At a working group meeting this Wednesday 8 March, the member states are to discuss the European Commission's proposal to define a raft of criteria to allow certain countries to derogate from the VAT directive in order to apply a reverse-charge mechanism, which provides for VAT to be paid by the final consumer.
This proposal, which was presented on 21 December last year following a promise made to the Czech Republic, is very restrictive in the eligibility criteria it lays down for the mechanism. At the Council, the fear is that the Czech Republic will take other texts hostage if it does not get its way over the reverse charge. The French, for instance, are not exactly enamoured by the idea, but are calling for electronic publications to be able to benefit from reduced rates of VAT (see EUROPE 11680). This dossier is also on the agenda of Wednesday's meeting.
In February, the European countries discussed the introduction of a mechanism aiming to ensure an exchange of information between states applying a reverse-charge mechanism and their peers, in order to make it possible to assess whether the system is leading to VAT fraud moving to other European countries. The countries benefiting from the derogation will be required to send their counterparts information regarding persons under VAT fraud charges in the previous 12 months or individuals who have not submitted a VAT return for two consecutive years, instance.
One of the criteria proposed by the Commission to secure a derogation to the traditional VAT rules was that countries must have a VAT gap of five percentage points more than the median European VAT gap (the most recent available figures indicate that this stands at 10.4%). One version of the text discussed between the member states aims at greater clarity, stating that this gap was expected to be at that level in 2014. (Original version in French by Élodie Lamer)