Commission plans to collect VAT from US firms online

The European Commission is expected next week to announce measures aimed at collecting millions of pounds in VAT from online transactions with US companies.

Over one in every four dollars spent with US e-commerce businesses comes from Europe and, at present, the sales are not subject to VAT, according to the Commission.

Mr David Byrne, the European Commissioner for Health and Consumer Protection, said in Dublin yesterday that "without going into detail, I can say that we are very close to presenting a legislative proposal". A spokesman for Mr Byrne said the Commission was expected to issue a directive next week that would call on member-states to bring in legislation that would require US companies wishing to sell online to be registered for VAT in the EU. The US company would then have to levy VAT, at the rate applicable in the country in which they were registered, on all online transactions done within the EU. A spokesman for Mr Byrne said the Commission was confident that most large US e-commerce players would co-operate with the new measure as many already had existing businesses in the EU. The measure is aimed at ensuring that EU-based e-commerce operations, which must charge VAT on sales in Europe, are not at a disadvantage.

Mr Byrne, the former Irish attorney general, told an Institute of Directors lunch in Dublin: "If we are to succeed in bringing the European economy online, we need to act quickly to overcome the consumer confidence barrier." Mr Byrne told the Institute of Directors that the new approach should gravitate around three core elements.

The Commission should stimulate the development of trustmarks on the web and also encourage the financial services industry to provide credit-card chargeback facilities.

A network should be put in place to allow consumers in one EU state access to consumer dispute resolution mechanisms in the country of origin of the business they were dealing with.

Provision should be made to allow consumers seek redress through domestic courts if the dispute resolution process failed.