1 Value added taxation
| (31234)
17760/09
COM(09) 672
| Draft Council Regulation laying down implementing measures for Directive 2006/112/EC on the common system of value added tax (Recast)
|
| Legal base | Article 113 TFEU; consultation; unanimity
|
| Department | HM Treasury
|
| Basis of consideration | Minister's letter of 29 March 2010
|
| Previous Committee Report | HC 5-vii (2009-10), chapter 5 (20 January 2010)
|
| To be discussed in Council | Possibly 18 May or 8 June 2010
|
| Committee's assessment | Politically important
|
| Committee's decision | Not cleared; further information requested
|
Background
1.1 In 2006 Council Directive 2006/112/EC, the VAT Directive,
which entered into force on 1 January 2007, consolidated the legislation
governing value added taxation in the EU.[1]
Article 397 of the VAT Directive says "The Council, acting
unanimously on a proposal from the Commission, shall adopt the
measures necessary to implement this Directive." Article
398 establishes "the VAT Committee", a Commission-chaired
advisory body, to examine questions raised by the Commission,
or Member States, in order to agree how the provisions of the
Directive should be applied, where there is some doubt.
1.2 With this draft Regulation the Commission
proposed a recast (that is codification, or consolidation, together
with some substantive amendment) of Council Regulation (EC) No
1777/2005, which prescribed the implementing measures for the
pre-2007 VAT legislation.[2]
The aim of the proposal was to provide clear and uniform interpretation
of selected areas of the VAT Directive.
1.3 In addition to recasting the measures in
Council Regulation (EC) No 1777/2005 to reflect the structure
and numbering of the VAT Directive, there were articles in the
proposal derived from guidelines as to how the VAT Directive's
provisions should be interpreted, which had been unanimously,
or nearly unanimously, agreed by Member States in the VAT Committee.
New measures proposed were of three types:
- Guidelines agreed within the
last year that are directly linked to the changes to the rules
for "place of supply" in Council Directive 2008/8/EC,
which entered into force on 1 January 2010[3]
— there were 30 of these, forming by far the largest and
most significant category of measures;
- four Guidelines relating to different elements
of the VAT Directive which were agreed in the VAT Committee prior
to adoption of Council Regulation (EC) No 1777/2005, but which
for various reasons were not included within it; and
- four Guidelines relating to different elements
of the VAT Directive which had been agreed in the VAT Committee
since adoption of Council Regulation (EC) No 1777/2005.
1.4 When we considered this document, in January
2010, we heard, in relation to "place of supply" rules,
that:
- although the Government broadly
welcomed the proposal and supported the objectives in principle, it
had identified a small number of issues on which it proposed
to undertake some further analysis and consult with UK business;
- the Government also needed to ensure sufficient
time was built into the discussions of the proposal to enable the
detail to be tested against commercial transactions undertaken
under the new "place of supply" rules, before being finally
consolidated into a legally binding Regulation; and
- it would therefore continue to work with business
to monitor what happens in practice and to obtain a clearer picture on
these issues.
On the other new provisions in the draft Regulation
we heard that they covered a range of topics which broadly reflected
the Government's existing approach or which provided welcome clarifications,
but that while it would be desirable to achieve agreement to this
category of new measures, they were not as important as the "place
of supply" category.
1.5 We commented that, clearly, this draft Regulation
would serve a useful purpose and we recognised that the draft
was largely unexceptionable. Nevertheless, before considering
the document further we asked to hear from the Government about
progress in improving the text in the light of its further analysis
and its consultations with UK business. Meanwhile the document
remained under scrutiny.[4]
The Minister's letter
1.6 The Financial Secretary to the Treasury (Mr
Stephen Timms) writes now to update us on where things stand on
this proposal. In relation to Council consideration the Minister
says that:
- the Spanish Presidency so far
has held two Working Party meetings for a first consideration
of the draft Regulation;
- it is currently producing a compromise which,
when issued, is expected to be discussed at meetings planned for
14 April and 5 May 2010; and
- depending on the content of the compromise text
and the outcome of the meetings, the Presidency may then take
the proposal to the ECOFIN Council on either 18 May or 8 June
2010 for political agreement.
1.7 On consultation with UK business the Minister
says that:
- the Government has held initial
discussions with business, through existing HMRC and Treasury
liaison fora, including the Joint VAT Consultative Committee and
the VAT Forum;
- this has led to creation of a Joint Working Group,
to review the text in detail;
- business welcomes the clarity and consistency
that such implementing measures would provide and so early agreement
would be advantageous, provided the content is satisfactory;
- the Joint Working Group will undertake a review
of the Presidency compromise text when it emerges to test that;
and
- this will then inform the Government negotiation
position for the meetings in April and May 2010.
1.8 Finally the Minister says:
"If the legal text or the outcome of those discussions
provides UK businesses with the right level of clarity and consistency,
then business will be keen to see early agreement and the Government
would certainly not wish to stand in the way of that."
Conclusion
1.9 We are grateful to the Minister for this
account of where matters stand on this draft Regulation. We note
that the Government may wish, if UK business is content with the
outcome of negotiations, to accede to a political agreement on
this proposal. We do not yet wish, in the absence of a definitely
acceptable text, to clear the document. However, if the Government
judges it appropriate we would be content for it to support a
political agreement, under the terms of Article (3)(b) of the
House of Commons Scrutiny Reserve Resolution of 17 November 1998.
1.10 Whether the Government makes use of this
dispensation or not we would, of course, wish to have a further
account of developments on the proposal. Meanwhile the document
remains formally under scrutiny.
1 (25558) 8470/04: see HC 42-xx (2003-04), chapter
23 (18 May 2004). Back
2
(26014) 13394/04: see HC 42-xxxv (2003-04), chapter 12 (3 November
2004). Back
3
(26739) 11439/05: see HC 34-v (2005-06), chapter 6 (12 October
2005), HC 34-xv (2005-06), chapter 3 (18 January 2006) and Stg
Co Debs, European Standing Committee B, 16 February 2006,
cols. 3-20. Back
4
See headnote. Back
|
