Documents considered by the Committee on 11 March 2015 - European Scrutiny Contents

22 Value added taxation

COMMITTEE'S ASSESSMENT Legally and politically important
COMMITTEE'S DECISION Cleared from scrutiny
DOCUMENT DETAILS Draft Council Directive concerning a standard VAT return
LEGAL BASE Article 113 TFEU; consultation; unanimity


HM Treasury

(35419), 15337/13 + ADDs 1-3, COM(13) 721


22.1 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. Negotiation of the proposal has proved difficult.

22.2 When in February we last considered the proposal we heard of a Latvian Presidency suggestion that there might be an optional standard VAT return and of the Government hope that the Commission might improve a new EU web portal in support of this solution.

22.3 The Government now tells us that all Member States support an optional standard VAT return, that the Presidency is likely to seek a political agreement on the basis of its solution to the negotiating difficulties, that the Commission is looking at ways to improve the web portal and that, in the Government's view, these are good outcomes for UK businesses. The Government asks us to now clear the document from scrutiny so that it might support a Latvian sponsored political agreement.


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.


22.5 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.

22.6 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.

22.7 When we 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 in February the Government gave us a full account of the context within which that Presidency was starting work on the proposal, mentioning in particular its request that Member States consider a standard VAT return on the basis of implementation being optional for Member States. We looked forward to further reports as negotiations progress. Meanwhile the document remained under scrutiny.


22.8 The Financial Secretary to the Treasury (Mr David Gauke), reminding us of the Latvian Presidency request to Member States to consider a standard VAT return on the basis of implementation being optional for Member States, says that at a Council working group meeting on 27 February all Member States signalled support for an optional standard VAT return. The Minister continues that:

·  this formed the basis of discussion and as a consequence there was broad agreement to reducing the information boxes on the standard VAT return;

·  Member States saw merit in a common format (in terms of numbering and content of the boxes) but saw no real benefit in any common presentation (colour, logo etc); and

·   Member States agreed that there should be no need for any of the provisions to be left to the comitology process.

22.9 The Minister reiterates his previous comments to us that:

·  an optional standard VAT return is an approach the Government could support since UK businesses trading across Member States could see a benefit;

·  it is unlikely that the Government will want to opt into a standard VAT return because UK businesses value the UK's existing simple nine box return and are very clear that they would prefer to keep that; and

·  the Government, with other Member States, continue to make the case for a wider application of the EU web portal as this initiative has the potential to provide substantial benefit to businesses trading across the EU.

22.10 The Minister then says that:

·  given the strong support from Member States the Government expects the Latvian Presidency to seek political agreement (in May or June) to an optional standard VAT return, with the proviso that work should then continue on the detail to reduce the number of information boxes and to firm up content;

·  overall, this would be a welcome outcome for UK businesses — they would continue to benefit from the simple UK return and those that trade with Member States which adopt a standard VAT return would benefit too;

·  businesses would also be able to call for reform in Member States that do not have a simplified VAT return; and

·  the Commission is now looking at ways to take forward the initiative for a wider application of the EU web portal building on the 2015 model so as to include additional information.

22.11 The Minister concludes by asking us, on the basis of the information he now provides, to consider clearing the proposal from scrutiny, in order that the Government could take a positive position at an ECOFIN Council should the Latvian Presidency seek political agreement.


Twenty-fifth Report HC 83-xxii (2013-14), chapter 8 (27 November 2013), Twenty-fifth Report HC 219-xxiv (2014-15), chapter 6 (10 December 2014) and Thirty-fourth Report HC 219-xxxiii (2014-15), chapter 9 (25 February 2015).

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