FC: E.U. will tax offshore digital sales; restrictions on journalists

[Declan McCullagh <declan () well com>]

This is, in a word, silly. The E.U. explicitly recognizes that it won't
be able to compel firms in U.S. or any other non-European country to
voluntarily start charging taxes on purchases or downloads sent to Europe.

Let's take it as a given that the E.U. can compel some U.S. firms to
collect VAT for purchases of digital content where the customer is
known to be inside the E.U. That would appear to be the case when the
U.S. firm has a physical presence or business arm inside Europe (Yahoo
France, Terra Lycos, etc.). But if not? The Eurocrats are plain out of luck.

A EuroFAQ admits this, and hopes for voluntary compliance:

http://europa.eu.int/rapid/start/cgi/guesten.ksh?p_action.gettxt=gt&doc=MEMO/00/31|0|AGED&lg=EN&display=
> "Legitimate operators certainly do not want to give credence to the
> idea that Internet is a zone where laws do not apply - the incentive
> to voluntary compliance should not therefore be underestimated."

See also:
http://europa.eu.int/rapid/start/cgi/guesten.ksh?p_action.gettxt=gt&doc=IP/00/583|0|AGED&lg=EN&display=
> "Stated simply, electronically delivered services for consumption
> within the EU will be subject to VAT, whilst those for consumption
> outside the EU will not be subject to VAT."

Talk about giving a competitive advantage to small offshore firms that
can thumb their noses at silly E.U. directives...

Previous Politech message:

"Council of Europe on May 14 debates limiting media, speech"
http://www.politechbot.com/p-03437.html

-Declan


---

http://europa.eu.int/rapid/start/cgi/guesten.ksh?p_action.gettxt=gt&doc=MEMO/02/89|0|RAPID&lg=EN;

     _________________________________________________________________
   
  Preparation of Eurogroup and Council of Economics and Finance Ministers,
  Brussels 6-7 May 2002
     _________________________________________________________________
   
   DN: MEMO/02/89     Date: 06/05/2002
   TXT: EN
   PDF: EN
   DOC: EN
   MEMO/02/89
   
   Brussels, 6 May 2002
   
   Preparation of Eurogroup and Council of Economics and Finance
   Ministers, Brussels 6-7 May 2002
   
   (Gerassimos Thomas & Jonathan Todd)


   [...]

   The biannual Macroeconomic Dialogue meeting will take place at 17h30
   on Monday 6 May. Eurogroup Finance Ministers are due to meet in
   Brussels at 20h00 on Monday 6 May. The EU's Council of Economics and
   Finance Ministers will start on Tuesday 7 May at 9h30. The European
   Commission will be represented by Economic and Monetary Affairs
   Commissioner Pedro Solbes and Internal Market and Taxation
   Commissioner Frits Bolkestein. A press conference by the Presidency
   and the Commission will take place at the end of the Council meeting
   in the afternoon.

   [...]

   The Council is expected to agree that the situation of journalists in
   connection with the dissemination of false or misleading information
   would be assessed taking account of existing national legislation on
   the press and freedom of expression, unless the journalists involved
   in disseminating the information knew or ought to have known it was
   false and they derive advantage or profit from it.

   [...]
       
   Over the Ministers' lunch on 7th May, the Presidency wishes to explore
   possible Community action on money remittance systems and wire
   transfers, following Special Recommendations on terrorist financing
   from the Financial Action Task Force on money laundering (FATF see
   http://www1.oecd.org/fatf/), the international organisation dealing
   with this issue. FATF set June 2002 as the deadline for implementation
   of its Recommendations.
   
   The second EU anti-money laundering Directive, adopted in December
   2001 (see IP/01/1608), envisages a third such Directive in due course.
   These matters could potentially be covered in that Directive if the
   FATF process points to the need for Community action.
   Supervision of financial institutions: EFC mandate (JT)
       
   During the Ministers' lunch on 7th May, a possible mandate for the
   EU's Economic and Finance Committee (EFC) to consider the issue of the
   supervision of financial institutions is due to be discussed, together
   with how this could be linked with the mandate given by the informal
   meeting of Finance Ministers in Oviedo in April 2002 for the
   Commission to suggest appropriate arrangements for such supervision.
   VAT on electronically delivered services (JT)
       
   The Council is due to adopt definitively, without discussion, a
   Directive and a Regulation to modify the rules for applying value
   added tax (VAT) to certain services supplied by electronic means as
   well as subscription-based and pay-per-view radio and television
   broadcasting. The new rules, based on Commission proposals of 7 June
   2000 (see IP/00/583 and MEMO/00/31), will create a level playing field
   for the taxation of digital e-commerce in accordance with the
   principles on the taxation of e-commerce agreed at a 1998 OECD
   Ministerial Conference. The rules will ensure that when these services
   are supplied for consumption within the European Union, they will be
   subject to EU VAT, and that when they are supplied for consumption
   outside the EU, they will be exempt from VAT. The changes modernise
   the existing VAT rules to accommodate the emerging electronic business
   environment and to provide a clear and certain regulatory environment
   for all suppliers, located within or outside the EU. The rules also
   contain a number of facilitation and simplification measures aimed at
   easing the compliance burden for business. Member States must
   implement the new measures by 1 July 2003.
   
   The Council already reached political agreement on the Commission
   proposal on 12 February 2002 (see MEMO/02/22). However, formal
   adoption by the Council had to await the opinion of the European
   Parliament on the Regulation that establishes the procedures for
   co-operation between Member States' VAT authorities and for
   revenue-sharing.

   [...]

