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By Sally Watson, 31 August 1999 16:41

NEWS The UK's VAT (value-added tax) revenues are under threat from ecommerce, according to a research paper published by the Institute of Directors (IoD) this week. The report claims the UK government will find itself short of up to £10bn per year unless it sorts out online taxation as a matter of urgency. It says no governments can afford to be complacent, as they will not be able to collect VAT on music or software delivered electronically from abroad, and will also not be able to collect it on packages posted from other countries. According to the IoD, VAT is still the best way for collecting tax on ecommerce, but it points out that collecting VAT from consumers will be much harder than keeping track of business-to-business transactions. The IoD says consumers could only be taxed directly if software did the work for them. The IoD says businesses, as well as government, should be concerned with the Internet's effect, and should lobby the government for proper consultation on any change in taxation. Richard Baron, deputy head of the policy unit at the IoD and author of the report, said in a statement: "The British government is ahead of the game in consulting with business, but there is still a lot of work to be done. The practical difficulties are such that we need to allow plenty of time for careful implementation of whatever solutions we end up with."