On Friday 16 June, the Maltese Presidency of the Council of the EU kicked off the discussions between the European finance ministers in full knowledge of the fact that it would not be able to reach any agreement on the VAT proposals it was putting before them for a general approach.
In the final moments of the talks behind the scenes, according to our information, France is reported to have said that it would rather the negotiations on the pilot project requested by the Czech Republic on a reverse-charge mechanism continue in September, in the framework of the forthcoming Commission proposal on a definitive VAT regime.
Reduced rates on electronic publications. On the other hand, France, like Luxembourg, amongst others, hoped that the ministers would conclude the dossier on reduced VAT rates on electronic publications. However, right from the start of the discussion, the new Czech minister made it clear that he would not be lifting his veto on this text, stressing arguments related to its substance. From the atmosphere of the discussion, however, it came across quite clearly that his peers suspect him of a veto on principle.
The charge was led by the Netherlands and the Commission. Dutch Finance Minister Jeroen Dijsselbloem said that he was “annoyed” by what he felt equated to having his time wasted. “My patience is running out. My Czech colleague, you’re laughing (…). Colleagues are being unreasonable, you shouldn’t waste our time”, Dijsselbloem said.
Of the Czech minister’s explanations for his refusal to lift his veto on VAT on e-publications, Commissioner for Taxation Pierre Moscovici said that not a single one had any value at all to support his opposition. “The technique of blocking proposals in order to get something is sterile”, he added later.
“We were prepared to reach a compromise today; we are wasting time, I agree with you”, the Czech minister told his Dutch opposite number.
The Luxembourg finance minister, Pierre Gramegna, took the floor to suggest taking a break in the public debate to look at how to resolve the problem and return to it later that day, but his Maltese counterpart, Edward Scicluna, said that he had already considered that option but, under the circumstances, he saw no reason to go along with the suggestion.
The hope is now that Estonia, which takes over the Presidency on 1 July, will put the VAT on e-books dossier on the agenda of the July meeting and that the Czech Republic’s position will no longer be tenable by then. According to our information, at the end of the debate, the Czech Republic raised its flag again, but the Maltese Presidency decided to close the debate instead of giving the minister the floor. We do not therefore know whether the minister had decided to revise his position at the end of the debate.
Reverse charge. Several countries took the floor on the reverse-charge mechanism. France said that it opposed the text in principle. “It is dangerous from the point of view of the objective itself, fighting fraud”, the ambassador explained. As checks on VAT payments are only carried out at the level of the very last link in the chain, this will create “considerable vulnerability for the entire VAT system”. Reversing the charge furthermore runs “counter to the objective of a definitive VAT regime based on harmonisation and unity of the single market”, he added.
The Czech Republic went on to say that it had a problem with the cut-off point of 2022 for the derogation to the VAT rules in order to apply a reverse charge and called instead for 2025. The Austrian representative criticised the fact that no agreement could be reached on reverse charge, as the eligibility conditions are so strict that Austria would not fulfil them. “I cannot accept the mechanism not being piloted at all” through a pilot project in one member state, he said.
Romania spoke out against the threshold of €10,000 of goods and services for the reverse-charge mechanism to apply and would rather the member states determine this threshold themselves. In general, Romania would also like to see more flexible conditions. In the opposite corner, Slovenia said that it shared the concerns of the French and the legal services of the Council (see EUROPE 11808). Hungary and Slovakia said that they hoped to conclude both dossiers as soon as possible.
At a press conference, the Maltese minister said that the problems were now of a political order rather than technical. He added that reverse charge should be looked at in a broader context, suggesting that France’s preference for waiting until September will be followed. He concluded by saying that Friday 16 June was not the right time to try to put these dossiers to bed. (Original version in French by Élodie Lamer)