   Energy taxation (JT)
       
   Ministers are due to consider guidelines drawn up by the Spanish
   Presidency which are designed to give a clear direction to further
   work on the details of the proposal for a Directive on the taxation of
   energy products on the basis of the Commission's 1997 proposal (see
   IP/97/211). The guidelines deal in particular with:
     * the principle that energy products are to be taxed only when
       intended for use as motor or heating fuels
     * the possibility of applying a lower tax rate to business use of
       energy products than to household use
     * the application of tax reductions for particular areas of
       production, such as for energy-intensive businesses, or where
       agreements have been reached with businesses which lead to
       achievement of environmental protection objectives or improvements
       in energy efficiency
     * the principle of allowing greater flexibility than under the
       present procedure, so that each Member State can introduce tax
       differentials for particular areas, such as local public transport
       or diesel used as a propellant
     * the minimum levels of taxation of energy products already subject
       to harmonised excise duties and of those not yet subject to
       harmonised excise duties.
       
   Commissioner Bolkestein will welcome the Presidency's efforts to
   broker a compromise on this difficult issue and will give his broad
   support to most of its proposals although some further technical work
   is necessary on some points. He will particularly welcome the
   Presidency's explicit proposals concerning minimum rates, which have
   not been addressed in detail in the Council up to now. However,
   Commissioner Bolkestein will state his opposition to the Presidency's
   proposal for a permanent tax differentiation for diesel used as
   propellant by the goods and passengers road transport industry. The
   divergent national excise duties applied to diesel used by the road
   haulage sector lead to distortions of competition in the internal
   market. A permanent differentiation in favour of road hauliers defined
   at national level would not resolve the problem and would therefore be
   unacceptable to the Commission. Commissioner Bolkestein will announce
   that the Commission services are working on a proposal for a Community
   Directive aimed at ensuring in the long term a common approach to the
   taxation of excise duties on diesel used by road hauliers, in
   accordance with the objectives laid out in the Commission's White
   Paper on European Transport Policy for 2010 (see IP/01/1263). The aim
   is to present this proposal to the Commission before the summer.
   
   The Commission's 1997 proposal for a Directive would progressively
   increase minimum rates of excise duty on mineral oil products and
   ensure minimum rates of taxation of coal, natural gas and electricity.
   At present only the excise duties charged on mineral oils are governed
   by a Community system of minimum taxation, the rates of which have not
   been revised since 1992. This immediately leads to distortions between
   the different sources of energy and between the Member States. For
   this reason, the Commission proposed that all energy products should
   be taxed, and that the rates for hydrocarbons should be updated. The
   flexibility contained in the proposal for a Directive would also
   enable the Member States to pursue environment and transport policy
   objectives and to restructure tax systems in favour of employment.
   
   The Barcelona European Council in December 2001 asked to Council "in
   parallel with the agreement on the opening of the energy markets, to
   reach an agreement on the adoption of the energy tax directive by
   December 2002, bearing in mind the needs of professionals in the
   road-haulage industry".
   Savings taxation (JT)
       
   Commissioner Bolkestein will discuss with Ministers the progress to
   date of negotiations with the United States, Switzerland,
   Liechtenstein, Monaco, Andorra and San Marino on the adoption of
   measures in those countries in order to allow effective taxation of
   savings income paid to EU residents. Mr. Bolkestein will be able to
   report some developments although it is a difficult process. He will
   emphasise the need for Member States to continue to provide the
   greatest possible political and technical support to the Commission in
   its work. He will welcome the Presidency's proposal, which the Council
   is due to consider, to send a letter to the US Secretary of the
   Treasury, Paul O' Neill, asking for active support for the
   negotiations between the Commission and the US.
   
   The Council will also consider the state of play of the negotiations
   of the United Kingdom and the Netherlands with their dependent and
   associated territories (the Channel Islands, Isle of Man, and the
   dependent or associated territories in the Caribbean) to ensure the
   application of the same savings taxation measures as have been agreed
   within the EU.
   
   The Council on 13 December 2001 gave its political agreement to the
   text of a Directive to ensure effective taxation of interest income
   from cross-border investment of savings paid to individuals within the
   Community as proposed by the Commission in July 2001 and amended by
   the High Level Group on Taxation on 7th December (see MEMO/01/439).
   Under the Directive, each Member State would ultimately be expected to
   provide information to other Member States on interest paid from that
   Member State to individual savers resident in those other Member
   States. But for a transitional period of seven years, Belgium,
   Luxembourg and Austria would apply a withholding tax instead of
   providing information, at a rate of 15% for the first three years and
   20% for the remainder of the period.
   
   The December 2001 Council agreed that the present draft Directive
   "represents the entirety of the provisions for the taxation of savings
   for the purpose of negotiating with the third countries" as requested
   by the Feira European Council in June 2000. At Feira Heads of State
   and Government requested that, in parallel with the discussions within
   the Community on the savings proposal, talks be initiated with key
   non-EU countries to ensure the adoption of equivalent measures in
   those countries in order to allow effective taxation of savings income
   paid to EU residents. The third countries in question are the United
   States, Switzerland, Liechtenstein, Monaco, Andorra and San Marino.
   The Commission has since had contacts with all the countries in
   question. A formal negotiating mandate was conferred on the Commission
   by the Council in October 2001 (see MEMO/01/330).
   
   Under the timetables established at Feira and by the Council in July
   2001, the Council should in June 2002 discuss and take note of the
   finalisation of the negotiations with the third countries. The Council
   should also take note of the results of parallel discussions between
   the United Kingdom and the Netherlands and their relevant dependent or
   associated territories to ensure the application of the same savings
   taxation measures there. The Council should then in the second half of
   2002 decide, on the basis of a report presenting the outcome of the
   negotiations with the third countries and the dependent and associated
   territories, on a final text of the Directive no later than 31
   December 2002, and do so unanimously.
   Postal Services Directive (JT)

   [...]





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