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By | Mark Ballard 17th May 2006 13:24

EC wants more ecommerce VAT

To stop US etailers eating more European babies

The European Commission has proposed extending the provisional ecommerce tax to give it more time to push through permanent legislation.

Agreed in 2003 on the proviso that it would be "revisited" again by the end of June this year, the rules controversially imposed VAT on firms selling into the EU, but exempted European firms selling outside EU borders.

Ecommerce VAT was applied to anyone selling services electronically over the internet, by subscription or pay-per-view television and radio. They also applied to firms selling within the EU.

Critics of the tax wanted a moratorium applied to electronic sales to promote a growing ecommerce industry. The EC argued this would discriminate against existing businesses that had worked hard and paid taxes for too many generations to mention.

To imagine how a moratorium would have panned out for good old fashioned shops and traders, consider what fortunes befell importing ecommerce upstarts under the old rules.

Before 2003, anyone selling into the EU electronically could avoid paying VAT. This on the one hand, was great news for anyone who wanted to buy cheap books and CDs. But it was bad news too, as many of the same consumers would later lament, because it encouraged the dominance of US behemoth's like Amazon and the decline of traditional indigenous retail businesses. ®

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