The Direct Marketing Association is creating an industry task force to identify legal and practical issues surrounding the European Union’s new requirement for non-EU firms to collect value added tax (VAT) from EU consumers for goods and services they digitally download.
The tax goes into effect in July 2003.
The task force will attempt to communicate the industry’s concerns to EU regulators before the new law takes effect.
“We had discussions with the EU about why they’re implementing this tax in the first place,” DMA spokesman Louis Mastria said. “But now that it is, we want to show the EU the problems with the tax, how it may slow the development of e-commerce, and come up with suggestions for dealing with these issues.”
Under the new law, non-EU companies not having a presence in Europe will have to register with the tax authorities in one of the 15 member countries of the Union.
Those firms must then collect VAT from consumer buyers at the rate applicable to the product in the country of the buyer’s residence and remit it to the authority with which they are registered, who will reallocate it. These VAT rates could be widely different, and determining the correct one will be the responsibility of the seller.
Mastria also cited problems with identifying the location of buyers as well as adjusting for currency fluctuations as obstacles to smooth implementation of the VAT.
The tax collection and remittance obligation is intended to cover anything supplied either through the Internet or online through other media, including the telephone or wireless. This will affect publishers, service and software suppliers and educational institutions.
It was not clear at deadline how large this task force would be, Mastria said.
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