Brussels, 14/06/2000 (Agence Europe) - The existing value added tax (VAT) system in the European Union is known as a "transitional" system, because it includes application in the country of destination of goods. Realising, however, that this system could stay in place much longer than expected, the European Commission has come forward with its strategy for modernising it over the next two years. Whereas in 1996, it programmed for the year 2000 the transition to the definitive VAT system based on the principle of taxation of operations in the country of origin, Member States' lack of drive in this direction has led it to lower its ambitions. In a communication to the Council and European Parliament, it presents an action programme based on four objectives: simplifying and modernising the current VAT system, making uniform Member States' implementing rules and intensifying administrative cooperation between them, in particular with a view to combating fraud. As to when the switchover to the final system takes place, time will tell.
The broad lines of this new strategy were approved by the Economy/Finance Council on 8 May. The Commission hopes the Member States will show the political dynamism needed to bring the reform to a successful conclusion. The first phase of its programme consists of adoption "at the earliest opportunity" of four proposals for simplification of the VAT system tabled several years ago but still held up in the Council, concerning: a) modification of the statutes of the VAT Committee; b) abolition of the obligation of designating a tax representative; c) improvement of mutual assistance for the recovery of claims; d) introduction of a right to cross-border deduction.
For phase two, the Commission has announced five new proposals, to be presented in 2000, on: 1) taxation of electronic commerce (a proposal already tabled on 7 June, see EUROPE of 8 June, p. 11); 2) taxation of postal services (by end of July); 3) invoicing of VAT, including electronic invoicing; 4) setting of a minimum standard rate of VAT for five years (July 2000); 5) revision of rules on administrative cooperation and mutual assistance (December 2000).
The Commission foresees under phase three the presentation to the Council of an assessment of the work achieved as at early 2001. "Future priorities will largely depend on the progress made by the Council in adopting the proposals already tabled", it notes. "The Commission has no intention of calling into question the idea of a definitive system of taxation in the country of origin as a long-term Community objective", commented Internal Market Commissioner Frits Bolkestein.
The communication is available at the following address: http: //europa.eu.int/comm/ taxation_ customs/french/publications/official_doc/com/com_fr.htm.