In a letter dated 11 July – of which EUROPE has had sight – the European Commissioner for Taxation, Pierre Moscovici, notified the chair of the committee on economic and monetary affairs (ECON) of the European Parliament that the Commission may withdraw the legislative proposal providing to set in place four quick fixes pending a definitive replacement for the current 'temporary' VAT system (see EUROPE 11874).
The purpose of this letter is to add a fifth solution as called for by France, Italy, Austria, Ireland, Luxembourg and Latvia, namely a VAT exemption for autonomous groups of persons pooling their services and sharing costs.
Readers may recall that at the Ecofin Council of 22 June (see EUROPE 12047), France and Italy opposed an agreement on the four quick fixes, making their approval of them conditional on the addition of the fifth solution, which is a serious problem for the Commission. The two countries then proposed to continue work on this solution over the coming weeks.
However, two days before the meeting, the Commission is reported to have notified the national ambassadors to the EU (Coreper) of its intention of withdrawing its proposal if the Council continues discussions towards a 'general orientation' to that effect.
In his letter, Commissioner Moscovici reiterates his criteria for this solution, which he has previously raised before the European finance ministers. “I would like to stress this new exemption is in no way related to the Commission's core proposal, which it denatures”, he explains, referring to the harmful effects for the smooth functioning of the single market and the freedom of establishment.
He also reiterates that this inclusion impinges the Commission's right of initiative and that it has not been subjected to an impact assessment.
The Commission considers that European Parliament should be consulted again if the compromise reached at the Council takes up this fifth quick fix, as it is essentially a departure from the initial proposal on which it returned its opinion.
“This is not the first time that members state in Council denature a proposal in such a way that VAT measures could no longer be adopted without infringing basic legal principles”, Commissioner Moscovici concludes. (Original version in French by Marion Fontana)