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RECOMMENDED!






eBook Taxes and the E.U.

by Wendy J. Woudstra   

 
 


The Internet's status as a tax-free zone seems destined to come to an end, as the European Union's Council of Economic and Finance Ministers recently approved a plan that will require companies from outside the EU to collect taxes on digitally delivered products sold to European residents. That means publishers and retailers of ebooks in North America will be expected to charge and collect, for example, the Swedish 25 percent VAT on purchases made by their Swedish customers.

The EU's current tax system imposes tax on digital purchases based on the location of the supplier. Therefore, all products digitally delivered by companies in the EU carry an added tax - no matter where in the world their customer is. European companies like Bertelsmann feel the change will be for the better, since the current system puts companies based in Europe at a disadvantage in the digital marketplace. Europeans buying from the United States or other non-EU country can avoid paying the high VAT, while European companies have to charge the VAT, which ranges from 15 to 25 percent depending on the country the company operates in.

The proposed system, however, poses some problems for the administration of the taxes. Since there is no physical border crossing, and European countries have no right to request an audit of companies outside their borders, it is unclear how they expect to enforce compliance, or ensure fair dealings when it comes to VAT collection and remittance.

How to Avoid Collecting EU Taxes

  • Stay small
    The proposal states that companies selling less than 100,000 euros worth of digital goods to EU customers will be exempt. This amount could be lowered to between 30,000 and 50,000 euros after pressure from various European parliaments, but even that amount leaves out all but the largest ebook sellers today.
  • Don't comply
    Honestly, what could possibly happen to you if you failed to collect and remit taxes to a country that has no legislative power over you? You jump through all the hoops and insane regulations in your own country because the government can take away your home and/or business and put you in jail for tax evasion, but what can a Swedish tax collector do to you? Confiscate your ABBA collection?
  • Don't sell to Europeans
    Either stop selling your goods to EU customers, or sell European rights to an EU company, and let them deal with the taxation issue.

by Wendy Woudstra