Brussels, 29/11/2000 (Agence Europe) - As the dossier was not yet ripe for coming to an agreement, the Ecofin Council simply took stock, on Monday, of the state of work concerning the VAT directive applicable to electronic commerce. The French Presidency expressed its intention, in October, to reach a political agreement (see EUROPE of 20 October, p.11), but the positions held by the Fifteen are still divergent over the question of the place where third country operators must register and above all the breakdown of VAT receipts they should pay. "There are several potentially possible solutions but it is necessary to strike a balance when attributing these receipts", said French Finance Minister and Council President Laurent Fabius, after the Council. The Fifteen therefore entrusted their tax experts with the task of preparing an amended draft directive for approval by 30 June 2001 at the latest.
The draft directive aims to modify the VAT rules in force in the Union to apply the principle of taxation in the place where digital products downloaded from the Internet are consumed. It is thus a question of correcting the current anomaly which means that the payments made by the third country operators to the benefit of European clients are not subject to tax while European operators must invoice the tax to their clients established in third countries. The Council confirmed it adheres to several key principles, such as: a) the nature of operations targeted (supply by electronic means of intangible goods and other services as well as radio and television services, but not goods ordered through the Internet); b) application of the normal rate of VAT (except for radio and TV services which may benefit from reduced rates). The European Commission proposal whereby the third country operators could choose a single place of registration, among the EU States in which they have clients, and would pay the VAT at the rate in force in that place, is, on the other hand, challenged. The experts are charged with seeking a solution that would maintain the single place of registration but would allow effective attribution of VAT receipts to the countries where the services in question are consumed.
European Commissioner Frits Bolkestein reiterated his disappointment at seeing Member States "focus far too much on the sharing of receipts, which, for the time being, do not exist".