The latest crazy idea to come out of the EU is: wait for it: they want to tax the internet. Yes that’s right they are proposing to tax the net.

How it is going to be done is not yet known, but on the 25th October 2013 at the European Summit in Brussels this was announced:

“The ongoing work to tackle tax evasion, tax fraud, aggressive tax planning, tax-base erosion and profit shifting is also important for the digital economy. Member States should further coordinate their positions where appropriate in order to achieve the best possible solution for Member States and the EU in the OECD/BEPS (Base Erosion and Profit Shifting) framework. In its ongoing VAT review, the Commission will also address issues which are specific to the digital economy, such as differentiated tax rates for digital and physical products. The European Council welcomes the Commission’s initiative to set up an expert group on taxationof the digital economy. The European Council will return to taxation-related issues at its December 2013 meeting.”

What this means is really quite simple, the EU intends a continent-wide charge on the digital transfer of personal information outside of the EU. In other words, if you want to buy a book via an American website and transfer your personal information to the vendor, the EU will include a charge for itself. Its public rationale is this: why should the likes of Amazon base themselves in a non-EU country and not pay tax?

That explanation will appeal to many people. We have been hearing a lot recently about foreign owned companies not paying tax, and at the last G8 Summit we were told by our leaders that the world was going to get tough on tax evasion. This neatly shifted the blame away from the Governments who are spending too much to the corporations who pay too little.

Until we have some detail on how they intend to administer this, let’s look at some of the potential consequences.

Firstly, this is going to cost a fortune to set up and administer.

Secondly, this could involve EU-tracking of your personal internet activity and could present a massive erosion of civil liberties, quite ironic timing as the EU is berating the USA for snooping and bugging.

Thirdly, any European based company is going to have to pay higher prices for these imports, and will make them less profitable, endanger growth and employment prospects.

Fourthly, consumers will see an automatic erosion of choice as some foreign-based companies will not be able to compete, thus leading to compound inflation as supply will be restricted.

Fifthly, this non-Tariff Barrier will artificially support less efficient EU-based companies and ruin economies of scale on a continent-wide basis and add to inflation.

Sixthly, the over-complication of business transactions will lead to gaming of the system and a higher probability of fraud and money laundering.

Seventhly, the new system will favour the larger corporations that can afford the best available accounting advice and give them a competitive advantage forcing closures of smaller businesses, and then reduce efficiencies, cause inflation and job losses.

Finally, this non-Tariff Barrier will lead inevitably to an escalation of trade war.

No matter how this tax comes into force it will kill business growth, cost jobs, increase the scope for crime – all at a compounded rate because to cover the inevitable shortfall from one year to the next the rate and scope of the tax will increase. And all because the Governments spent too much, too badly, for too long.

 

Iain McKie is the UKIP Parliamentary Candidate for the Isle Of Wight. He tweets at @Iainmckie_UKIP

 

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