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Semeta Outlines Future Of VAT In Europe

by Ulrika Lomas, Tax-News.com, Brussels

08 December 2011


European Union Commissioner for Taxation Algirdas Semeta has outlined details of the Commission’s strategy for the reform of value-added tax (VAT) in the European Union (EU), which aims to simplify the system, to make it more effective and robust, as well as fraud-proof, to the benefit of businesses and the Internal Market.

Among the proposals outlined in the strategy are plans to expand the “one-stop-shop” system for cross-border traders (a measure proposed in the Commission’s plan to reduce administrative burdens), to introduce a standardized VAT declaration, available in all languages, to put in place a centralized VAT information portal and to set up an EU VAT forum involving all stakeholders in the establishment and interpretation of relevant EU laws.

To ensure quality and stability of VAT revenue, which currently accounts for over 20% of member states’ income, the Commission proposes limiting the use of reduced VAT rates and exemptions, which would, it argues, serve to provide member states with important new revenue, without burdening their citizens with further standard rate increases. Examining and assessing which provisions are justified and which are not, may even serve to enable member states to reduce their standard rates and to harmonize the system, Semeta suggested.

Determined to address the issue of fraud in any reform plans, Semeta explained that member states must reinforce their administrative capacity to end the practice, noting that as part of the strategy the Commission aims to monitor the effectiveness of national measures, provide benchmarks and highlight areas for improvement.

Semeta underscored that at EU level, the Commission aims to strengthen existing instruments, notably Eurofisc (a body set up by EU member states to combat VAT fraud) and the automated access to information, and intends to create new anti-fraud tools such as a quick reaction mechanism for when fraud is suspected, and a platform for the better exchange of information on cross-border cases.

Concluding his presentation, Semeta emphasized that "reform of our VAT system is not a 100 metre sprint, but a long-distance run".

"Changes will have to be gradual and steady, to avoid any risk to member states' revenues or sudden adjustments for businesses. This is not to say, however, that we cannot see the finishing line," he said.

I have my sights firmly set on an EU VAT system which is easy to comply with, brings in quality revenue, and is well protected against fraud," Semeta added. "Today's Communication is a major step in that direction, and the starting point for substantial improvements that lie ahead."

TAGS: compliance | tax | business | value added tax (VAT) | tax compliance | commerce | law | small and medium-sized enterprises (SME) | multinationals | European Union (EU) | services | Europe

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