Two major announcements on a modernized system of VAT have been made in the past month, as part of an ongoing discussion among European Union leaders.
First, the Estonian Presidency of the Council of the European Union stated its intention to launch negotiations on a definitive cross-border system of VAT, based on the principle of taxation in the Member State of consumption.
Secondly, Pierre Moscovici, the European Commissioner for Economic and Financial Affairs, announced that he will present an overhaul of the VAT system in autumn of 2017. The Commissioner stressed that the current “temporary” VAT system has been in place for 20 years, and that reforming the system would promote tax fairness. The three elements of the Commissioner’s overhaul are:
- Simplifying VAT obligations for companies
- Giving Member States greater flexibility in the use of reduced VAT rates
- Combating cross-border VAT fraud
These objectives are aligned with the European Commission’s VAT Action Plan, adopted in April of 2016.