The members of the European Committee of the Regions (CoR) broadly support the European Commission’s move to modernise VAT in the EU through an opinion  prepared by Dainis Turlais (LV) and adopted during the October plenary.

The Action Plan on VAT by the European Commission is the first step towards a single EU value added tax (VAT) area in order to tackle fraud and simplify the administrative burden especially for e-commerce and SMEs. The huge level of existing VAT fraud reflects the shortcomings in the current system.

Rapporteur Dainis Turlais, member of the Riga City Council:

The ‘VAT gap’ between expected revenue and revenue actually collected is estimated at EUR 170 billion. The huge levels of fraud lead to significant losses of revenue for Member States every year. This has a negative impact on public sector budgets, particularly those of local and regional authorities, and their ability to provide quality services. The increasing risk of fraud has not only an economic, but also a political impact. Fraudulent schemes, able to operate for years, create distrust of European citizens towards national and EU institutions. It is therefore essential that banks should also fully cooperate with tax authorities in cases of suspected VAT fraud, certainly within the limits of the applicable data protection legislation.

Bearing in mind that differences in VAT rules and rates between countries have a particular impact on border regions and SMEs the CoR voted in favour of extending and reviewing the list of goods and services eligible for reduced tax rates as opposed to the abolition of the restricted list.

Giving Member States more leeway would lead to greater differences in rates, distort the single market and impose burdens on businesses and particularly SMEs, which are the basis for employment at regional levelconcluded Dainis Turlais (LV / ALDE)
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