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Titel
8 PwC
Mónica Azcárate
(VAT-Team Frankfurt)
Tel.: +49 69 9585-6111
monica.azcarate@de.pwc.com
Martin Diemer
(VAT-Team Frankfurt)
Tel.: +49 69 9585-6104
martin.diemer@de.pwc.com
Green Paper on the future of the VAT system
Part 1: The Green Paper and strategies against VAT fraud
Over the course of time VAT receipts accounted for significant part of the national tax revenues of EU Member States.
As a reaction to the consolidation needs resulting from the financial crisis or in the context of a longer-term shift towards
indirect rather than direct taxation, several Member States have recently increased VAT rates or are considering doing so.
The objective of the Green Paper published by the Commission on December 12, 2010 is to trigger and encourage public
debate on the future of the EU VAT system. The Commission therefore invites all interested parties to submit their contributions
in response to the questions raised in the Green Paper by May 31, 2011.
Besides tax avoidance and losses due to insolvencies the shortfall of VAT within the European VAT system is largely
attributable to fraud resulting in part from the endemic weaknesses of the current provisions, which, in particular, allow
VAT-free cross-border purchases of goods and services. The current VAT system distinguishes between supplies among
taxable persons (business to business or “B2B”) and supplies to final consumers (business to consumer or “B2C”). For crossborder
B2B transactions taxation is at the rate and conditions of the Member State of destination, whereas B2C supplies are
normally taxed in the Member State where the sale of goods is made or where the supplier is established. This distinction is
the potential weak spot and a source of vulnerability to fraud. Consistency between domestic and intra-EU transactions
could be achieved by applying a reverse charge mechanism on domestic B2B transactions.
The so called one-stop-scheme proposed by the Commission in 2004 is still of significance in the course of the present
discussions. Under this system traders would be allowed to use a single VAT number for all supplies made throughout the
EU and submit one single VAT declaration for all taxable turnovers made within the EC. As long as VAT is based on taxation
at destination, the one-stop-shop is desirable as a simplification measure and would increase compliance and cross-border
trade.
A review of the VAT collection system was launched by the Commission to find ways of improving and simplifying the
collection of VAT by means of modern technology or financial intermediaries. It is further suggested that all invoice data be
sent to a central VAT monitoring database from which the tax authorities could obtain information more quickly. The VAT
compliance process and internal controls of the taxpayers should be certified, which would increase trust between taxpayers
and tax authorities. In one further step the entrepreneur uploads predefined transaction data into a secure VAT data
warehouse maintained by him and being accessible to the tax authorities. Finally, it is discussed to enhance the dialogue
between tax authorities and taxpayers, for instance by setting up a permanent discussion forum allowing tax authorities
and business representatives at EU level to exchange views. The Commission encourages all interested parties to bring up
issues other than those discussed in the Green Paper in order to launch as broad a debate as possible. (MH)