EU split over online VAT plans

A split has developed in the European Union on plans to clamp down on VAT
payments for goods and services bought online.

Austria is calling for EU-wide laws to force companies to levy VAT at the
normal rate in the country where the consumer lives rather than where the
supplier is based.

The move has been blocked by Germany, with the backing of Luxembourg and

The plan is part of a wider campaign by the EU to crack down on VAT fraud,
which costs the EU billions of euros ever year, The Guardian reported.

Many internet businesses are planning on moving their businesses to
Luxembourg and Madeira, where VAT is levied at a lower rate – 15% and 13%
respectively – compared with the 17.5% charged in the UK.

Under the Austrian proposal consumers could be forced to pay more VAT on
music downloads and internet telephony provided by companies operating in
low-tax havens and offshore islands.

Plans to finalise the VAT policy on this issue are due to be finalised by EU
finance ministers next month.

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