Coalition for U.S.-European E-Commerce Taxation is Formed

Accounting and consulting firm, Ernst & Young LLP, announced on Friday, that it is forming a coalition to help U.S. companies formulate policy on issues related to taxation of U.S. companies conducting e-commerce in the European Union.

As the Internet, in general, and e-commerce, in particular, ignore international borders, it appears that government officials are becoming increasingly concerned with losing taxation revenue. This issue is particularly pronounced in Europe, which lags far behind the U.S., in terms of e-commerce and, therefore, European officials fear an Internet trade imbalance.

“It is important for companies, which are involved in e-commerce sales where VAT may not currently apply, to begin to work with the EU now, when policies can still be influenced and self-regulation is possible,” says Howard Lambert, of Ernst & Young’s European VAT Desk in San Jose.

“The Forum provides an opportunity for companies to resolve issues that will affect their competitive positioning not just in the EU, but around the world and for years to come.”

At the first meeting of the group, held in San Francisco on January 29, seven international companies actively involved in e-commerce — with sales totaling more than $40 billion — indicated interest in joining the coalition. Within the next two months, forums will also be held in New York and Seattle.

VAT, which is applied to products and services at each stage of their production, is in common use in the EU. When goods or services are purchased by businesses or individuals in the EU from sources outside the EU, mechanisms for collecting the tax are complex, especially for products that can be delivered electronically. How this issue is resolved will have a major effect on anyone doing business in the EU, which includes a vast array of businesses around the world.

Ernst & Young LLP provides assurance and advisory business services, tax services and consulting worldwide. The firm has 85,000 people in 675 offices in 132 countries.

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