European businesses are finding it hard to compete with non-EU businesses due to the current rules on application of VAT to e-commerce. The EeTG claims that adoption of the directive will help businesses located within the EU to compete internationally and maintain European jobs.
As things stand, European companies when engaging in e-commerce must apply VAT to their prices regardless of whether they are selling inside or outside the EU. However, US services are not subject to sales tax (the equivalent US levy for traditional sales), and the EeTG points out that US companies can undercut European rivals by up to 25%. The directive would introduce a single European VAT collection model where sellers form outside the EU register once and subsequently apply local VAT charges.
The EeTG believes that this will level the playing field in e-commerce.