New tax for a new economy

The European Commission is now looking to catch up.

There are already rules that require non-European companies selling tangible goods over the net to European customers to register for VAT in the EU, and officials are seeking to extend the arrangements to intangible goods and services like music and software. Under these rules companies would be able to register in a single EU state and charge VAT at that state’s rate.

But how successful can officials expect to be in a game where the goalposts are constantly shifting? And how positively are US companies likely to view a massive additional administrative burden if they are brought into the VAT system for the first time.

All this may raise more questions than answers, but it puts the resumption of the double taxation row into perspective. This week saw Vodafone threaten to quit the UK if the government does not reverse its decision.

The realisation of that threat is as unlikely as a complete volte-face by the government. But both sides are neglecting the bigger picture. They should save their energies for addressing the issue of taxation in the new economy, not the old.

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