Transatlantic Trade Squabbles Escalate with e-tax

The European Union has agreed to impose new rules on Internet retailers outside of the EU to levy value-added-tax (VAT) on sales to customers within the 15-nation bloc starting July 2003, reports BBC News. The rules will apply to sales of products downloaded from the Internet, including software and online film or radio subscriptions. They are expected to affect European sales of major US e-commerce enterprises such as AOL Time Warner, and exacerbate transatlantic trade relations, already strained by the U.S. decision to tax steel imports earlier this year.

"They will remove the serious competitive handicap which EU firms currently face in comparison with non-EU suppliers," the European Commission says. EU-based Internet retailers are already obliged to charge VAT on sales to customers within the European bloc. Currently, EU consumers can avoid paying VAT on many products by ordering them online from US-based e-commerce sites.

Non-EU Internet retailers desiring to sell within the bloc will be obliged to register in one of the 15 EU nations. The e-tailer will levy VAT on all sales to EU customers at the rate applied by the country with which it registered. National VAT rates range from 15 percent in Luxembourg to 25 percent in Sweden.

Moderator Comment: Should online purchases be taxed the same as those made in a store? [George Anderson - Moderator]

• EU Imposes e-commerce Tax - BBC News