1. 15 May 2008 International Tax Conference 1 POSSIBLE FUTURE DEVELOPMENTS IN EUROPEAN VAT LAW Stephen Bill European Commission

2. 23 January 2009International Tax Conference2 WHY DO WE NEED AN EU VAT ? ART. 93 of Treaty requires harmonisation ART. 93 of Treaty requires harmonisation „ to the extent … necessary to ensure the establishment and functioning of the internal market “

3. 23 January 2009International Tax Conference3 CURRENT POLICY OBJECTIVES REDUCING TAX COMPLIANCE COSTS REDUCING TAX COMPLIANCE COSTS MODERNISING THE COMMON VAT SYSTEM MODERNISING THE COMMON VAT SYSTEM ENABLING MEMBER STATES TO MAINTAIN STABLE REVENUE BASES ENABLING MEMBER STATES TO MAINTAIN STABLE REVENUE BASES

4. 23 January 2009International Tax Conference4 SIMPLIFICATION MEASURES VAT PACKAGE (adopted) VAT PACKAGE (adopted) E-INVOICING E-INVOICING

5. 23 January 2009International Tax Conference5 MODERNISATION POSTAL SERVICES POSTAL SERVICES FINANCIAL SERVICES FINANCIAL SERVICES VOUCHERS AND OTHER PROMOTION SCHEMES VOUCHERS AND OTHER PROMOTION SCHEMES PUBLIC AUTHORITIES PUBLIC AUTHORITIES

6. 23 January 2009International Tax Conference6 REDUCED RATES PRIMARY ROLE OF VAT – RAISE REVENUE PRIMARY ROLE OF VAT – RAISE REVENUE

7. 23 January 2009International Tax Conference7 REDUCED RATES (locally delivered services) JULY 2008 PROPOSAL JULY 2008 PROPOSAL DECEMBER EUROPEAN COUNCIL CONCLUSIONS DECEMBER EUROPEAN COUNCIL CONCLUSIONS CURRENT ACTIVITIES CURRENT ACTIVITIES

8. 23 January 2009International Tax Conference8 REDUCED RATES (ENERGY & CLIMATE CHANGE) “GREEN“ PRODUCTS “GREEN“ PRODUCTS “GREEN“ HOUSING “GREEN“ HOUSING

9. 23 January 2009International Tax Conference9 COMBATING FRAUD - MAIN PROBLEM MISSING TRADER FRAUD IN INTRA- COMMUNITY TRADE OF GOODS MISSING TRADER FRAUD IN INTRA- COMMUNITY TRADE OF GOODS

10. 23 January 2009International Tax Conference10 COMBATING FRAUD Commission communication in May 2006 THREE POSSIBLE APPROACHES TO COMBATING MISSING TRADER FRAUD : 1. Increased cooperation between Member States 2. Taxation of intra-community supplies 3. Application of generalised Reverse Charge

11. 23 January 2009International Tax Conference11 COMBATING FRAUD DEBATE CONCLUDED (temporarilly) DEBATE CONCLUDED (temporarilly) CONCLUSION IS TO CONCENTRATE ON RE- INFORCING THE EXISTING SYSTEM CONCLUSION IS TO CONCENTRATE ON RE- INFORCING THE EXISTING SYSTEM

12. 23 January 2009International Tax Conference12 COMBATING FRAUD Strategy involves 3 categories of actions: 1) Those aimed at preventing potential fraudsters from abusing the system; 2) Those aimed at enhancing the tools for detection; 3) Those aimed at improving the possibility of collecting unpaid tax.

13. 23 January 2009International Tax Conference13 LONGER TERM ISSUES 2 FUNDAMENTAL CHALLENGES HOW CAN WE FURTHER FACILITATE TRADE IN THE INTERNAL MARKET HOW CAN WE FURTHER FACILITATE TRADE IN THE INTERNAL MARKET WHILST SAFEGUARDING TAX REVENUES ? WHILST SAFEGUARDING TAX REVENUES ?

14. 23 January 2009International Tax Conference14 PROCESS OF EVOLUTION A POTTED HISTORY OF EUROPEAN VAT A POTTED HISTORY OF EUROPEAN VAT

15. 23 January 2009International Tax Conference15 1 st and 2 nd VAT Directives (April 1967) Legal and Political commitment to the establishment of a common VAT system based on taxation at ORIGIN.

16. 23 January 2009International Tax Conference16 Attempts to apply origin system in the 1980s and 1990s Rules and tax rate of country of origin (implying quasi-complete harmonisation) Rules and tax rate of country of origin (implying quasi-complete harmonisation) Receipts reallocated to country of consumption Receipts reallocated to country of consumption

17. 23 January 2009International Tax Conference17 Why has origin system not been implemented? Reluctance to give up fiscal sovereignty and accept the necessary harmonisation of rates etc. Reluctance to give up fiscal sovereignty and accept the necessary harmonisation of rates etc. Reluctance to rely on other Member States to collect a substantial portion of VAT revenue. Reluctance to rely on other Member States to collect a substantial portion of VAT revenue.

18. 23 January 2009International Tax Conference18 What has happened since 2000? Emphasis increasingly placed on taxing in country of consumption Emphasis increasingly placed on taxing in country of consumption Harmonisation efforts concentrated on areas where compliance burdens could be reduced without undermining fiscal sovereignty Harmonisation efforts concentrated on areas where compliance burdens could be reduced without undermining fiscal sovereignty

19. 23 January 2009International Tax Conference19 Where are we now? Since 1993: B2C supplies of goods above minimum threshold: taxed in country of consumption (supplier required to register in country of consumption) B2C supplies of goods above minimum threshold: taxed in country of consumption (supplier required to register in country of consumption) B2B supplies of goods: taxed in country of consumption via I. C. supply plus I.C. Acquisition B2B supplies of goods: taxed in country of consumption via I. C. supply plus I.C. Acquisition

20. 23 January 2009International Tax Conference20 Where are we now? From 2010: From 2010: B2B supplies of services will be taxed in country of consumption using reverse charge mechanism From 2015: From 2015: Certain B2C supplies of services will be taxed in the country of consumption using a one stop shop mechanism

21. 23 January 2009International Tax Conference21 WHERE WILL WE BE IN THE FUTURE? DESTINATION BASED SYSTEM (THUS RESPECTING FISCAL SOVEREIGNTY) DESTINATION BASED SYSTEM (THUS RESPECTING FISCAL SOVEREIGNTY) MIGHT BE NECESSARY/ POSSIBLE TO RE- THINK CURRENT RULES REGARDING RATES MIGHT BE NECESSARY/ POSSIBLE TO RE- THINK CURRENT RULES REGARDING RATES

22. 23 January 2009International Tax Conference22 WHERE WILL WE BE IN THE FUTURE? FURTHER DEVELOPMENT OF 1 STOP SHOP PRINCIPLE FURTHER DEVELOPMENT OF 1 STOP SHOP PRINCIPLE SINGLE ON-LINE RETURN FOR ALL EU SUPPLIES (?) SINGLE ON-LINE RETURN FOR ALL EU SUPPLIES (?)

23. 23 January 2009International Tax Conference23 WHERE WILL WE BE IN THE FUTURE? POSSIBLE NEW WAYS OF COLLECTING TAX (?) POSSIBLE NEW WAYS OF COLLECTING TAX (?)