Europe kicks off debate on VAT rules

But, experts say a more realistic date for implementation would be January 2002, although they are upbeat that the move is the first step in the right direction.

The proposed rules now pass to the European parliament and European Economic and Social Committee for discussion and comment. The proposal will then go to the Council of ministers, which is comprised of representatives from all 15 member states.

All member states have to agree unanimously for the rules to become an EU directive.

The commission’s proposal aims to remove distortions of competition with EU companies, who already charge VAT to European customers. But, the proposals suggest that non-European companies offering digitized services have to register in only one member state. Most experts say if the rules are passed, most companies will register in Luxembourg which enjoys the lowest VAT rate at 15%.

Gary Burnes, VAT senior manager at PricewaterhouseCoopers, said: ‘Although non-Eu companies will now have to register for VAT, in respect of sales to private consumers in the EU, they will only have to do so in one EU country. It is difficult to see why anyone should register outside of Luxembourg…member states with higher VAT rates may need some persuading by the commission to adopt this part of the proposal.’

The proposals will affect a wide range of entertainment services enjoyed by private and business consumers, including subscription and pay per view TV, streamed video and the downloading of games software, music, films and books over the internet.

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