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European Union Imposes World’s First Digital Tax—Changes Could Spark Trade War

On February 12th, the European Council of Economics and Finance Ministers (ECOFIN) took steps towards new laws that would require non-European companies to collect value added tax (VAT) on sales of digital products, such as software, MP3’s, graphics, and online universities, to EU consumers.

The new Directive eases regulation and taxation on EU companies, but goes too far on new requirements for non-EU, namely U.S., companies. (More on specifics of the Directive can be found below in our guest column.)

Despite a Directive last year from the EU to encourage the global growth of e-Commerce, the Directive is in conflict as they specifically target US-based companies, who dominate the global marketplace as home to 80 of the top 100 technology related firms in the world.

The EU has carelessly risked US participation in the marketplace, with some already discussing the possibility of a trade war. Instead of expanding the EU e-commerce marketplace, they have risk further regionalizing e-Commerce, with EU consumers taking the brunt of the proposal.

The matter now rests with the European Parliament, where the United Kingdom has been a reluctant hold-out. The UK’s position is now unclear.

You can rest assured that we will be watching this carefully as we head to the United Kingdom later this month.

NoInternetTax.org Expands to the UK

The February 12th ECOFIN Directive was a wake up call for us and a signal that we needed to expand our efforts overseas.

As such, we are proud to announce the formation of a spin-off group, NoETax.com.

NoETax.com will be based in the United Kingdom and will pattern their efforts to encourage average citizens to learn more about the pitfalls of Internet regulation and taxation after our highly successful U.S. campaign last year, which renewed the existing U.S. Internet moratorium for two years.

We are proud to announce the addition of our European colleagues and look forward to working with their new organization as we move forward with our new plans.

Key leadership from both groups will be meeting in the UK in April to plan a series of publicity events, projects and a media campaign to raise the profile of e-Tax publicly before the key votes take place this Spring.

NoETax.com was founded by Andre Walker, who has assumed the senior posts of Executive Director of NoETax.com respectively. Andre is working with NoInternetTax to plan a Europe wide media tour and have high hopes for the new pressure group.

“E-Tax is a huge risk and is not an issue that the public know a great deal about, our central aim is to change that,” stated Walker. “This risk has defiantly gone global and therefore we need a global response.”

The group hopes to pressure the Europeans on their quest to spur the global economy, particularly British Prime Minister Tony Blair, though grassroots efforts into ruling out the tax rise. Initial phases will target young people, who rely more than any other group on email and text messaging, both of which are likely tax targets.

To learn more about Walker, please visit: /default.asp?Page=Board

Guest Column: Andre Walker, Executive Director, NoETax.com

EU Digital VAT Directive Explained

The European Union (EU) has approved plans to force foreign companies to levy value-added tax on services digitally delivered via the Internet, radio or television to customers in the EU.

The Directive will aim to create a “level playing field” between EU and United States (U.S.) companies for services such as downloading compact disks, software, videos or computer games supplied in digital form. Online or remote university studies, radio and television are also effected under the new Directive.

The Directive requires foreign companies to register in at least one EU country and levy VAT at the rate of that country, somewhere between 15% and 25%.

Another part of Directive would help EU companies selling digitally to consumers in the U.S. by amending an EU law that forces them to charge VAT. They will now charge the zero rate of VAT that applies to exports. The Directive has already been criticised by U.S. companies who described the proposals as “e-protectionism“.

Ignoring all of the impracticalities of how this tax would be implemented, the main reason to oppose the tax is that there is absolutely no justification for it in the first place.

The main reasoning behind the EU’s Directive is their assertion that much information is transmitted via the Internet these days by businesses, so there must be an additional tax levied upon this form of communication.

However, bearing in mind that there is no equivalent taxation on any other method of information transfer, it instantly becomes obvious that such reasoning is wholly inappropriate and without precedence, especially given that tax is already paid when the necessary equipment is purchased, and tax is also paid on the phone call made to access the internet.

What the EU is proposing is to tax that, which is already taxed.

We will campaign in Europe and beyond for a no vote on e-taxation by lobbying British Priminister Tony Blair and raising the issue in the British and European parliaments.

NoEtax.com is determined to fight for the consumers and e-Commerce ventures, which will undoubtedly be affected by the wholly unnecessary implementation of the European e-tax policy. It is our aim to combat a global issue, by launching a global response.

(The directive can be found at: http://www.cordis.lu/esprit/src/ecomcomx.htm)

Off the Deep End? Grassroots Success!

Recently, we issued an alert in Washington State to stop “streamlining” efforts needed to impose Internet taxation.

Two Representatives replied to our action alert by stating that we were “off the deep end” on the legislation and our position.

In the words of Margaret Thatcher, “...if they attack one personally, it means they have not a single political argument left.”

Our members responded in droves and we are happy to report that HB 2608 is dead in the Washington State House of Representatives.

Thank you to each and everyone for your hard work in this battle. Without your efforts and support, the corporations, big government advocates and pro-Internet tax supporters may win.

Our “friends” at the United Nations---at it again!

On Monday, March 18th, the UN will begin a four-day conference in Monterrey, Mexico, to discuss ways to tax the world.

President Bush will be attending this conference--email him today at: president@whitehouse.gov
and tell him to say NO to the United Nations.

Remember, this is the same group who in 1999 buried a proposal to levy BIT taxes on emails in a report on the human condition...

Help Us!

Our work to educate and inform members of the European Union, United Nations and World Trade Organization is just beginning.

Please consider making a donation today. We can’t continue this fight without your support. Your contribution can be mailed to us at:

12500 NE 10th Place
Bellevue, WA 98003

As NoInternetTax.org engages in grassroots and direct lobbying, donations are not deductible as charitable contributions for federal tax purposes.

NoInternetTax.org is organized as a nonprofit, nonpartisan organization under Washington State Law.

Last But Not Least....

Special thank you’s this month to the following individuals for their hard work and support!

Scott Burge, Emily Cummins, Heath Hilyard,
Kate Losleben, Brett Mecum, Javier Ortiz, Andre Walker, Chris Blanchard

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