Trying to Meddle with U.S. Tax policy.(COMMENTARY)

The Washington Times (Washington, DC), May 23, 2002 | Go to article overview
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Trying to Meddle with U.S. Tax policy.(COMMENTARY)


Byline: Daniel Mitchell, SPECIAL TO THE WASHINGTON TIMES

You don't have to be an economist to know that when tax collectors from the European Union complain about "certain distortions of competition" - and announce a need to "correct" it - that a blueprint for higher taxes can't be far behind.

This normally wouldn't concern most Americans, but this time the EU wants to conscript U.S. companies to act as deputy tax collectors.

Specifically, U.S. companies that sell digital products such as music or computer software that can be downloaded from the Internet. European consumers who buy from U.S. companies online avoid certain "value-added taxes" (VATs-a form of national sales tax that can reach as high as 25 percent) that they would have to pay if they bought from EU companies instead.

The finance ministers don't like that. So the EU is demanding that U.S. companies be required to collect European VATs and send the money to European governments.

If Europe's welfare states want to slap excessive taxes on sales that take place within their borders, that's their business. But they have no right to impose their misguided tax laws on transactions that take place in other nations.

This isn't the first time Europe has tried to undermine our fiscal sovereignty. The European Union already has dragged the United States before the World Trade Organization in an attempt to compel American lawmakers to impose higher taxes on U.S. companies. The EU also wants American officials to weaken financial privacy laws, so they can reach across the Atlantic and tax the money that Europeans have deposited in our banks and invested in our stock market. This so-called "Savings Tax Directive" could drive hundreds of billions, perhaps even trillions, of dollars from the U.S. economy.

The VAT collection scheme is just the latest episode in the EU's relentless campaign for "tax harmonization." The Europeans understand that high tax burdens are making their companies uncompetitive and that investors and entrepreneurs are shifting their economic activity to low-tax nations. But with exceptions such as Ireland, which has enacted sweeping tax rate reductions and become Europe's fastest-growing economy, European politicians think the answer is to make low-tax governments raise taxes so all countries are equally noncompetitive.

The United States should say no to any European-sponsored tax cartel.

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