Taxation and customs union

Public Consultation on the reform of VAT rates

Title

Open public consultation on the reform of VAT rates (proposal for a Council Directive amending Directive 2006/112/EC on the Common system of value added tax as regards the rules governing the application of VAT rates)

Policy fields

Taxation

Target groups

This open public consultation seeks the views of businesses, national administrations or authorities, academics, tax experts, representative organisations and the general public.

Period of consultation

From 20.12.2016 to 20.03.2017

Context of the consultation

On 7 April 2016 the Commission adopted an Action Plan on VAT - Towards a single EU VAT area. The Action Plan provides clear orientations towards a robust single European VAT area in relation to the definitive VAT system for cross-border supplies. In view of such reform, other aspects of VAT will have to be examined, such as the existing special rules for small enterprises (SMEs) and the VAT rates which can be applied by Member States. Hence the Action Plan also sets out actions to adapt the VAT system to the needs of SMEs and proposes options for a modernised policy on EU rules governing VAT rates.

Some of the initiatives stemming from the Action Plan have already been presented by the Commission, while others are being prepared (for a timeline of all the proposals contained in the Action Plan, see p.14 of that document). As part of the ongoing work, public consultation procedures have been or will be launched in respect of the following legislative proposals:

Objective of the consultation

The VAT Directive sets out general rules framing Member States' freedom to set VAT rates. These rules were intended to guarantee, above all, the neutrality, simplicity and workability of the VAT system.

This framework was originally established with the aim of arriving at a definitive VAT system based on the so-called 'origin principle', i.e. a system in which the location of the seller determines the tax treatment, including the rate. To avoid unfair competition, the origin system strictly requires Member States to tax the same goods at very similar rates (otherwise, sellers located in Member States with a higher VAT rate would suffer an unfair disadvantage compared with sellers located in low VAT countries). For this reason, the VAT directive set minimum taxation levels, in the hope that over time VAT rates would converge.

Nevertheless, given that over many years no progress was made on rate convergence, it was decided in 2011 to abandon the objective of introducing the origin-based VAT system in favour of a destination-based one, according to which the VAT applicable is the one where the buyer is located (so that the same tax rate is paid by all sellers).

By nature, the destination system allows greater rate differentiation between Member States with a lower risk for distortion of competition. The introduction of the destination system has opened up the possibility to reform rules on rates and make them less constraining for Member States. Consequently, the Commission intends to present a reform proposal in the autumn of 2017.

This Open Public consultation aims at obtaining stakeholders views' on the following aspects:

  • The need for EU action in the field of VAT rates;
  • The proper balance between harmonisation and Member States autonomy in setting VAT rates;
  • The problems and risks linked to differentiation of VAT rates within the Single Market;
  • The desirable direction for reform
  • Stakeholders' views on the proposed policy options.

Its results will feed into the review of the current rules on VAT rates.

 

How to submit your contribution

Respondents can fill an online questionnaire via the EU Survey Application which is available at the link below. Responses are submitted through that application.

View the questionnaire

Questionnaire

Contact details

responsible service

Directorate-General for Taxation and Customs Union
VAT - Unit TAXUD/C1

e-mail

TAXUD-C1-SECTOR- D@ec.europa.eu

 

postal address

European Commission
Directorate-General for Taxation and Customs Union
VAT - Unit TAXUD/C1
Rue Joseph II 79, Office J79 05/065
B-1049 Brussels
Belgium 

View the contributions

In the interests of transparency, organisations have been invited to provide the public with relevant information about themselves by registering in the Interest Representative Register and subscribing to its Code of Conduct. If the organisation is not registered, the submission is published separately from the registered organisations.

Results of consultation and next steps

Protection of personal data