68 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
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| Basis of consideration | Minister's letter of 28 July 2010
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| Previous Committee Report | HC 5-vii (2009-10), chapter 5 (20 January 2010) and HC 5-xvi (2009-10), chapter 1 (30 March 2010)
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| Discussion in Council | Not known
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
68.1 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.[294]
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.
68.2 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.[295]
The aim of the proposal was to provide clear and uniform interpretation
of selected areas of the VAT Directive.
68.3 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
preceding year that were 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[296]
— 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.
68.4 When the previous Committee considered this
document, in January 2010, it heard, in relation to "place
of supply" rules, that:
- although the then 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
our predecessors 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.
68.5 The previous Committee commented that, clearly,
this draft Regulation would serve a useful purpose and it recognised
that the draft was largely unexceptionable. Nevertheless, before
considering the document further it 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.
68.6 Our predecessors considered the matter again
in March 2010, having heard from the then Government that:
- the Spanish Presidency was
then producing a compromise text of the draft Regulation which,
when issued, was expected to be discussed at Council working party
meetings planned for 14 April and 5 May 2010;
- depending on the content of the compromise text
and the outcome of the meetings, the Presidency might then take
the proposal to the ECOFIN Council on either 18 May or 8 June
2010 for political agreement;
- the Government had held initial discussions with
UK business, through existing HMRC and Treasury liaison fora,
including the Joint VAT Consultative Committee and the VAT Forum;
- this had led to creation of a Joint Working Group,
to review the text in detail;
- business welcomed the clarity and consistency
that such implementing measures would provide and so early agreement
would be advantageous, provided the content was satisfactory;
- the Joint Working Group was to undertake a review
of the Presidency compromise text when it emerged to test that;
and
- this would inform the Government negotiation
position for the meetings in April and May 2010.
68.7 The then Minister told the previous Committee
that:
"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."
It said that:
- it did not yet wish, in the
absence of a definitely acceptable text, to clear the document;
- if, however, the Government judged it appropriate
the Committee 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;
- whether the Government made use of this dispensation
or not it would, of course, wish to have a further account of
developments on the proposal; and
- meanwhile the document remained formally under
scrutiny. [297]
The Minister's letter
68.8 The Exchequer Secretary to the Treasury (Mr
David Gauke) tells us that:
- in the event Council negotiations
have still not concluded;
- the Belgian Presidency is taking the matter forward
as a priority and may be able to conclude discussions in the next
few months, with a text going to the ECOFIN Council thereafter;
- officials have continued discussions with UK
business and have feed its views into the EU discussions;
- UK business welcomes the overall clarity and
consistency that the latest text provides and would now like to
see agreement as soon as possible; and
- on that basis, the Government would be prepared
to accede to a political agreement on the proposal if it should
go the Council before the end of the Belgian Presidency.
Conclusion
68.9 We are grateful to the Minister for his account
of where matters stand on this draft Regulation. In the light
of the welcome of UK business for the latest text of the proposal
we now clear the document.
294 (25558) 8470/04: see HC 42-xx (2003-04), chapter
23 (18 May 2004). Back
295
(26014) 13394/04: see HC 42-xxxv (2003-04), chapter 12 (3 November
2004). Back
296
(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, 16 February 2006, cols.
3-20. Back
297
See headnote. Back
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