by William New
The value-added tax (VAT) that will be applied to e-commerce transactions
in the European Union beginning next July could be the subject of review by
the <http://www.wto.org/> World Trade
Organization, a WTO source said Monday.
"It is difficult for me to see how it could be avoided," the official
said. "It has become an issue between jurisdictions and between continents."
The VAT will impose a single tax on business-to-consumer online purchases from
U.S. firms made in any EU member country. Meanwhile, purchases from European
companies would be taxed at the rate of the country of purchase, which in some
cases would be lower than the average rate for U.S. firms.
In recent months, the United States has threatened to challenge the tax at the
WTO based on the view that it would treat U.S. firms less fairly than European
competitors. A basic WTO principle is that every member country's businesses
should receive the same treatment in any other member country as that country's
domestic companies receive.
The WTO secretariat is preparing a report on e-commerce issues and how they
relate to WTO agreements. Deputy Assistant U.S. Trade Representative Claude
Burcky in July called it the "next action-forcing event" for e-commerce
in Geneva, where the WTO is based. The report, referred to as a "note,"
is due to be presented at the next discussion on e-commerce expected in October.
On Thursday, the secretariat will hold an informal consultation with WTO members
on the procedure for handling e-commerce in the WTO, according to a government
official in Geneva. Most members appear to support continuing the current method
of addressing it in special sessions of the general council as an issue cutting
across all areas of the WTO, the official said.
The upcoming note is an opportunity for the secretariat to update members on
the status of e-commerce discussions at the WTO. How online transactions fit
into WTO agreements, and conversely, how existing agreements apply to such transactions,
has been the subject of discussion since before the 1999 WTO ministerial in
Seattle.
Most of the WTO agreements pre-date the rise of the Internet and do not directly
address e-commerce. As a result, interpretations have varied on how to classify
Internet transactions -- as a good or service -- and therefore which agreement
applies.
The United States prefers to consider classification on a product-by-product
basis. For instance, software is already under the <http://www.wto.org/english/docs_e/legal_e/ursum_e.htm#General>
General Agreement on Tariffs and Trade, which covers products. The argument
is that the product does not change with the Internet, just the mode of delivery.
Japan and the European Union support placing everything related to e-commerce
under the <http://www.wto.org/english/docs_e/legal_e/legal_e.htm#services>
General Agreement on Trade in Services (GATS), which currently is the subject
of new negotiations. Some countries are concerned that others will use the e-commerce
discussion to abandon previous GATS commitments.
In the declaration out of last year's WTO ministerial in Doha, Qatar, members
reaffirmed a standstill on customs duties on e-commerce until the next ministerial
in Mexico in 2003.
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