Dáil Éireann Debate, Wednesday - 7 February 2007
142 Mr. Callely asked the Minister for Finance the mechanism in place by his Department and by the Revenue Commissioners in relation to trading on the internet; the level of taxes or VAT generated by trading on the internet; and if he will make a statement on the matter. [3854/07]
View answerI am informed by the Revenue Commissioners that, in general, the amount of VAT and other taxes collected from Internet trading is not separately identifiable as businesses are obliged to calculate and return VAT and other taxes by reference to their entire taxable activities, which includes both traditional forms of business and e-commerce.
The potential risk to VAT revenues from e-commerce lies in the area of non-EU businesses trading with Irish consumers solely by means of the Internet, rather than with Irish businesses that have developed on-line business in conjunction with their existing retail business. In particular, the area of the supply of digitised services, such as music and software, by non-EU suppliers, is particularly difficult.
In so far as goods are concerned, there is no doubt but that the Internet has led to increased sales of goods by businesses outside the EU to private consumers in Ireland. The vast bulk of this business is small goods and involves postal importations. VAT is payable on imports into Ireland from outside the EU. Trade within the EU to private consumers is (with the main exception of new means of transport) generally subject to VAT in the Member State from where the good is supplied. Revenue has a Customs presence at the four An Post mail depots that receive third country mail. All non-Community mail on arrival at the depots is subject to either an external or internal examination of the goods and documents. Revenue staff raise the relevant charges, customs duty, excise and VAT, which are shown on a charge label affixed to the package and collected by the postal authority on delivery. While Revenue is generally satisfied with its existing procedures in this area, it is an area that is kept under review from both a staffing and procedural viewpoint.
There has also been an increase in the supply of e-services from businesses outside the EU to customers in the EU. An EU Directive in 2003 introduced temporary changes requiring non-EU based businesses to charge VAT on supplies to EU customers and to register for and pay VAT in each Member State where they have customers. To reduce the costs to businesses of complying with the revised rules, an electronic system called the VAT on e-Services System was introduced. Under this Special Scheme a non-EU business providing e-services to customers in the EU may register for the scheme with one EU Member State of their choice and account for VAT electronically in relation to their supplies in all Member States.
The EU Commission has concluded that the Special Scheme has been a success and it has recently been agreed to extend the scheme to 31 December 2008. Some 900 companies are registered under the Special Scheme with 6 of those businesses currently registered in Ireland. Up to September 2006 Revenue had collected some €21.8 million from the non-EU businesses registered in Ireland. Of this, almost €379,000 represents VAT on sales to consumers located in Ireland. In the same period, Ireland has been the recipient of almost €1.7 million in VAT remitted by other Member States in respect of sales to consumers located in Ireland by non-EU traders who have registered with those other Member States under the Scheme.
Revenue's approach to VAT compliance and indeed tax compliance generally is based on risk analysis, taking into account all taxes and duties relevant to the businesses and both the e-commerce and traditional economic activities of the business. This approach generates a much greater knowledge of business activities, more detailed local risk assessment and faster compliance interventions. Also, at both regional and national level, Revenue is undertaking reviews of certain business sectors, the purpose of which is to improve overall tax compliance across those sectors. Overall, Revenue is satisfied with its monitoring of the tax on e-commerce obligations of businesses that are registered in the State.
It should be noted that in the context of e-commerce taxation issues are best resolved through international co-operation. In this regard, Revenue will continue to work with its counterparts at EU and OECD level. The tax administrations of all EU Member States recognise the need to be able to detect and identify traders who operate on the Internet. The EU Commission has set up a project group to investigate the tools and techniques available to aid in the detection of traders operating on the Internet. Revenue jointly heads up the Steering Group for this project with its UK and Polish counterparts. Amongst the agreed objectives of the project are the benchmarking of Internet search tools and the production of an e-commerce road map, which will give a step-by-step guide to the identification of e-commerce activity.
