The Czech Republic believes that the amendments to the criteria to define countries to be authorised to carry out a pilot generalised reverse-charge mechanism scheme confirm that it would be eligible.
At the Economy/Finance Council on Tuesday 21 March, the Czech minister, Andrej Babis, also said that he was prepared to exchange information, as provided for by the amendments tabled by the Presidency. Under these amendments, countries with a derogation would be required to submit information to their peers on persons who have been prosecuted for VAT fraud in the last 12 months and on persons who have not submitted a VAT return for two years in a row, for instance.
However, the Czech minister still has concerns, particularly over the fact that the system could be scrapped six months after being set in place, if the Commission should take the view that it damages the single market. This is not viable, Babis said. However, he expressed his satisfaction at the fact that it is the Council, rather than the Commission, that will have powers to suspend the derogation. The voting rules at the Council on suspending the derogation (inverse unanimity) did not secure Bulgaria's support.
Vienna expresses annoyance at criteria
Austria, on the other hand, was not quite so satisfied. The restrictive conditions are unacceptable, as the country would not be able to benefit from the derogation. The Commission had ensured that any country bordering a state applying the reverse-charge mechanism would be automatically authorised to apply it, precisely in order to allow Austria to qualify, according to our information. However, the legal services of the Council expressed misgivings about this option. This is a “very problematic element”, as it could lead to the possibility that, by domino effect, the territorial scope of the application of this mechanism, which is vastly different from the traditional VAT system, will be extended. The legal services are to return a more detailed analysis in the coming weeks.
One of the criteria proposed by the Commission for countries wishing to depart from the traditional VAT rules was that the countries should have a VAT gap of five percentage points more than the median European VAT gap (the most recent figures available put this at 10.4%). The Presidency's compromise aims for greater precision, stating that this criterion must be met in 2014. At the discussions of the Ecofin Council, Slovenia said that this criterion should be based on the most recent VAT gap figures, not those from 2014. The country also said that it wanted cumulative criteria.
Germany said that it could accept the criteria if they were acceptable to Austria and the Czech Republic. It is also the only country to have called for the derogation to be valid beyond 2022. (Original version in French by Élodie Lamer)