The EU Commission argued that VAT sales tax should be applied to electronic commerce, in a text adopted in Strasbourg on Wednesday. The text was part of preparations by the EU for a ministerial conference of the Organisation for Economic Co-operation and Development (OECD) on electronic commerce to be held in Ottawa, Canada, in October.

The Commission held that taxation should have a neutral effect on electronic commerce by comparison with other kinds of distribution and that therefore sales tax on services should be applied.

The Commission recommended that such services be taxed systematically within the EU when they were provided for use within the Union, but that the tax could be reclaimed if the services were consumed outside the EU. An international arrangement would enable operators to pay the tax electronically.