Annexes to COM(2011)851 - Future of VATTowards a simpler, more robust and efficient VAT system tailored to the single market - Main contents
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| dossier | COM(2011)851 - Future of VATTowards a simpler, more robust and efficient VAT system tailored to the single market. |
|---|---|
| document | COM(2011)851  |
| date | December 6, 2011 |
(22) The Commission will initiate and facilitate initiatives for a stronger cooperation between tax and customs authorities.
5.3.3. Reviewing the way VAT is collected and monitored
The new methods of collection as mentioned in the Green Paper were the subject which provoked probably the most outspoken reactions.
In particular, the split payment model [22], which was considered to be the most far reaching change, prompted generally negative reactions from business and tax practitioners. The latter were concerned about the impact of the method with regard to cash flow, compliance costs and commercial issues. Moreover, they had doubts about its ability to actually reduce the VAT gap. However, some Member States still have an interest in exploring it further.
The lack of detailed data about its impact and imprecision about its workings might go some way to explaining this criticism. The Commission therefore believes that it is premature to discard the model.
As regards the data warehouse model (SAFT) [23], which is already implemented by some Member States, many stakeholders asked for its implementation to be made easier and uniform.
(23) The Commission will further analyse the feasibility of the split payment and its design in order to allay the concerns expressed, with a view to deciding on the appropriate follow-up at a later stage.
(24) The Commission will seek a common approach at EU level on the SAFT in order to streamline its implementation.
5.4. A VAT system tailored to the single market
The Green Paper described several ways of achieving taxation at destination. Two fundamental issues need to be addressed in this connection: firstly, the definition of the place of destination and, secondly, whether the supplier charges VAT on intra-EU transactions or the acquirer accounts for the VAT instead (reverse charge).
The current transitional VAT arrangements for intra-EU B2B transactions are already based on taxation at destination. However, given the shortcomings described under point 2, most stakeholders are against making them the definitive regime. In their current form, they are not in line with the fundamental objective that cross-border transactions should not be treated differently from domestic transactions.
Businesses stakeholders and the European Parliament have called for the concept of taxation at the place of establishment of the customer to be explored further. This would ensure that supplies of goods and services are treated in the same way. Decoupling taxation rules from the physical flow of the goods, while connecting them to the contractual flow, seems like a promising approach that deserves further examination.
As to the second issue, charging of VAT by the supplier on cross-border B2B supplies could lead to equal treatment for domestic and cross-border transactions. The principle of fractioned payment of VAT would be reinstated since it would apply to both domestic and intra-EU transactions. Such an approach would therefore deal with the VAT system’s current vulnerability to fraud.
However, intra-EU trade represents about EUR 2 500 billion which would mean that several hundreds of billions of VAT would have to be charged on transactions in which the acquirer currently only accounts for the VAT. The impact on businesses, particularly in terms of cross-border cash flow, would be substantial. As regards the tax authorities, the business that is liable for the payment of the tax would no longer be the one established in the Member State where the tax is due.
In terms of compliance costs, charging VAT on such supplies would require the implementation of a comprehensive One-Stop-Shop. For the purposes of securing the revenues, additional measures or guarantees might be needed.
(25) The Commission will proceed with in-depth technical work and a broadly-based dialogue with Member States in the Group on the future of VAT and stakeholders in the VAT expert group examining in detail the different possible ways to implement the destination principle.
(26) The Commission will table in the 1st half of 2014 a legislative proposal laying down the definitive regime of taxation of intra-EU trade.
6. Other actions to be launched in the medium term
The Communication has now laid down the priorities and a practical work programme for the coming years with several proposals, both legislative and non-legislative, as well as a number of in-depth studies to be launched with a view to preparing further proposals.
These priority initiatives are coherent with and should also reinforce the proposed development of a new own resource based on VAT. Broadening the tax base, restricting the use of reduced rates and reducing the scope for fraud could increase revenue for the Member States. A part of these gains could be attributed to the EU level, and these could be further increased through improving the performance of the VAT system.
Other aspects of EU VAT already raised in the Green Paper will be addressed in the medium term.
A number of provisions in the VAT Directive are outdated and do not take the single market aspect into account. This is particularly the case for the small business scheme and the VAT grouping provisions.
To better ensure the neutrality of the tax, it will also be necessary to review the complex and divergent rules on the right of deduction and to provide a mechanism for resolving double taxation issues.
A level playing field for non-EU and EU suppliers also has to be ensured. The treatment of small consignments and other internet sales is to be tackled in this context.
7. Conclusion
The Communication has designed a way forward to achieve a simpler, more robust and efficient VAT system, adapted to the single market.
The Commission invites the Council, the European Parliament and the European Economic and Social Committee to provide political guidance, confirming their willingness to explore the directions set out in this Communication.
In order to ensure a continued steering of the overhaul of the EU VAT system, the Commission will report regularly on the state of play of this review and set out new actions.
[1] COM(2011) 815, 23.11.2011.
[2] COM(2010) 695, Commission Staff Working Document, SEC(2010) 1455, 1.12.2010.
[3] They are available together with a report summarising their main elements at http://ec.europa.eu/taxation_customs/common/consultations/tax/2010_11_future_vat_en.htm
[4] Resolution of 13 October 2011, P7_TA(2011)0436.
[5] OJ C 318, 29.10.2011, p. 87.
[6] http://ec.europa.eu/taxation_customs/common/publications/studies/index_en.htm
[7] COM(2011) 510, 29.6.2011.
[8] Including social security contributions, Taxation trends in the European Union, 2011, annex A, table 8.
[9] COM(2010) 2020, 3.3.2010.
[10] COM(2011) 206, 13.4.2011.
[11] First Council Directive 67/227/EEC and Second Council Directive 67/228/EEC of 11 April 1967.
[12] COM(2008) 394, 25.6.2008.
[13] COM(2009) 544, 22.10.2009, Annex, p. 83.
[14] http://ec.europa.eu/enterprise/policies/better-regulation/administrative-burdens/high-level-group/index_en.htm
[15] http://ec.europa.eu/taxation_customs/resources/documents/common/publications/studies/ vat_public_sector.pdf.
[16] Copenhagen Economics, Study on reduced VAT applied to goods and services in the Member States of the European Union, Final Report, 21.6.2007.
[17] Belgium, France, Germany, Greece, Hungary, Italy, Poland, Spain and United Kingdom.
[18] COM(2006) 254, 31.5.2006; COM(2007) 758, 23.11.2007.
[19] COM(2008) 870, 1.12.2008.
[20] Council Regulation (EU) No 904/2010 of 7 October 2010.
[21] Council Regulation No 1553/89 of 29 May 1989.
[22] A model in which the purchaser pays the VAT to a blocked VAT bank account with the tax authorities’ bank which can only be used by the supplier for paying VAT to his suppliers’ blocked VAT bank account.
[23] A model whereby the taxable person uploads predefined transaction data structured in an agreed format into a secured VAT data warehouse maintained by the taxable person and accessible to the tax authorities.
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