15 May 200815 May 2008 International Tax ConferenceInternational Tax Conference 11

POSSIBLE FUTURE POSSIBLE FUTURE DEVELOPMENTS IN EUROPEAN DEVELOPMENTS IN EUROPEAN

VAT LAWVAT LAW

Stephen BillStephen Bill

European CommissionEuropean Commission

23 January23 January 2009 2009 International Tax ConferenceInternational Tax Conference 22

WHY DO WE NEED AN EU VAT ?WHY DO WE NEED AN EU VAT ?

ART . 93 ART . 93 of Treaty requires of Treaty requires harmonisation harmonisation

„ „ to the extent … necessary to ensure to the extent … necessary to ensure the establishment and functioning of the establishment and functioning of the internal market “the internal market “

23 January23 January 2009 2009 International Tax ConferenceInternational Tax Conference 33

CURRENT POLICY OBJECTIVESCURRENT POLICY OBJECTIVES

REDUCING TAX COMPLIANCE COSTSREDUCING TAX COMPLIANCE COSTS

MODERNISING THE COMMON VAT MODERNISING THE COMMON VAT SYSTEMSYSTEM

ENABLING MEMBER STATES TO ENABLING MEMBER STATES TO MAINTAIN STABLE REVENUE BASESMAINTAIN STABLE REVENUE BASES

23 January23 January 2009 2009 International Tax ConferenceInternational Tax Conference 44

SIMPLIFICATION MEASURESSIMPLIFICATION MEASURES

VAT PACKAGE (adopted)VAT PACKAGE (adopted)

E-INVOICINGE-INVOICING

23 January23 January 2009 2009 International Tax ConferenceInternational Tax Conference 55

MODERNISATIONMODERNISATION

POSTAL SERVICESPOSTAL SERVICES

FINANCIAL SERVICESFINANCIAL SERVICES

VOUCHERS AND OTHER PROMOTION VOUCHERS AND OTHER PROMOTION SCHEMESSCHEMES

PUBLIC AUTHORITIESPUBLIC AUTHORITIES

23 January23 January 2009 2009 International Tax ConferenceInternational Tax Conference 66

REDUCED RATESREDUCED RATES

PRIMARY ROLE OF VAT – RAISE PRIMARY ROLE OF VAT – RAISE REVENUEREVENUE

23 January23 January 2009 2009 International Tax ConferenceInternational Tax Conference 77

REDUCED RATESREDUCED RATES(locally delivered services)(locally delivered services)

JULY 2008 PROPOSALJULY 2008 PROPOSAL

DECEMBER EUROPEAN COUNCIL DECEMBER EUROPEAN COUNCIL CONCLUSIONSCONCLUSIONS

CURRENT ACTIVITIESCURRENT ACTIVITIES

23 January23 January 2009 2009 International Tax ConferenceInternational Tax Conference 88

REDUCED RATESREDUCED RATES(ENERGY & CLIMATE CHANGE)(ENERGY & CLIMATE CHANGE)

““GREEN“ PRODUCTSGREEN“ PRODUCTS

““GREEN“ HOUSINGGREEN“ HOUSING

23 January23 January 2009 2009 International Tax ConferenceInternational Tax Conference 99

COMBATING FRAUD COMBATING FRAUD - MAIN PROBLEM- MAIN PROBLEM

MISSING TRADER FRAUD IN INTRA-MISSING TRADER FRAUD IN INTRA-COMMUNITY TRADE OF GOODSCOMMUNITY TRADE OF GOODS

23 January23 January 2009 2009 International Tax ConferenceInternational Tax Conference 1010

COMBATING FRAUDCOMBATING FRAUD

Commission communication in May Commission communication in May 20062006

THREE POSSIBLE APPROACHES TO THREE POSSIBLE APPROACHES TO COMBATING MISSING TRADER FRAUD :COMBATING MISSING TRADER FRAUD :

1.1. Increased cooperation between Member StatesIncreased cooperation between Member States

2.2. Taxation of intra-community suppliesTaxation of intra-community supplies

3.3. Application of generalised Reverse ChargeApplication of generalised Reverse Charge

23 January23 January 2009 2009 International Tax ConferenceInternational Tax Conference 1111

COMBATING FRAUDCOMBATING FRAUD

DEBATE CONCLUDED (temporarilly)DEBATE CONCLUDED (temporarilly)

CONCLUSION IS TO CONCENTRATE ON CONCLUSION IS TO CONCENTRATE ON RE-INFORCING THE EXISTING SYSTEMRE-INFORCING THE EXISTING SYSTEM

23 January23 January 2009 2009 International Tax ConferenceInternational Tax Conference 1212

COMBATING FRAUDCOMBATING FRAUD

Strategy involves 3 categories of Strategy involves 3 categories of actions:actions:

1) Those aimed at preventing potential 1) Those aimed at preventing potential fraudsters from abusing the system;fraudsters from abusing the system;

2) Those aimed at enhancing the tools 2) Those aimed at enhancing the tools for detection;for detection;

3) Those aimed at improving the 3) Those aimed at improving the possibility of collecting unpaid tax. possibility of collecting unpaid tax.

