Ignoring U.S. objections, European Union finance ministers Tuesday approved new rules for taxing Internet purchases of software, music and other "virtual goods" from non-EU companies.
Under the new law, European companies will pay only their home country's VAT. Non-EU companies will have to charge customers the rate where the customer lives, ranging from 15 percent in Luxembourg to 25 percent in Sweden.
So how are they going to actually inforce this? What can they really do if a Non-EU company decides not to do this?
Well first of all this is not yet approved by the European parliament. When that is done with, member states are allowed up to 18 months to incorporate it into national law.
The point here really is, European companies as well as customers had to pay VAT, while companies from outside the EU did not, thus being able to offer products and services cheaper.
The US has agreed basically this was not ok, but tried to delay the whole thing. Their line of argument was that some day a worldwide agreement would be found. US and other non EU companies are now subject to the same rules as applied to EU companies when dealing with customers of Euro countries.
I think it's understandable why the EU takes this step. If it's economically a wise decision, I'm not so sure.
>So how are they going to actually inforce this? Good question...
<added>Great Britain has made sure this new agreement is limited to 3 years - giving the US/WTO the chance to really put up a worldwide internet tax until then</added>
The Register link that mike posted points to another register story [theregister.co.uk] that gets into the enforcement a little more.
Our friends in Brussels waffle on wistfully about tools, audit trails and enforcement, but fail to come up with anything that could even be termed slightly convincing evidence that European tax authorities will be able to find the vendors, never mind take a cut from every last eligible download.
But although Mom & Pop's Linux Store in Nobhead, Nebraska is probably safe for a few years yet, the big music and entertainment companies, big software and music stores and - oh yes - ISPs with a creative approach to taxation will surely have to turn themselves in