TaxPersonal TaxVAT on digitised products

VAT on digitised products

As the vast majority of consumers will pay for these products by debit or credit cards administered by companies with as EC base, would it not be possible to force such companies to withhold the VAT element of any monies transferred to companies without an EC base.

(Re:The problem of enforcing compliance og VAT rules on non-EC businesses supplying digitised products over the internet

Where the request for transfer was originated at a terminal situated in the EC and the transferee has failed to make a declaration that no VAT is due on the transaction? Any incorrect deduction could be dealt with by way of a repayment claim. Should it subsequently be discovered that a company made a false declaration, all the card companies could be informed and instructed to apply punitive deductions to future transfer requests until all outstanding taxes / penalties had been paid. The more regular the checks, the less the value of the fraud that would be perpetrated.

This system would not prove popular with the credit card companies due to the upgrade in technology, which would be required in order to verify whether or not a terminal was situated in the EC. Or who are supplying exempt / zero ? rated goods to make an online declaration that no VAT is due on the transaction. Add to that the higher administrative costs and the inevitable delay to fund transfer times. However, these are relatively minor obstacles, which could overcome with ever improving technology and by a fractional processing allowance as a means of compensation for the considerable extra costs incurred.

The effect if unenforceable of VAT laws on non-EC businesses trading within the EC will be that EC will simply have to dream up more ways of maintaining the tax take by increasing the tax burdens on their own citizens whether directly or indirectly.

Steven Walshaw

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