"European taxes and regulatory barriers that impair access to the marketplace for global companies are protectionism plain and simple," Harris Miller, president of the Information Technology Association of America said in remarks prepared for a Senate hearing ahead of the US-EU summit.

"In a matter of days, US companies will be forced to comply with costly tax collection and reimbursement policies of 15 different EU nations, soon to rise to 25.

The new tax to take effect July 1 would require all firms to remit EU value-added taxes (VAT) on services delivered by Internet such as software, film or music downloads, e-books, as well as distance learning or consulting.

The tax affects Internet auction sites such as eBay as well as Internet games and gambling. It also is applied to pay-per-view radio and television broadcasts.

"For small and medium US sellers, this onerous policy may force them to stop doing business with EU customers, one of the largest markets in the world," said Miller, whose group includes some 400 US technology firms.

"For large companies, fifteen new tax compliance procedures will narrow profits and eat into dollars that might otherwise be invested in research, new products and productivity enhancement."

Miller said US firms "will be monitoring the issue very carefully and, if it turns out to be a discriminatory situation, as we are afraid it might be, we will talk to the US Trade Representative about the possibility of bringing a World Trade Organization complaint."

He added, "Claiming free trade and open borders while imposing discriminatory VAT is dressing up the protectionist wolf in sheep's clothing."

Miller said the move to tax electronic services was among a trend in the EU that placed more barriers to trade and electronic commerce.

"In too many Internet policy areas, Europe is galloping backwards toward the 19th Century while the US creates an environment for the 21st," Miller said.

"On privacy, consumer protection, data retention and levies on IT hardware, the EU has adopted or is adopting policies that erode the hallmarks of free and open trade between the EU, the US and other global players."

SPACE.WIRE