sullen - 8:46 pm on Dec 11, 2004 (gmt 0)

As you mention Luxembourg has a reasonably low VAT rate. As Luxembourg are a member of the EU, any other country in the EU only has to pay their tax rate of 15%. If they were based in the UK, then the customers would have to pay 17.5% VAT.

Not true.

Don't know if there's an exception for downloadable merchandise, but for tangible goods in the EU, you are supposed to pay the rate of VAT applicable in the country to which the goods are being shipped.

Of course it's a complete nightmare, so most companies don't bother, but amazon do: try placing an order to be shipped to Spain, for example and you'll see the VAT change.

<added>On the original topic: tax isn't the only consideration. I am much more likely to buy stuff from a company based in the EU, than I am other countries. I am also more likely to buy from the US, Canada, etc than I am from companies in, say, Belize.</added>