6 Value added taxation
| Committee's assessment
| Legally and politically important |
| Committee's decision | Not cleared from scrutiny; further information requested
|
| Document details | Draft Council Directive concerning a standard VAT return
|
| Legal base | Article 113 TFEU; consultation; unanimity
|
| Department
Document numbers
| HM Treasury
(35419), 15337/13 + ADDs 1-3, COM(13) 721
|
Summary and Committee's conclusions
6.1 The Commission has proposed this draft Directive to introduce
an EU level standard VAT return, aiming for a balance between
simplification for EU business and the needs of all 28 tax authorities.
6.2 When we considered the proposal in January, we
heard that while the Government accepted that there might be a
case for standardised VAT return, it thought that the draft Directive
went wider than that and would have unwelcome impacts. We noted
that, as the draft Directive required unanimous agreement in the
Council, the UK was well placed to insist on a more acceptable
text or even a non-legislative solution to cross-border problems.
We looked forward to hearing, at regular intervals, about progress
in this regard.
6.3 The Government now tells us of an acceptable
Greek Presidency text on provisions in relation to VAT return
processes, of less helpful Italian Presidency consideration of
information requirements for a standard VAT return and of the
Latvian Presidency intention to continue negotiations.
6.4 We are grateful for this information about
developments on the draft Directive.
6.5 However, we are concerned that the Government's
report does not meet our request for information at regular intervals
— we would have expected to receive a first report at the
end of the Greek Presidency. So we wish to receive the next report
no later than shortly after the end of the Latvian Presidency.
6.6 Meanwhile the document remains under scrutiny.
Full details of
the documents: Draft Council Directive
amending Directive 2006/112/EC on the common system of value added
tax as regards a standard VAT return: (35419), 15337/13 + ADDs
1-3, COM(13) 721.
Background
6.7 The principal VAT Directive, Directive 2006/112/EC,
requires all taxable persons to submit a declaration (a VAT return)
with all the information needed to calculate the tax that has
become chargeable and the deductions to be made, including, as
required, the total value of the relevant transactions. However,
Member States retain discretion over the content of the declaration,
frequency of submission, payment, error correction and all other
related processes.
6.8 In November 2013 the Commission proposed this
draft Directive to amend the principal VAT Directive to introduce
a standard EU VAT return. Achieving a balance between simplification
for EU business and the needs of all 28 tax authorities, for whom
the VAT return is an important tool, is challenging. The Commission
therefore tried to produce a compromise solution in order to provide
a certain amount of flexibility. It proposed an implementation
date of December 2016. In an attempt to minimise the risks associated
with any implementation, the Commission annexed to the draft Directive
its Detailed Implementation Plan — a series of preparatory
actions it intended to undertake.
6.9 When, in January, we considered the proposal
we learnt that the Government considered that, in proposing to
set defined parameters for VAT returns and in standardising submission
and correction procedures, the proposal raised issues of subsidiarity,
particularly in relation to UK's risk analysis and taxpayer compliance
activity. We heard that while the Government accepted that there
might be a single market case for an EU level standardised VAT
return, it thought that the draft Directive went wider than that
and would have unwelcome impacts.
6.10 We considered the proposal for compliance with
subsidiarity and concluded that the Commission had sufficiently
demonstrated a strong internal market justification for EU-level
action. We also considered that many of the Government's arguments,
notably concerning the inclusion of non-cross-border business
in the proposal and its (as yet unquantified) impact on UK businesses,
raised issues of proportionality rather than subsidiarity. Accordingly,
we did not recommend that the House adopt a Reasoned Opinion on
this proposal. But we noted that, as the draft Directive required
unanimous agreement in the Council, the UK was well placed to
insist on a more acceptable text or even a non-legislative solution
to cross-border problems. We looked forward to hearing, at regular
intervals, about progress in this regard. Meanwhile the document
remained under scrutiny.
The Minister's letter of 27 November 2014
6.11 The Financial Secretary to the Treasury (Mr
David Gauke) writes now to update us on progress under the Greek
and Italian Presidencies on the draft Directive, first reminding
us that while it could offer real benefits for businesses involved
in cross border trade, it would be challenging to achieve a balance
between simplification for EU business and the needs of 28 tax
authorities.
6.12 The Minister then tells us that:
· the
Greek Presidency concentrated on provisions in relation to VAT
return processes;
· essentially
this covered error correction, submission of returns (including
by electronic means) and payment of VAT; and
· the
consequence is that the current text would enable the UK to retain
its existing procedures, which are much favoured by UK businesses.
6.13 The Minister tells us that an orientation discussion
at the June ECOFIN Council set the tone for the Italian Presidency.
In particular it was suggested that:
· the
objective should be to reduce administrative burdens for businesses
and national tax authorities, whilst at the same time ensuring
no increase in the overall burden for businesses in any individual
Member State; and
· the
Commission should explore a cost effective solution for setting
up an EU VAT web portal to provide readily available information
to businesses on the VAT rules across the Member States.
6.14 The Minister continues that:
· the
Italian Presidency has begun discussions on the information requirements
of the standard VAT return;
· some
Member States are keen to include more and more information —
others, in particular the UK, want to keep things as simple as
possible;
· the
UK's current nine box return is supported by UK businesses and
they want to retain that;
· as the
Office for Tax Simplification said in its recent report, Review
of the Competitiveness of the UK Tax Administration, "The
UK's VAT return always wins praise for simplicity — as one
person put it 'I support the idea of a common EU VAT return, but
only if the return is based on the UK model'";[6]
· however,
the Presidency has to date given ground and increased the information
requirements, and also suggested that a common template should
be mandatory; and
· the
Government and others do not agree and are therefore resisting
that, due to the potential for increased burdens, costs and errors
for businesses.
6.15 The Minister concludes by saying that:
· the
Italian Presidency gave a progress report to the ECOFIN Council
on 7 November and undertook to reflect on the way forward; and
· from
bilateral discussions, the Government knows that the forthcoming
Latvian Presidency plans to continue negotiations.
Previous Committee Reports
Twenty-fifth Report HC 83-xxii (2013-14), chapter
8 (27 November 2013).
6 See Review of the Competitiveness of the UK Tax Administration. Back
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