The European Commission held a debate on reform of the VAT framework on February 24. The Commission was preparing to publicate an Action Plan on VAT.
The European Union’s value-added tax system “needs reform”, said the commission. It needs to close the difference between theoretical VAT revenue receipts and the actual.
This was estimated at EUR180bn (USD198bn) in 2013. It was result from avoidance, cheating and providing by the states of the European Union of reduced VAT and tax benefits.
The VAT system creates administrative burdens nowadays, noted the European Commission, especially for small businesses and online companies. It said, that the VAT system should to be modernized in today’s digital environment because of innovative business models and technological progress.
The Commission issued a Roadmap earlier on February. Roadmap of the release of its Action Plan for a simple and efficient system of VAT to the single market that is going to be in March 2016.
The Action Plan is intended to summarize the achievements made since the 2011 and set out the direction for future work. The principle of the new rules it is the destination principle. It provides that supplies should be taxed where they are effectively used.
– Also it will include actions to solve a complexity of the VAT system, especially for SMEs; – actions to expand the scope of the VAT base by reviewing the VAT treatment of the activities of state bodies, taking into account the evolution in the states of EU towards privatization and deregulation of activities that reserved for the public sector; – and actions to strengthen the fight against VAT fraud, particularly through cooperation between tax administrations.