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EC dampens fears over IT tax

The European Commission has brushed aside claims that tariff duties could be re-introduced on IT products.14 Jun 2007

By Kelly Fiveash for The Register.

This story has been reproduced with permission.

According to IT trade body Comptia, changes could be made to the Information Technology Agreement (ITA) that, if implemented, could have far-reaching consequences for the IT industry in Europe.

It reckoned that "back-door" methods had been employed by the EC to apply tariffs to IT goods that had previously been exempted from such charges. Under the ITA, which was introduced by the World Trade Organisation (WTO) in 1996, tariffs had been waived on IT products and telecommunications equipment used by businesses.

But Peter Mandelson's Trade Commission has responded by saying that the EC has no power to make such changes without first consulting the 150 state members of the WTO, which includes the US.

EU trade commission spokesman Stephen Adams, told us: "Any change in this agreement needs the green light of all parties in the agreement.

"Would the EC wish to expand the scope of the ITA, it would need the consensus of all the parties involved."

He added that technology had changed significantly since the inception of the ITA and said "convergence of technology makes it increasingly difficult to draw a borderline between professional IT equipment and 'final consumer' electronics".

Re-classifying products has also proved a bugbear for the trade commission which had offered to discuss disputes within the framework of the ITA with the US. According to Adams, "the US declined the offer".

He also told El Reg that "the EC has proposed expanding geographical and product coverage of the ITA during the DDA negotiations", indicating the commission's apparent willingness to adopt a global, rather than Euro-centric approach to shaping the IT industry's economic future.

According to Comptia, lifting tariffs on such goods had helped to springboard the IT industry's productivity and innovation over the past decade.

Comptia's European public policy director Hugo Lueders told The Register: "This is the threat, that the commission will take the ITA, one of the pillars of the WTO, to pieces on the grounds that products are more technologically sophisticated."

He added that "inconsistencies in trade policy" could hit small businesses particularly hard if tariff duties were to be introduced by the EC. The main concern being that competition would then be opened up to off-shore rivals, pushing prices up in the European IT marketplace.

"Small businesses would have to pay the bill, if not the consumer," said Lueders.

Doha is the latest round of WTO talks where hot topics on trade have included tariffs, non-tariff measures and competition.

© The Register 2007

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