The EU’s Vat system is broken and out-dated and ideas on a simpler, more effective system were outlined in Brussels.
After more than two decades EU member states are ready to change so that the Vat becomes payable at the final destination, where the sale is taking place.
Outgoing EU Taxation Commissioner Algirdis Semeta said the five options for shaping a future Vat regime followed on extensive consultations with member states and stakeholders.
The current system — that gave rise to a €177bn gap in taxes that should have been collected last year — was intended as a temporary measure more than two decades ago.
The commission has pushed improvements to the system over the past few years, to make it more business-friendly and to better protect it against fraud.
“However, there comes a point when it is time to buy a new car, rather than tinkering with spare parts. We need to redesign the EU Vat system, and here we have presented first ideas on how this could be done.”
When the Single Market was established in 1992 the plan was to create a Vat system for intra-EU trade that would reflect the way goods were taxed at national level and support a genuine borderless union.
Politically and technically it was not possible because national tax systems taxed at origin. The current system exempts cross-border supplies of goods from Vat in the EU while taxing intra-EU purchases in the member state where it is bought. But the system has been complicated and prone to fraud.
Now, the commission said that from their consultations a Vat system where the tax is due at the point of destination of the goods is possible, but there are many ways it could be designed.
The options the commission considers feasible are:
The next steps involve a detailed assessment of the impact of each option for member states and on the basis of its findings will present a way forward next year.
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