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The aim of the reform is to minimise the
administrative burden for companies engaged in
cross-border operations and prevent distortions of
competition between countries operating different VAT
rates.
It does this by shifting the place – and thus also
the rate – of taxation from the service provider's
country of establishment to that of the consumer. In
this way, all customers are charged the same VAT rate
regardless of their supplier's location.
The reform had been long delayed due to Luxembourg's
vetoing of the plans, which it claimed could cause it to
lose out on VAT revenues worth around €200 million per
year. The main concern related to earnings generated by
large electronic service companies, such as Amazon.com,
Skype or PayPal, which have all settled in Luxembourg,
attracted by its business-friendly VAT rate of 15% - the
lowest allowed within the EU.
However, under a compromise agreed last December (EurActiv
4/12/07), the small country obtained a delay in the
introduction of the new VAT system for electronic,
telecoms and broadcasting services, which will be
phased in from 2015 rather than implemented
directly as of 2010.
Under the deal, countries that are home to telecom
and electronic service businesses will be allowed to
keep their hands on 30% of the VAT revenues collected
after 2015, with only 70% going to the country of
consumption. This share would be cut progressively to
15% after 2017 and zero as of 2019, in order to ensure a
"smooth transition".
The reform package also introduces the possibility
for businesses to fulfill all their EU-wide VAT
obligations in the country of their establishment,
thanks to the creation of "one-stop shops". A
new, fully-electronic procedure for the reimbursement of
VAT incurred by companies in member states where they
are not established will also be set up, in order to
ensure a faster refund for claimants. Member states
will be required to pay interest if they are late making
the refunds.
EU Taxation Commissioner László Kovács welcomed
the Council's adoption of the new rules, saying they
would help to ensure a more even playing field for
businesses supplying services throughout the Community
and ensure a fairer distribution of VAT revenues.
"This is particularly true of services which can be
supplied at a distance where, as a result of current
rules, businesses have been locating in countries with
lower VAT rates. As a result, member states have seen
their revenues eroded," he said.
Small and medium-sized enterprises, represented by
UEAPME, added that the one-stop-shop system
would "dramatically diminish bureaucracy" and
put an end to "years of uncertainties in which SMEs
were potentially confronted with 27 different
administrative systems and collection formulas,
triggering unbearable compliance costs and acting as a
barrier to cross-border trade in the EU".
Source
: EurActiv - Brussels, Belgium, dated 13/02/2008
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