarre that Europeans constantly use t
  • by mocm ( 141920 ) on Wednesday June 11, 2003 @06:07AM (#6169320) Homepage
    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.
  • 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.
  • Well, government just has to get its taxes somewhere. So you either tax the money the moment it's earned (income tax), or the moment it's spent (VAT, special taxes on gasoline, alcohol, tabacco...).

    Income taxes can easily be enforced locally, but people don't like to have their hard-earned money taken away before they even saw it.

    VAT and their likes _could_ be enforced locally, i.e. the place where the money is actually spent. So if I buy a TV in Luxembourg, I pay 15% VAT to the the local government, and
  • by fiddlesticks ( 457600 ) on Wednesday June 11, 2003 @06:28AM (#6169412) Homepage
    >"These remain challenging times for many American Internet companies," wrote Rep. Cliff Stearns.... "We ask that they be given a fair chance and a level playing field."

    Yep, and so do the EU businesses (living in equally challenging times)- who want VAT levied on purchases made outside the EU, just as they currently are on purchases made within the EU

    So, although this will hurt my wallet, as I buy good online from outside the EU, I will benefit by the increased taxes raised by my government, and by the level playing field which now operates between Us/ EU companies.

    It *wont* affect US purchases, so US readers can continue flying the 'no-tax' flag all they like

  • by WIAKywbfatw ( 307557 ) on Wednesday June 11, 2003 @06:32AM (#6169439) Journal
    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.
  • by azummo ( 208929 ) on Wednesday June 11, 2003 @06:49AM (#6169538)

    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.

  • by erroneous ( 158367 ) on Wednesday June 11, 2003 @06:50AM (#6169550) Homepage
    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.
  • Why is tax bad? (Score:5, Insightful)

    by CompVisGuy ( 587118 ) on Wednesday June 11, 2003 @07:16AM (#6169705)
    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.

  • by Jouni ( 178730 ) on Wednesday June 11, 2003 @09:31AM (#6170807)
    The original posting is a bit misleading, the tax is only on "sales of digital goods and other electronic transactions", as stated by the article [washingtonpost.com] (which nobody reads :)).

    To verify this, quoted from Europemedia [europemedia.net]: "From the first of next month, a new EU directive will be enacted, forcing all internet companies to impose VAT (value-added tax) on all digital sales. This amounts to a tariff of between 15 and 25 per cent on items such as software or music downloads, any transactions as part of online auctions and subscriptions to internet service providers, sold over the internet anywhere within the European Union."

    In other words, the tax is on services and digital products sold to EU citizens on the Internet. It's still annoying (and hellish for small shareware shops to deal with!) but at least it doesn't affect the cost of physical goods... yet.

    And in the case of online auctions, this means that the EU will tax the service eBay provides, not the actual product supplied from seller to buyer.

    Jouni

  • Help with specifics! (Score:3, Interesting)

    by MrIcee ( 550834 ) on Wednesday June 11, 2003 @10:40AM (#6171750) Homepage
    As an Indie game producer (tranquility [tqworld.com]) we obviously need to examine this. Our games are purchased, currently, by download only - and we have a fairly decent following in europe.

    Does anyone out there (current level 5 posters havn't had this info) have a SITE we can go to, to learn the specifics of this?

    Since we're a very very small company we won't be putting up any "headquarters" in europe.

    Who do we pay? How frequently do we pay? What laws do we need to follow in terms of documentation? How long do we need to hold onto records? Where to we go to find out if tax rates have been changed, or even what they are?

    It's one thing to demand a VAT... it's another thing entirely to make sure we get the proper information in order to implement it correctly.

  • by brooks_talley ( 86840 ) <brooks@@@frnk...com> on Wednesday June 11, 2003 @11:15AM (#6172195) Journal

    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 work with a porn site; starting July 1, US residents will pay $19.95, EU residents will pay $29.95. We have to charge more than the EU tax to cover the administration costs of sorting out 15 different tax zones.

    And we'll certainly make it clear to EU residents *why* they're paying 50% more than people who live in the US. On the bright side, they won't really have a choice of going somewhere else, as any remotely major competitor of ours will also be charging more.

    My petty side hopes that the US passes a law that EU internet companies have to collect state and local sales tax for the location where US buyers are. I reckon there are about 45,000 different local sales taxes in the US. The administrative costs alone would basically force EU companies to just not sell to US residents.

    Cheers
    -b

  • by Angst Badger ( 8636 ) on Wednesday June 11, 2003 @12:00PM (#6172709)
    There is no way in hell I have the time or resources to keep track of VAT rates for fifteen different countries. It's possible that if I did a lot of business with EU states that I would have no choice, but for the smattering of EU customers that I have, I'm not going to bother with it. As far as I'm concerned, any transaction conducted with me here in the United States is taking place within in the United States and is subject to US laws. If I were buying something from Europe, I would operate under the reverse assumption and pay the local taxes -- which I presume would be collected by the seller and included in the price.

    Provided there's no actual enforcement, I plan to ignore this. If I get a notice from an EU tax agency that I need to pay up or face extradition on tax evasion charges, I will cut a final check to the Europeans and not deal with them in the future.

    This is not, BTW, some flag-waving anti-European rant on my part -- I like the EU a good deal better than my own country -- but from a business standpoint, it isn't worth the hassle to me. I'm not sure this is such a hot idea anyway. I'm not viscerally opposed to sales taxes on net sales -- it would help curb the obliteration of thousands of local businesses by giants like Amazon -- but it ought to be collected by the seller and the seller's government. For the seller to have to keep track of the buyers' governments and their innumerable laws is an unreasonable burden on trade. Giant corporations have the resources to deal with that sort of thing; small businesses do not.
  • by jmorris42 ( 1458 ) * <jmorris.beau@org> on Wednesday June 11, 2003 @12:43PM (#6173211)
    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.

Always look over your shoulder because everyone is watching and plotting against you.

Working...