23 January23 January 2009 2009 International Tax ConferenceInternational Tax Conference 1313

LONGER TERM ISSUESLONGER TERM ISSUES

2 FUNDAMENTAL CHALLENGES2 FUNDAMENTAL CHALLENGES

HOW CAN WE FURTHER FACILITATE HOW CAN WE FURTHER FACILITATE TRADE IN THE INTERNAL MARKETTRADE IN THE INTERNAL MARKET

WHILST SAFEGUARDING TAX WHILST SAFEGUARDING TAX REVENUES ?REVENUES ?

23 January23 January 2009 2009 International Tax ConferenceInternational Tax Conference 1414

PROCESS OF EVOLUTIONPROCESS OF EVOLUTION

A POTTED HISTORY OF EUROPEAN VATA POTTED HISTORY OF EUROPEAN VAT

23 January23 January 2009 2009 International Tax ConferenceInternational Tax Conference 1515

11stst and 2 and 2ndnd VAT Directives VAT Directives (April 1967)(April 1967)

Legal and Political commitment to the Legal and Political commitment to the establishment of a common VAT establishment of a common VAT system based on taxation at ORIGIN.system based on taxation at ORIGIN.

23 January23 January 2009 2009 International Tax ConferenceInternational Tax Conference 1616

Attempts to apply origin Attempts to apply origin system in the 1980s and 1990ssystem in the 1980s and 1990s

Rules and tax rate of country of origin Rules and tax rate of country of origin (implying quasi-complete (implying quasi-complete harmonisation)harmonisation)

Receipts reallocated to country of Receipts reallocated to country of consumptionconsumption

23 January23 January 2009 2009 International Tax ConferenceInternational Tax Conference 1717

Why has origin system not Why has origin system not been implemented?been implemented?

Reluctance to give up fiscal Reluctance to give up fiscal sovereignty and accept the necessary sovereignty and accept the necessary harmonisation of rates etc.harmonisation of rates etc.

Reluctance to rely on other Member Reluctance to rely on other Member States to collect a substantial portion States to collect a substantial portion of VAT revenue.of VAT revenue.

23 January23 January 2009 2009 International Tax ConferenceInternational Tax Conference 1818

What has happened since What has happened since 2000?2000?

Emphasis increasingly placed on Emphasis increasingly placed on taxing in country of consumptiontaxing in country of consumption

Harmonisation efforts concentrated on Harmonisation efforts concentrated on areas where compliance burdens could areas where compliance burdens could be reduced without undermining fiscal be reduced without undermining fiscal sovereigntysovereignty

23 January23 January 2009 2009 International Tax ConferenceInternational Tax Conference 1919

Where are we now?Where are we now?Since 1993:Since 1993:

B2C supplies of goods above minimum B2C supplies of goods above minimum threshold: taxed in country of threshold: taxed in country of consumption (supplier required to consumption (supplier required to register in country of consumption)register in country of consumption)

B2B supplies of goods: taxed in B2B supplies of goods: taxed in country of consumption via I. C. supply country of consumption via I. C. supply plus I.C. Acquisitionplus I.C. Acquisition

23 January23 January 2009 2009 International Tax ConferenceInternational Tax Conference 2020

Where are we now?Where are we now?

From 2010:From 2010:

B2B supplies of services will be taxed B2B supplies of services will be taxed in country of consumption using in country of consumption using reverse charge mechanismreverse charge mechanism

From 2015:From 2015:

Certain B2C supplies of services will be Certain B2C supplies of services will be taxed in the country of consumption taxed in the country of consumption using a one stop shop mechanismusing a one stop shop mechanism

23 January23 January 2009 2009 International Tax ConferenceInternational Tax Conference 2121

WHERE WILL WE BE IN THE WHERE WILL WE BE IN THE FUTURE?FUTURE?

DESTINATION BASED SYSTEM (THUS DESTINATION BASED SYSTEM (THUS RESPECTING FISCAL SOVEREIGNTY)RESPECTING FISCAL SOVEREIGNTY)

MIGHT BE NECESSARY/ POSSIBLE TO MIGHT BE NECESSARY/ POSSIBLE TO RE-THINK CURRENT RULES RE-THINK CURRENT RULES REGARDING RATESREGARDING RATES

23 January23 January 2009 2009 International Tax ConferenceInternational Tax Conference 2222

WHERE WILL WE BE IN THE WHERE WILL WE BE IN THE FUTUREFUTURE??

FURTHER DEVELOPMENT OF 1 STOP FURTHER DEVELOPMENT OF 1 STOP SHOP PRINCIPLESHOP PRINCIPLE

SINGLE ON-LINE RETURN FOR ALL EU SINGLE ON-LINE RETURN FOR ALL EU SUPPLIES (?)SUPPLIES (?)

23 January23 January 2009 2009 International Tax ConferenceInternational Tax Conference 2323

WHERE WILL WE BE IN THE WHERE WILL WE BE IN THE FUTUREFUTURE??

POSSIBLE NEW WAYS OF COLLECTING POSSIBLE NEW WAYS OF COLLECTING TAX (?)TAX (?)