Select Committee on European Scrutiny Eighteenth Report


4 Value Added Tax

(25221)

5051/04

COM(03) 822

Draft Council Directive amending Directive 77/388/EC as regards the place of supply of services

Legal baseArticle 93 EC; consultation; unanimity
DepartmentHM Customs and Excise
Basis of considerationSEM of 26 March 2004
Previous Committee ReportHC 42-ix (2003-04), para 19 (4 February 2004)
To be discussed in CouncilNot known
Committee's assessmentPolitically important
Committee's decisionCleared (by Resolution of the House of 16 March 2004)

Background

4.1 In October 2002 the Commission published a Communication reviewing the definition of "the place of supply of services" for Value Added Tax (VAT) purposes. A Commission Communication of October 2003 on wider VAT issues also covered this matter. The draft Directive in the current document would amend the Sixth VAT Directive, 77/388/EEC, in relation to the rules determining the place of taxation for supplies of services made by one business to another. Presently most supplies of services are treated as made where the supplier is established. For the future they would as far as possible be taxed where they are consumed. They would be treated as made where the customer is established, with exceptions for certain services. Both the 2003 Commission Communication and the draft Directive were discussed in European Standing Committee B on 10 March 2004.[8]

The Regulatory Impact Assessment

4.2 The Paymaster General (Dawn Primarolo) now sends us the Government's Regulatory Impact Assessment for the draft Directive. The thrust of this assessment is very much in line with the comment the Minister made to us in her original Explanatory Memorandum that "The Government fully supports the Commission's overall aim to achieve taxation in the place of consumption, and this proposal represents a significant step in the right direction." The assessment concludes:

"This measure provides a clear benefit to UK suppliers overall, as it will allow them to compete in an increasingly competitive market on level terms with suppliers of the same types of services that are outside the EU. Further, it will reduce burdens on UK businesses in having to comply with the VAT requirements of other Member States and in making refund claims."

Conclusion

4.3 We are grateful to the Minister for this additional information.


8   See Stg Co Deb, European Standing Committee B, cols. 3-22. Back


 
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