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European Internet firms have lobbied to apply the tax to companies outside Europe, insisting that these firms enjoyed an unfair advantage and prevented EU netcos from competing.

EU PLANS E-COMMERCE TAX

Move Seen as Setback To U.S. Digital Downloading Business
Ministers of the European Union have greenlighted a tax on sales of digitally downloadable "goods" in the EU, according to a Wall Street Journal report.

This could be a major bummer for online companies based in the U.S. and elsewhere in the world, which were previously exempt from national sales tax that EU-based companies have borne alone. These companies, the Journal notes, have lobbied to apply the tax to companies outside Europe, insisting that these firms enjoyed an unfair advantage and prevented EU netcos from competing.

The EU hopes that, once certain bureaucratic procedures are fulfilled, all 15 participating nations will have relevant statutes in place by July 2003.

The U.S., meanwhile, has repeatedly extended a "temporary moratorium" on e-commerce sales taxes, the report points out, swayed by Stateside Internet firms’ claims that their exemption would encourage development of digital commerce.

Negotiations are reportedly ongoing between the U.S. and EU, who hope to hammer out a worldwide agreement on the matter. To say that progress on this issue has been glacial would, frankly, be an insult to glaciers.

The piece puts the value of e-commerce at around $2.2 trillion, of which downloadable goods make up a mere fraction. It cites a Forrester Research report valuing U.S. online transactions at $1.5 trillion, and the only downloads that contribute to that number are copies of Forrester Research reports. OK, we just threw that in to see if you were reading this far.

Understandably, advocates for U.S. businesses are pissed about the new tax, which will probably become law soon, though ratification is pending. It’s not clear, the Journal says, exactly how the revenues from these taxes will be disbursed, though one European source told HITS that much of it will cover the costs of plying EU ministers with wine, rich desserts and stinky cheese.

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