Cooking Up An E-VAT?

The European Commission wants to tax things sold on the Web by foreign firms, but can the proposal work in a virtual world?

A Spanish fan downloads the latest Prince album from the artist's U.S.-based website. A Swedish schoolboy has his mother buy him a Japanese Pokemon game online. An American expatriate in London orders personal-finance software from the U.S. O.K., class, question: Where should the sales tax go?

In most of the world today, the answer is "Nowhere." Almost every government in the world, following the lead of the U.S., refrains from taxing the Internet, for fear of stunting the world's most exciting new commercial medium. But the honeymoon may soon be over. In Europe, Luxembourg may be about to become the first...

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