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The European Commission has launched a public consultation on how the European Union’s VAT system can be strengthened and improved.
The EC believes that, since VAT was introduced more than 40 years ago, the marketplace has changed substantially. Despite piecemeal efforts over the years to modernise the system, the commission believes the current set-up does not suit a service-driven, technology-based economy.
The consultation – a green paper – asks whether the fundamentals of the current VAT system should be overhauled, and whether goods and services should be taxed in the member state of origin or where they are sold.
The document also looks at specific issues that have come into question over the years, such as whether reduced VAT rates are still relevant, whether the rules on deductions are neutral enough, how the system can be made more fraud-proof, and how red tape can be cut in VAT transactions.
Improvements to the collection of VAT to close the EU's €100 billion VAT gap are also considered.
The consultation is not limited to these questions; other issues can be raised. Responses should be sent by email no later than 31 May 2011.
