VAT – EC troubled over Internet tax

The European Commission is unlikely to complete discussions before the sum- mer with member states on how to impose VAT on sales made over the Inter- net, said a spokeswoman for fiscal affairs commissioner Mario Monti.

She was responding to a German finance ministry plan for a worldwide system to track sales on the Internet so that they bear consumption taxes.

?We have a working group on this matter and, in principle, we are in favour of fiscal neutrality – that is, not to tax any more than the normal rate of tax,? she said. ?But it is very difficult to ensure that goods would be taxed electronically as normal ones are. We can?t see how to implement all this and that is why we have a working group,? she added.

Another problem is the decision of which rate to apply to the sale of goods sold over the Internet. The commission is against ?a bit? tax which would be an additional tax on flows of data across the Internet.

Analysts predict that by the year 2000, shoppers will spend $8bn (#5bn) on products such as music, films or software bought over the Internet, generating $1.2bn in consumption tax. To be effective VAT would have to be introduced at EU and international level.

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