[FYI] (Fwd) FC: E.U. will tax offshore digital sales; restrictions on journalists

["Axel H Horns" <horns@ipjur.com>]

------- Forwarded message follows -------
Date sent:      	Wed, 8 May 2002 02:55:14 -0400
From:           	Declan McCullagh <declan@well.com>
To:             	politech@politechbot.com
Subject:        	FC: E.U. will tax offshore digital sales; restrictions on journalists
Send reply to:  	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&do
c=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&do
c=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&do
c=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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