3 VALUE ADDED TAX
(19251)
9741/98
COM(98) 377
| Draft Directive amending Directive 77/388/EEC as regards the rules
governing the right to deduct Value Added Tax; and draft Regulation on
verification measures, measures relating to the refund system and
administrative co-operation measures necessary for the application of the
proposed Directive.
|
| Legal base | Article 99 EC; consultation; unanimity
|
| Department | HM Customs and Excise
|
| Basis of consideration |
Minister's letter of 30 May 2003 |
| Previous Committee Report |
HC 34-xxii (1998-99), paragraph 3 (16 June 1999)
|
| To be discussed in Council
| None planned |
| Committee's assessment | Politically important
|
| Committee's decision | Not cleared; further information requested
|
Background
3.1 In June 1999 our predecessors considered this Commission
proposal for closer harmonisation of the VAT rules on the right
to deduct input tax, relating to the recovery of VAT incurred
in another Member State and to expenditure not eligible for full
deduction. They were concerned about the effect on the UK's input
tax blocking rules, and about the relationship between this limited
proposal and the Commission's broader ambitions for a new common
VAT system.[14] They
concluded:
"Whilst we thank the Minister for letting us see the
outcome of consultations in the UK, we are not clear how far they
may affect the Government's approach to these proposals, in terms
of either handling (for example, whether the two proposals could
be considered separately) or substance. Nor do we know whether
discussions of the proposal since our Report last year[15]
have provided any of the clarifications the Government sought.
We invite the Minister to provide us with an update of the Government's
views on these proposals, taking account of the consultations
and any discussions with other Member States, and on the prospects
for progress on them in the next Presidency."
The Minister's letter
3.2 The Paymaster General (Dawn Primarolo) writes now
to tell us that there was until last summer little negotiation
on this proposal. She says that harmonisation in relation to input
tax blocking rules has not progressed and it is now recognised
that Member States will continue with their existing practices.
This means the UK's input tax blocks would be safeguarded. As
for the proposed new cross-border deduction mechanism, the Minister
says that this remains problematical for many Member States, including
the UK. She says that the Council agreed last month that work
on the dossier should be suspended pending completion of other
elements of the modernisation of the VAT system.
Conclusion
3.3 We are grateful to the Minister for her update
on this document and note that the proposals are effectively suspended.
3.4 However,
although we recognise there has been very little activity on this
matter and the issue may now be dead, our predecessors clearly
expected a response to their specific questions. We should like
the Minister to let us know what the answers are to those questions,
in so far as they remain relevant.
3.5 We continue to hold the document
under scrutiny.
14 See headnote. Back
15
See (19251) 9741/98: HC 155-xxxvi (1997-98), paragraph 3 (29 July
1998). Back
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