Mr Bolkestein was speaking at a conference in The Hague
yesterday. He explained that the Commission is looking at new means
of collecting VAT in light of e-commerce and said that critics of
the Commission’s proposals are “missing the point”. He
explained:
“It is essential that taxation is not a
barrier to the growth of e-commerce. Rather, it should foster a
climate within which this growth can occur. Whilst onerous rules
can be stifling to business interests, indecision on the part of
governments or regulatory authorities can be similarly disruptive
particularly where the existing rules produce perverse
results."
In 1998, the OECD agreed that, for consumption taxes, the rules
in any country should result in taxation in the country where
consumption takes place. Mr Bolkestein observed that the current
VAT rules do not meet this requirement because services delivered
on-line by digital means were simply not envisaged at the time the
current VAT laws in the EU were established.
Today, when these services originate within the EU, they are
always subject to VAT irrespective of the place of consumption. On
the other hand, those services originating outside the EU are not
subject to VAT even when consumed or used inside the EU. He
explained that the current EU proposal is to remove the obligation
on EU suppliers to levy VAT on digital products sold to customers
outside the EU. Non-EU operators will also face the same tax
obligations as domestic operators when they sell to consumers
within the EU. This will bring the EU’s VAT regime in line with the
OECD proposals.
Mr Bolkestein said the OECD is now looking at how to adapt the
current international taxation rules to e-commerce in view of
direct taxes, as opposed to VAT. He suggested that the EU will
support but ultimately await the outcome of this investigation
before making its own proposals.
