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EU postpones decision on online taxation

Finance ministers set June deadline

European Union finance ministers shelved plans to introduce value added tax on online transactions, setting themselves a deadline of the end of June next year by which to reach a decision.

The stumbling block in front of an agreement is the question of how to charge VAT on transactions between buyers of goods and services online inside the EU and sellers from outside, said Norbert Schwaiger, spokesman for the Council of Ministers, the forum for ministerial meetings.

"No decision was foreseen," he said. "The ministers took stock of the situation and it was agreed that a formula must be found that secures member states their fair share of VAT revenues, while not putting off online transactions with excessive administration."

Until now two options have been considered. First, the online operator could choose the member state, which would obviously result in companies choosing the country with the lowest tax level. The UK and the European Commission, the EU executive body, are seen favouring this approach.

The second idea, proposed by France and Belgium, would require operators to register in all member states. "This is the worst option as regards burdensome administration," Schwaiger said.

The most likely outcome is somewhere between the two, Schwaiger said. "The ministers are now looking at a system where operators register for VAT in one country and the revenues are then shared among all 15 members of the EU," he said.

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