The Belgian Presidency of the EU Council has once again been hindered by Estonia’s veto on the directive on value added tax (VAT) on digital platforms, at the Ecofin Council meeting in Luxembourg on Friday 21 June.
Included in the ‘ViDA’ package, which aims to reduce the administrative burden on businesses and combat fraud, this directive is accompanied by two other legislative proposals – on single registration and on the exchange of information on the basis of electronic invoicing – on which political agreement has already been reached.
Mart Võrklaev, the Estonian finance minister, said during the public debate that the latest amendments did not present any substantial changes and that his concerns remained. “We are not interested in applying the deemed service provider regime in Estonia. We strongly believe that small and medium-sized enterprises (SMEs) that are below the VAT threshold should not be charged VAT, regardless of the nature of the service they provide”, he argued.
As he said at the last Ecofin meeting in May (see EUROPE 13409/2), this rule would, in his view, increase distortions of competition. In its latest compromise (see EUROPE 13431/13), Belgium had proposed an ‘opt-out’ system meaning the tax will apply by default, but if a Member State decides that it does not need it, it can exclude its SMEs. This would ensure harmonised implementation across the Member States.
But Estonia rejected this option. “It is difficult to justify a rule that we will not apply, but which will increase the administrative burden and costs for our country, our businesses and our tax administration”, explained Mr Võrklaev. From the outset, Estonia has defended an ‘opt-in’ system, which makes the measure possible if the Member States concerned decide to apply it. However, this measure will not be implemented in a harmonised way.
Several ministers expressed their disapproval of this suggestion from Estonia. “The package must be agreed as a whole, and we prefer a harmonised and mandatory system. For the sake of consensus and to favour a compromise solution, we would be ready to go ahead with optionality, under the current compromise proposal”, argued Carlos Cuerpo Caballero, the Spanish minister. All the ministers who spoke reiterated their support for the current compromise.
“We have done our job as an honest broker [...], any further move would unbalance the delicate compromise”, stressed Vincent Van Peteghem, Belgian Deputy Prime Minister and Minister of Finance, at a press conference. “The Hungarian Presidency is ready to take this proposal forward with the aim of reaching an agreement”, emphasised the Hungarian minister, Mihály Varga, who will take over the dossier on Monday 1 July.
Read the draft compromise: https://aeur.eu/f/cs1 (Original version in French by Anne Damiani)