Brussels, 02/06/2005 (Agence Europe) - The European Commission has published a report summarising 71 contributions received in the consultation exercise launched in February 2005 on the place of taxation of people not subject to VAT (see Europe No. 8882). Most of business agrees with the Commission's idea of transferring the place of taxation from the Member State where the service provider is established to the Member State where the consumer is established for services provided to people not subject to VAT, but opinions differ for some types of service. The Commission may decide to unveil draft amendments to Directive 77/388/EEC before the summer break.
Vehicle hire and leasing companies and catering services tend to support the Commission's ideas of taxing services in the Member State where they are provided. Hiring agencies also tend to favour a change in the general VAT for services provided to consumers subject to VAT. The establishment of a 'single counter' system for VAT seems to be a precondition for such changes. In the passenger transport industry, airlines are strongly opposed to changes in the rules, considering the place of taxation as less of a problem as exceptions and differences in VAT levels from one Member State to the next, and unequal treatment of air, sea, road and rail transport with regard to VAT. Opponents of the Commission's proposals say that changing the rules would create additional administrative obstacles.
The aim of the consultation exercise was to see whether it would be useful to amend Directive 77/388/EEC on the common VAT system, and looked at services like passenger transport, catering, e-commerce, short-term hiring of transport vehicles, exhibitions and fairs and the organisation of cultural events. Outlining its taxation priorities in May to the European Economic and Social Committee, European Commissioner Laszlo Kovacs said that before the summer break he would be unveiling draft legislation on the place of taxation for services to end consumers (B2C). The current rules, he said, lead to increasing levels of distortion of competition and company relocation for services that can be provided remotely (like e-commerce and telecommunications).