EU Plan To Tax Internet Sales Criticized

U.S. sellers of Internet-purchased products, mainly software and music, that are bought in the 15-nation European Union (EU), will soon have to pay a value-added tax (VAT). The tax is already levied on store sales of tangible goods, such as CDs and books. EU intends to exempt smaller Internet suppliers, but others will have to register to collect the tax, which is generally around 20% of sales price. EU has already received an appeal from the American Chamber of Commerce in Brussels to harmonize VAT rates between its member countries before taxing imported virtual goods. Failure to unify Europe's national VAT rates has triggered huge losses in EU tax revenue by encouraging cross-border fraud, according to the watchdog European Commission. Huge quantities of goods vanish into Europe's black markets because EU is not geared to track trade across its open frontiers within the Union. The Commission estimates that more than US$10 billion in tax money was lost on cross-border trade in this manner last year.

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