Because selling products to the US is VAT-exempt, and US companies selling to EU customers is also VAT-exempt.
I'm betting the first company doing this will be amazon.
US businesses are actually required to charge VAT, but smaller operations get away without doing that. At Amazon's volume it makes sense to set up tax entity in the EU to avoid import duty.
For example for amazon.com selling to a consumer in Ireland sees 17% import duty + compunded 23% VAT on the item cost and the shipping cost.
Rather than registering in each EU country, they could register in one country and use the VoES system to submit their returns.
It was because of this ruling that big companies like Amazon found a workaround by setting up subsidiaries in countries with low VAT rates like Luxembourg and sold their goods from there. This meant they could charge Lux VAT instead of the customer country's VAT rate.
This obviously gave them an unfair advantage not only over local businesses but also non-EU businesses that used the VoES system.
In effect these new rules change little for non EU businesses. The VoES system is being retired in favour of the new MOSS system which is effectively the same sort of thing, only now, ALL businesses including those in the EU, have to charge local VAT when selling digital services to the EU.
For e big companies like Amazon, this closes a loophole. For those who were correctly charging VAT under the VoES system, nothing much changes. For those non-EU companies who were chose not to comply with the 2002 rules, well I'd imagine they will continue to not bother. And those who were ignorant of them (many I'm sure) might now be a bit more aware.
But of course the businesses it affects the most are small EU businesses who now have to charge different rates of VAT or use MOSS when they didn't before.
Customers having to pay import duties and VAT, then being involved in an international tax evasion scheme.
You got this wrong. US companies need to collect and pay VAT if they want to sell to the EU - edit: for digital goods.
For the record, here's the HMRC (UK revenue service) explanation of the special VoES scheme that's been around for ages:
http://webarchive.nationalarchives.gov.uk/20120128212010/htt...
I think the main issue here is enforcement. I don't think it's reasonable to expect the IRS to enforce foreign legislation on US companies. And that's exactly the reason why US companies often don't comply.
Edit: I'm talking about digital downloads and digital services. If you're shipping goods then there might also be import duty liabilities, not sure.
The EU's VAT and tax authorities are barely keeping up with work as it is. And the idea that companies with five or six figure turnovers are worth chasing for a few percentage points of extra VAT is nonsensical when there's so much other VAT and tax fraud in the EU.
I'm not convinced taxation is the real point. To me this seems more like a ham-fisted attempt to force businesses to keep records for surveillance purposes.
I wonder if at some point in the next decade we'll see companies having to make their online sales records visible to the tax authorities for "automated verification", so they can find out who's been buying machetes and bomb chemicals.
Not sure on the second part, but I do know some tax authorities are already using various data mining techniques to flag certain behaviours.