The future of the VAT system: Resolution from the European Parliament towards a definitive VAT system and fighting VAT fraud
On 24 November the European Parliament adopted a resolution in relation to the introduction of a definitive VAT system and to the fight against tax fraud. This resolution is part of the process of change of the VAT system initiated through the so-called “VAT Action Plan” by the European Commission, with the aim to make changes that will help to modernize the tax, especially with regard to intra-Community trade in goods, and the fight against tax fraud.
Through this resolution the European Parliament gives green light to the Commission to continue with the development and ultimate implementation of the VAT “Action Plan”, urging the Member States to collaborate in this matter to improve the fight against VAT fraud. In this sense, among the findings expressed in the resolution the Parliament recognizes that an agreement by unanimity is needed, demanding simplicity and a practical approach, as well as a fiscal policy coordination between the Member States for the exchange of information on intra-Community trade.
Some of the most significant conclusions expressed in this resolution, in line with actions already referred to in the “VAT Action Plan” are:
- It requests financial services to be subject to VAT.
- The VAT system should be based on a principle of taxation in the country of final destination of the goods and services.
- Introduction of the principle of taxation at destination as a general rule for distance sales to individuals, as well as the introduction of harmonized measures for small businesses.
- It calls for a single European list of reduced goods and services to which they apply reduced rates of VAT, chosen jointly by the Member States.
- To apply VAT equally to private and public companies in areas in which they compete with each other.
- To study carefully the consequences of the reverse charge mechanism and to examine whether this procedure will simplify the situation for small and medium-sized entities and reduce VAT fraud.
- Welcomes the proposal of introducing a threshold for VAT (we understand as the threshold for registration for VAT purposes) as a measure of simplification and calls for the establishment of a clear definition on which Member State is responsible for a tax audit in the case of cross-border transactions.
- It celebrates the introduction of a VAT package for small and medium-sized enterprises in 2017, but claim that the implementation is done gradually.
- Remember that the absence of harmonized thresholds on e-commerce entails high costs for small and medium-sized companies in this activity.
- It supported the proposal of the Commission for which the VAT on cross-border sales (goods or services) would be collected by the tax authorities of the country of origin at the rate of VAT applicable in the country of consumption, and is transferred to the country where goods and services are actually consumed.
- Remember the importance of establishing an electronic mechanism for registration and payment of VAT operators in cases of online sales to consumers of goods to reduce the administrative burden.
- It suggests the implementation of two VAT numbers, one for the intra-Community transactions and one for domestic transactions.
Attached is a copy of the Resolution (2016 / 2033 (INI)).