FC: E.U. will tax offshore digital sales; restrictions on journalists

From: Declan McCullagh (declanat_private)
Date: Tue May 07 2002 - 23:55:14 PDT

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    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&doc=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&doc=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&doc=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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