The European Commission has issued a VAT Action Plan which sets out plans for the next two years for the modernization of VAT in the European Union.
The Commission should propose legislation and to introduce common EU-wide measures to simplify the rules to help small and start-up businesses in e-commerce and streamline audits for companies engaged in this sector by the end of 2016.
In addition, the Commission will seek to improve cooperation between tax administrations including countries outside the EU, customs and law enforcement agencies, in order to strengthen the capacity of tax administrations to combat fraud.
The Commission will also provide an opportunity to have a lot of freedom for setting rates of value added tax for the states of the European Union.
Existing rules on tax rates that have been developed over two decades ago, in order to ensure neutrality, simplicity and adaptability to the VAT system.
The Commission has proposed the freedom to establish rates subject to appropriate safeguards to prevent excessive complexity and distortions of competition and that there was no impact on the functioning of the single market. The Commission has put forward two versions of this freedom but nevertheless this is not a purely technical issue since also it requires political discussion.
Vice-president Valdis Dombrovskis said: “Today we begin a dialogue with the European Parliament and EU member states to establish a simpler VAT system to be protected against fraud, the Commission responsible for these innovations already offered clear measures to address the fight against avoidance of corporation. “
Commissioner for Economic and Financial Affairs, Pierre Moscovici said: “VAT is a major source of tax revenue for the countries of the European Union, however, we are faced with a staggering budget deficit. This is a huge waste of money could be invested to the development and growth of jobs. “