Brussels, 15/09/2000 (Agence Europe) - On Thursday, the European Commissioner responsible for Taxation issues, Frits Bolkestein pleaded in favour of a rapid adaptation of European tax systems to the new economy. "Economic commerce has highlighted the deficiencies of the existing tax systems throughout the world and forced administrations to consider long-awaited reforms", he declared, on the occasion of the 75th anniversary of the Vereniging voor Belastingswetenschap (Economic and Financial Sciences Foundation), in Amsterdam. "the problem does not only arise in Europe", he emphasised, and "must be seen as an opportunity to modernise our practices".
Mr. Bolkestein vehemently defended the proposal for a directive on taxing on-line services, that the European commission presented in June. The aim is to extend the principle of taxation in the place of consumption to digital goods tele-loaded on the Internet (video, software, music, creation and hosting of Internet sites, etc.), according to the decisions that the OECD took in Ottawa in 1998. This means that foreign companies should have to pay VAT when selling their services in the EU, which is not currently the case. Conversely, European companies would be exempt of VAT on their sales abroad.
"If the proposal is not adopted, the harmful effects will not be felt in terms of loss of VAT revenue for tax administrations. The sums at stake are truly minimal for now, and the increase in revenue from taxing electronic services provided in Europe will be almost compensated by the abolition of VAT on services provided outside Europe, the Commissioner explained. This proposal's main reason for being is to correct the handicap that now affect service providers based in Europe, both on the domestic and world markets.
His project provides for third country operators being able to choose a single place of registration, among the States in which they have clients, and to pay VAT at the rate in force in the place. "I am fully aware that (this aspect) may pose problems in some Member States. But we have studied all the alternatives and there was no other realistic option, in my opinion", Bolkestein commented.
This provision could place European countries in competition, due to the different rates of VAT they apply. The greediest, Denmark and Sweden, where the normal rate of VAT stands at 25%, already fear a drain of foreign operators to more clement places, like Luxembourg, where this rate only stands at 15%. But, for the Commissioner, who has always fought for greater harmonisation in rates of VAT n Europe, "electronic commerce only highlights real differences". To oblige foreign companies to register in all European countries where they are active would mean subjecting them to heavier administrative charges than local companies and expose ourselves to sanctions by the World Trade Organisation.