The proposals would not affect sales to business customers. In such sales, the supplier would continue to sell without having to apply VAT (which would be paid, as now, by the importing company under self-assessment arrangements).
According to a report by Newsbytes, the ITAA is concerned that non-EU e-tailers "could lose valuable time trying to verify the customer's location to compute the VAT they are supposed to levy." The lost time will result in lost revenue.
ITAA President Harris Miller has explained in a letter to the Treasury Department that "there is the risk that the EU may prescribe rules of compliance that, in effect, will close the European market to US and other non-EU businesses for certain transactions."
Non-EU suppliers would have to register with a VAT authority in one of the 15 EU Member States, but the VAT levied would be the rate applicable in the Member State where the customer was resident. The VAT revenue would be re-allocated from the country of registration to the country of the customer.
The EU's aim behind the proposal is "to remove the obligation for EU firms to apply VAT when exporting to world markets and thus remove a major competitive handicap." However, the EU has not yet addressed the question of how it would enforce the proposal on non-EU businesses.
The EU Council will consider its proposals at a meeting due to take place next month.