The European Union aims to tax Internet sales, even from US companies

WASHINGTON - Yesterday, the European Union unveiled its plan to impose a new tax on the purchase of downloaded goods such as software, videos and music by citizens of EU member states, regardless of the download provider\'s location. (Another new EU tax on tangible goods bought on the Internet, such as compact discs or books, is in the works.)

Currently, Internet businesses in the EU must apply the value-added tax (VAT) of each customer\'s country of residence to download sales, whereas downloads from US companies escape the imposition of the VAT, which typically ranges from 15 to 25 percent in the 15 EU nations, depending on the goods and services purchased. The new download tax will be applied starting July 1 of next year, and could be set at a higher rate that those prevailing in the EU.

The VAT is notoriously complicated for businesses to collect and governments to enforce. For example, some former judges on VAT tribunals in the United Kingdom (the tax is so elaborate that there are courts established to handle VAT disputes exclusively) privately admit that they were often tempted to flip a coin to reach a verdict because the intricacies of the VAT were insurmountably baffling -- even to the "experts".

Frits Bolkestein, the EU\'s Taxation Commissioner, claimed that the new tax "will remove the serious competitive handicap which EU firms currently face."

ATR President Grover Norquist replied, "EU firms do indeed face a competitive handicap. But it\'s not the fault of the United States. The greedy governments in Europe handicap their businesses by hanging boulders like the VAT around the necks of entrepreneurs. If they really wanted to do their businesses a favor, they would get rid of the tax. Instead, they\'ve decided to slap it on companies in America as well. The EU has just asked the US to go out on a date with them to the WTO."