WRITTEN QUESTION E-3157/00

by Gerhard Hager (NI) to the Commission

(10 October 2000)

Subject: Taxation of online supplies

In June 2000 the Commission submitted a proposal for a Council Directive amending Directive 77/388/EEC(1) on the treatment for VAT purposes of certain electronically provided services, and a proposal for a Council Regulation amending Council Regulation (EEC) 218/92(2) on administrative cooperation in the field of indirect taxation (VAT).

In the light of the problems linked to the online supply of digital products and their treatment for tax purposes, I should like to ask the Commission the following:

1. Before submitting the above proposals, did the Commission study the taxation of online supplies in regions with similar economies?

2. How is the taxation of this type of online supplies handled in the USA, for example?

3. In what international context beyond the countries of the EU does cooperation take place on the taxation of online supplies?

4. Is there any international requirement regarding the taxation of online supplies?

(1) OJ L 145, 13.6.1977, p. 1.

(2) OJ L 24, 1.2.1992, p. 1.

Answer given by Mr Bolkestein on behalf of the Commission

(8 December 2000)

The Commission studied the issues surrounding electronic commerce taxation systems in considerable depth before making a proposal. As well as working closely with Member States' tax administrations and with representatives of European business, the Commission played a central role in the work undertaken within the Organisation for economic cooperation and development (OECD). This recognised the international nature of the questions raised and the need to compare and exchange experiences in addressing a new economic paradigm. The taxation guidelines put forward by the Commission to the Ecofin Council in July 1998 reflected this, and these guidelines in turn formed the basis of a common Community position at the OECD ministerial conference at Ottawa in October 1998. The international taxation framework conditions established by the OECD at the Ottawa ministerial conference were subsequently considered by the Commission in its working paper of June 1999, which set out various issues and options for the consideration of those involved in electronic commerce and was the subject of extensive consultation. Finally, the proposal from the Commission was issued in June 2000(1), reflecting the international taxation framework conditions for electronic commerce established by OECD member countries, and encompassing the extensive consultative process of the preceding years.

The taxation of online supplies in the United States is not directly comparable as there is no harmonised national system of consumption taxation. Instead, most state governments impose retail sales taxes on the purchase of goods, and in some cases services, by their residents. Although e-commerce is an impetus for modernisation and reform of these systems, it is too early to say how online supplies will eventually be handled.

The OECD has established a role as the primary forum for international co-operation in developing policies on the taxation of on-line e-commerce. At present the Commission is participating there, together with other Community administrations and representatives of, inter alia, the United States, Australia, Japan and Canada on reaching international consensus on the measures needed to give effect to the taxation framework condition agreed at Ottawa.

The OECD framework conditions agreed at the ministerial conference at Ottawa in October 1998 lay down international taxation principles that should apply to electronic commerce. For consumption taxes (such as VAT) taxation should result in the jurisdiction where consumption takes place and, for these purposes, the supply of digitised products should not be treated as a supply of goods. The proposal from the Commission will ensure that the Community VAT system is in conformity with these principles.

The World Trade Organisation (WTO) also has a number of rules regarding taxation measures that have an impact on trade. The Commission's proposal is in line with these rules.

(1) COM(2000) 349 final.