EU VAT system urgently needs to keep pace with market developments

The EESC welcomes the European Commission's proposals regarding its Action Plan on VAT, aimed to be for the benefit of the final consumer, but calls for some modifications. It urges Member States to do their utmost to implement the proposed reforms and move towards the definitive Value Added Tax (VAT) system within a reasonable timeframe.

In the EESC's view, the current EU VAT system needs to be brought into line with new market developments, business models and technologies to ensure that the single market functions properly, to simplify VAT rules and to prevent tax fraud.

In order to close the VAT gap, Member States should set up the appropriate fora to exchange best practice on revenue collection and to explore ways to make better use of digital technology to combat VAT fraud, simplify the administrative burden on tax authorities and businesses and give them easier access to information. Particular attention should be paid to developing a system for efficient tax collection in cross-border trade situations.

The EESC calls on all institutions involved in the reform process to explore how a common VAT system for goods and services could be rolled out. It agrees with the Commission's proposals on reduced VAT rates and recommends that they should be applied to certain classes of goods and services, especially those of general interest. A "negative list" of goods and services to which the standard VAT rate would apply should not unduly curb Member States' freedom to establish reduced rates for certain general interest goods.

Finally, the EESC considers that the thresholds for the new VAT scheme for small businesses should be set at levels that ensure that all SMEs are covered. Their rules should also apply to social economy enterprises.

Please check our first and second opinion for more.  (jk)