9 Value added taxation
| Committee's assessment
| Legally and politically important |
| Committee's decision | Not cleared from scrutiny; further information awaited
|
| 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
9.1 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.
9.2 When we last considered the proposal, in December 2014, we
reminded the Government of our wish to receive regular reports
about developments in Council consideration of the proposal and
asked to receive the next report no later than shortly after the
end of the Latvian Presidency. In fact the Government now gives
us a full account of the context within which that Presidency
is starting work on the proposal.
9.3 We are grateful for this information about
Council consideration of the draft Directive. We look forward
to further reports as negotiations progress. 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
9.4 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.
9.5 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.
9.6 When we first considered the proposal in November
2013, 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.
When we next considered the draft Directive, in December 2014,
we heard from the Government about an acceptable Greek Presidency
text on provisions in relation to VAT return processes, about
less helpful Italian Presidency consideration of information requirements
for a standard VAT return and about the Latvian Presidency intention
to continue negotiations. We reminded the Government of our wish
to receive regular reports about developments in Council consideration
of the proposal and asked to receive the next report no later
than shortly after the end of the Latvian Presidency.
9.7 Meanwhile the document remained under scrutiny.
The Minister's letter of 19 February 2015
9.8 The Financial Secretary to the Treasury (Mr David
Gauke) writes now to give us some additional context as Latvia
begins its Presidency, first explaining that:
· many
Member States have continued to press for a standard VAT return
that would allow them to maintain their existing national approach
in relation to information requirements — that is not surprising,
the Government continues to do much the same;
· the
balance of opinion within the Council on information requirements
broadly reflects Member States' current national approach;
· a small
number of Member States favour a simplified VAT return and are
sympathetic to a simple approach such as the UK's; and
· many
other Member States are at variance with this position —
they favour a more complex return which closely reflects their
existing national version (with numerous boxes which they regard
as a necessary compliance tool).
9.9 The Minister continues that the Italian Presidency's
accommodation of such requests resulted in an increasing total
number of possible boxes which would be imposed on all Member
States through a mandatory common template, with requests for
additional (optional) information requirements beyond the basic
mandatory boxes (such as VAT due and deductible VAT) including:
· the
category of business activity;
· an IBAN
/ international bank account code;
· e-mail
address and/or telephone number;
· seven
boxes on categories of transactions where VAT is due;
· seven
boxes on categories of transactions where VAT is not due;
· 16 boxes
regarding categories of input tax deductions; and
· some
of these boxes are further split to require transactions for each
different rate of VAT.
9.10 The Minister says that:
· in
general this situation reflects current practice in many Member
States, but contrasts unfavourably with the UK's simple approach
of a nine box return;
· the
Government continues to promote the merits of the UK approach
in the Council, bilaterally with key Member States and at other
relevant meetings;
· however,
many Member States have established compliance systems reliant
on a return with numerous boxes;
· they
see benefit in sharing best practices but they make the point
that flexibility is needed to respond to individual national circumstances
— this reflects the concerns some Member States have on
subsidiarity and proportionality;
· reaching
agreement on a mandatory common standard VAT return that meets
the objective of simplifying obligations for business looks increasingly
unlikely; and
· the
Government continues to work closely with each Presidency and
with the Commission to steer towards an outcome that offers benefits
for UK businesses trading across Member States.
9.11 The Minister tells us that:
· at
its first Council working group meeting on this dossier in mid-January,
the Latvian Presidency noted that most Member States support the
objective to simplify businesses' obligations;
· however,
it also noted key issues remain — the information requirements
on a standard VAT return and the Italian Presidency's idea of
a mandatory common template; and
· in an
attempt to make progress, the Latvian Presidency has also asked
Member States to consider a standard VAT return on the basis of
implementation being optional for Member States.
9.12 The Minister comments that:
· such
an approach would effectively mean UK businesses could continue
to benefit from the simple UK VAT return for domestic transactions,
those involved in cross border trade would benefit where Member
States, in which country they trade, adopt a simplified VAT return
and the direction of travel set by the proposal would enable businesses
to apply pressure for reform in those Member States that do not
have, or adopt, a simplified VAT return;
· this
may be an acceptable outcome which could be improved if supported
by an EU web portal;
· the
Commission has recently introduced a limited web portal to support
the recent changes to the VAT place of supply rules (in respect
of telecommunications, broadcasting and electronically supplied
services);
· this
portal provides, in a single place, information about the relevant
rules in all Member States, including rules on VAT rates and invoicing,
and is available to all businesses across the EU;
· the
Government supports this initiative and is pressing for a wider
application of it to be progressed, including details of Member
States' VAT returns and the processes behind them as well as to
provide businesses with more information on the underlying VAT
rules; and
· this
further expansion could provide substantial benefit to businesses
trading across Member States.
9.13 The Minister concludes that it is not yet clear
what other Member States think about this and the Latvian Presidency
is continuing to reflect on the way forward, with its next working
group meeting scheduled for 27 February.
Previous Committee Reports
Twenty-fifth Report HC 83-xxii (2013-14), chapter
8 (27 November 2013); and Twenty-fifth Report HC 219-xxiv (2014-15),
chapter 6 (10 December 2014).
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