Transcript Taxation and Customs Union

European Commission
Taxation and Customs Union
The future of VAT
EU perspective
Donato Raponi
26 October 2011
Copenhagen
GREEN PAPER
 After more than 40 years, the European Commission has considered
it was time for a critical look to the EU VAT system, therefore a
broad based consultation with all stakeholders
 Presentation of the Green Paper in December 2010
 Consultation has been open until 31st May 2011
 33 questions in total. Questions both for evaluating the current
system and for potential solutions
 Conference in Milano with tax administrations and stakeholders on
6 May
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GREEN PAPER
 +- 1700 contributions received (+- 8500 pages) : will be published
on the web of DG TAXUD
 Study launched on the evaluation of the present system: to be
published soon on the Web of DG TAXUD
 Discussion with Member States : Taxation Policy Group, Deputy
Directors for VAT and the Future of VAT Working Group.
 Opinions of the European Parliament, the European Economic and
Social Committee
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GREEN PAPER
General reflections
 Value added tax (VAT) constitutes a major source of revenue for
national budgets (in 2009: 784 billion in tax revenue, 21 % of
national tax revenues)
 Indirect taxes are more growth-friendly than direct taxes
 broadening the tax base is a must to allow tax shifts
 Enhancing the single market of vital importance (Europe 2020
strategy)
 Business: current VAT system too complex and burdensome
 Business: easier to import/export than intra-EU trade
 The current arrangements expose the VAT system to fraud (about 12%
of VAT remains uncollected)
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THE FUTURE OF EU VAT
A VAT SYSTEM ADAPTED TO THE SINGLE MARKET
 Some figures:
 Intra-EU trade represents about 2500 billion €, in 1993
about 700 billion.
 40 % of sales of manufactured goods leave the MS, 70 %
of those going to other MS.
 Which system ?
 1967: commitment: taxation in the country of origin
• Is it achievable ? Unanimity ( EP, ECOSOC, BUSINESS) : not
realistic in the foreseeable future
• Need a pragmatic solution
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THE FUTURE OF EU VAT
A VAT SYSTEM ADAPTED TO THE SINGLE MARKET
 System based on taxation at destination(rate and rules of
MS of destination)
 Several ways of achieving this objective:
• Current transitional arrangements for intra-EU B2B
transactions but too complex, burdensome and do not cope
well with normal commercial practices.
• Taxation at the place of establishment of the customer
–Similar treatment of supplies of goods and services
–Decoupling taxation rules from the physical flow of the
goods but connecting to the contractual flow
• Taxation at the place of arrival of goods
–Flow of goods taken into account, similar to the current
concept of distance sales
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THE FUTURE OF EU VAT
A VAT SYSTEM ADAPTED TO THE SINGLE MARKET
 The supplier charges VAT on cross-border B2B supplies:
 Equal treatment for domestic and cross-border transactions
 The intregrity of the VAT system with the fractional collection
mechanism reinstituted
 Economic evaluation shows significant advantages but impact for
businesses and tax authorities significant too
 This would require the implementation of a comprehensive OneStop-Shop.
 Conclusion: EU VAT SYSTEM should be based on the principle
of taxation at destination. Technical work on the different
possible ways to implement the destination principle
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THE FUTURE OF EU VAT
A SIMPLE SYSTEM
 Compliance cost: 2 to 8 % of VAT collections
 Businesses engaged in intra-EU trade: additional burden : national
obligations, different options left to MS
 Harmonisation of VAT procedures: substantial gains in trade, GDP and
consumption
Possible initiatives:
 Provide the business with better and more reliable information at EU
level: rules and obligations relating to registration,invoicing, VAT
returns,VAT rates, speicial obligations,limitation to the right of
deduction…etc
 Improvement of the EU legal process: larger involvement of
stakeholders, more transparency in the process of establishing and
interpretating EU vat law, publication of VAT Committee guidelines
approved and explanatory notes for the implementation of new
legislation…etc
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THE FUTURE OF EU VAT
A SIMPLE SYSTEM
 Improvement of the governance of the VAT at EU level:
• Setting up of a communication channel at EU-level where Tax
Authorities, the Commission and business representatives exchange
views on practical matters of VAT administration.
 Standardisation of VAT obligations:
• Divergent obligations oblige businesses to tailor IT specifications and
procedures for each MS where they operate
• Is seen as a key to easing administrative burdens
Possible solutions: standardisation of obligations: declaration,
registration … available in all languages
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THE FUTURE OF EU VAT
A SIMPLE SYSTEM
 The One-Stop-Shop
• « mini » OSS for Eu providers of telecommunications, boroadcasting
and electronic services supplied to final consumers within the EU:
enter into force by 2015 = major milestone
• More general use of this concept
• Crucial instrument to reduce compliance costs and easing trade (
SMEs), especially in a VAT system based on taxation at destination
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THE FUTURE OF EU VAT
MORE EFFICIENT SYSTEM
A broader tax base + a larger application of standard rate
Better efficiency of the tax
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More revenue
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c
 Broadening the tax base
 Public bodies and exemptions for certains activities in the
public interest
• Study highlighted shortcomings of present rules:
–Lack of neutrality
–Distorsions of competition
–Complexity
• Possible solutions:
–Full taxation (GDP: + 0,19, VAT revenue=+195 billion, public
employment: - 200.000)
 Concerns: cost of public goods, social security if education or health
activites taxes
–Targeted and progressive approach: starting with activities
with a larger degree of private sector involvement: waste
collection, water treatment …etc
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THE FUTURE OF EU VAT
MORE EFFICIENT SYSTEM
 Passenger transport services
• Present rules = different treatments (exemption, reduced rates,
standard rates) depending of the means of transports and Member
States
distortions of competition
• Possible approaches:
– suppression of the exemption applied to international air and
sea transport ?
–Extension of the exemption to the other means of transport ?
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THE FUTURE OF EU VAT
MORE EFFICIENT SYSTEM
 Structure of rates
 Approximation of rates : condition for the functioning of the origin
based system
 VAT system based on taxation at destination : no more a
condition
 Business concerns: divergences in VAT rates = additional
compliance costs (reduction by 50 % the dissimilarity between
MSin terms of the special VAT rates = + 9,8 % of intra-EU trade
gains, + 1,1 of GDP)
 Study: VAT rate is not the most suitable instrument for pursuing
policy objectives
 Equal treatment between products ( online formats and traditional
formats)
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THE FUTURE OF EU VAT
A MORE ROBUST SYSTEM
 Fraud and avoidance: correlated to the compliance burden
Appropriate system for the taxation of intra-EU transactions
Simpler VAT system
Contribute to the robustness of the VAT system
 VAT Collection
• new ways:
–Split payment
–Wharehouse model
 Quick reaction mechanism
• Provide MS with a legal base in order to take immediate national
measures to stop massive fraudulent practices
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THE FUTURE OF EU VAT
Thank you
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