EU to Impose Tax on Internet Products

The European Union agreed to impose a new tax on products downloaded from the Internet--including software, videos and music--aiming to help Europe’s Web-based businesses compete with U.S. companies.

EU Taxation Commissioner Frits Bolkestein said the new tax rules “will remove the serious competitive handicap which EU firms currently face.”

Bolkestein complained that U.S. giants of the industry levy no taxes on online customers. The effect has been to give a sales tax loophole to European buyers, who find cheaper-price goods on U.S. sites.

Although U.S. businesses are the focus of the legislation, the tax affects all non-European Internet businesses selling digital products, whether in the United States or elsewhere, said Nicholas Colannino, a European Commission spokesman in New York.