At the Ecofin Council on Friday 16 June, European finance ministers discussed the initiative on value added tax (VAT) in the digital age. There is consensus on the text in principle, but certain details, such as the implementation date and the deemed supplier mechanism, are open to debate.
As the European Commissioner for Economic Affairs, Paolo Gentiloni, pointed out, this proposal has the “double objective of both combating VAT fraud and reducing administrative burden” (see EUROPE 13194/18).
Poland has indicated that it would like to see further discussions on the scope of the agreement, and in particular on the data to be communicated. Similarly, Slovakia has asked that “the scope of these measures be precisely defined and that the risk of tax fraud be examined”.
Regarding the implementation date, Italy, the Netherlands, the Czech Republic, Poland, Slovakia, Luxembourg and Hungary felt that the planned date was too soon. “We need to be aware that the tax authorities need sufficient time to adopt the necessary modified infrastructures to ensure that the new mechanisms work properly”, said the Italian Minister, Giancarlo Giorgetti.
The proposal provides for an update of the VAT rules applicable to passenger transport and short-term accommodation platforms, which would oblige platform operators to collect VAT. They will also be responsible for paying it to the tax authorities where service providers fail to do so.
This so-called ‘deemed supplier’ mechanism has caused problems for several ministers, in particular those from Poland, Slovakia, Romania, Ireland and Greece. While the latter two countries simply expressed reservations pending an in-depth examination, the others were more hostile.
“This would create a number of problems, such as a contradiction with the principle of VAT neutrality, the absence of VAT deduction, particularly for SMEs, problems with the payment of taxes by platforms established in third countries and different treatment for the same type of services, depending on whether they are provided via platforms or other channels”, explained the Polish minister, Magdalena Rzeczkowska.
The negative effect of the introduction of VAT on short-term rental accommodation on certain tourist activities has also raised questions. Some Member States, such as Denmark, have “asked to be able to decide which accommodation should be defined as similar to hotels and therefore subject to VAT”.
Moreover, not everyone is in agreement about the arrangements for electronic invoicing. All the countries have come out in favour of a single, coherent framework for intra-European transactions, but a majority refuse to harmonise national invoicing and are calling for flexibility.
Work will continue under the Spanish Presidency, which begins in July. (Original version in French by Anne Damiani)