DETERMINATION OF LIABILITY FOR VAT
(19681)
13408/98
COM(98) 660
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Draft Directive amending Council Directive 77/388/EEC as regards the
determination of the person liable for payment of Value Added Tax.
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| Legal base:
| Article 93 EC; unanimity
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| Department: |
HM Customs and Excise |
| Basis of consideration:
| Letter of 11 October 2000
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| Previous Committee Report:
| HC 34-vi (1998-99), paragraph 7 (20 January 1999)
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| Discussed in Council:
| 17 October 2000 |
| Committee's assessment:
| Politically important |
| Committee's decision:
| Cleared |
Background
14.1 The current system of Value Added Tax (VAT)
is designed so that the tax is directly collected by the Member
State on whose territory the consumption of the goods or services
sold is deemed to take place. This has given rise to complex legislation
regarding the determination of the person liable for payment of
VAT. In particular, there is a series of optional arrangements
for collecting VAT where the person liable for VAT is not established
in the Member State where the transaction takes place. We reported
last year on a Commission proposal which aimed to simplify the
current arrangements. We noted that the Minister was concerned
about the possible loss of the option, currently available in
the UK, to make the recipient liable for VAT payment where the
trader is not established in the UK (the so called "reverse
charge" option). With that in mind, and the absence of a
Regulatory Impact Assessment, we left the document uncleared.
The Minister's letter
14.2 The Paymaster General (Dawn Primarolo) wrote
to us on 11 October 2000 to tell us that, in the negotiations
on this document, it has been agreed to drop the proposal to remove
the "reverse charge" option. The Minister says that:
"The package as it now
stands will mean little change to UK practices but it will have
significant benefits for businesses trading on a non-established
basis in other Member States because they will no longer be required
to appoint a tax representative there. This simplifies procedures,
creates consistency of treatment, and reduces UK business costs".
14.3 As a result of the changes, the Minister
says that a Regulatory Impact Assessment is no longer needed.
14.4 The Minister's letter also explained that
this proposal was moving forward quickly and might be agreed at
the ECOFIN meeting on 17 October 2000. In that event she intended
to give the UK's agreement to the Directive, notwithstanding that
the document had not cleared scrutiny. We understand that the
Directive was agreed at ECOFIN on 17 October.
Conclusion
14.5 We are glad to see the Minister's assurances
that this proposal, as revised, will be helpful to UK business
interests. We accept that, in the circumstances, it was reasonable
for the Minister to override the scrutiny reserve. On the basis
of the Minister's letter, we clear the document.
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