U.S. Trade Group Calls EU E-Commerce Tax Unfair

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The European Union's application of value-added tax to electronic commerce may put U.S. companies at a competitive disadvantage in the expanding EU marketplace, an EDS Corp. executive told a congressional panel yesterday.

Karen Myers, director of tax and trade policy with EDS, spoke before the Senate Foreign Relations Committee's subcommittee on European affairs. She said that though not opposed to the application of VAT to electronically delivered goods and services from abroad, U.S. industry thought the EU's approach would place unfair obligations on non-EU companies.

"In trying to level the playing field, the European Commission has created a trading environment that discriminates against U.S. and other non-EU businesses," said Myers, who testified on behalf of the U.S. Council for International Business, a pro-trade group.

The EU directive on applying value-added tax to electronically delivered goods and services takes effect July 1. For the first time, EU member states will be obliged to apply their VATs to e-commerce transactions between non-EU firms and EU consumers.

In addition, non-EU companies will be required to register with EU authorities and to levy, collect and remit the VAT applicable in the customer's place of residence. EU companies will be allowed to assess VAT at the rate of the member state in which they are based.

The pro-trade group thinks such disparate tax treatment between EU and non-EU firms will distort the EU market and create a discriminatory environment for non-EU companies, Myers said, and may also contravene World Trade Organization rules on liberalization of services trade.

Myers said the pro-trade group "is deeply concerned that the requirement for non-EU firms to collect VAT based on the location of their EU customers ignores the fact that most firms lack the technical means of verifying this information in a cost-effective manner."

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