The proposals would not affect sales to business customers. In
such sales, the supplier would continue to sell without having to
apply VAT (which would be paid, as now, by the importing company
under self-assessment arrangements).
According to a report by Newsbytes, the ITAA is concerned that
non-EU e-tailers "could lose valuable time trying to verify the
customer's location to compute the VAT they are supposed to levy."
The lost time will result in lost revenue.
ITAA President Harris Miller has explained in a letter to the
Treasury Department that "there is the risk that the EU may
prescribe rules of compliance that, in effect, will close the
European market to US and other non-EU businesses for certain
transactions."
Non-EU suppliers would have to register with a VAT authority in
one of the 15 EU Member States, but the VAT levied would be the
rate applicable in the Member State where the customer was
resident. The VAT revenue would be re-allocated from the country of
registration to the country of the customer.
The EU's aim behind the proposal is "to remove the obligation
for EU firms to apply VAT when exporting to world markets and thus
remove a major competitive handicap." However, the EU has not yet
addressed the question of how it would enforce the proposal on
non-EU businesses.
The EU Council will consider its proposals at a meeting due to
take place next month.
