Brussels, 02/01/2007 (Agence Europe) - The European Association of Craft, Small and Medium-Sized Enterprises (UEAPME) wrote to Peer Steinbrück, Germany's Finance Minister, end December to express its displeasure at Germany's attitude in the field of value added tax (VAT). Germany is blocking negotiations on the VAT legislative package - which aims to simplify tax obligations for companies with cross-border activity - in order to have the possibility of applying the VAT self-liquidation mechanism at national level to combat tax fraud.
“Your blockade of the VAT package is a very worrying signal for European businesses. I urge once again you and your Government to cease this behaviour that is, in my humble opinion, both irresponsible and counterproductive”, writes Hans-Werner Müller, Secretary General for the organisation. The last Ecofin Council “agreed to disagree” on the VAT package, postponing a “comprehensive solution” to combat tax fraud until June 2007, Mr Müller regrets. “Your Government bears a key responsibility in this respect, both as unreceptive to the VAT package in the near past and as holder of the Presidency of the European Union in the near future”, he went on to add. The issue does not appear in the German authorities' document setting out the priorities for the first half of 2007.
UEAPME describes the advantages that small and medium-sized businesses expect to gain from adoption of the VAT package: a dramatic reduction in red tape by ensuring a single set of VAT procedures for SMEs, no matter where their services are provided, as well as simplification of onerous procedures on VAT refunds by changing the place of taxation from the place where the supplier is located to the place where the customer is located.
At the end of November 2006, European finance ministers had disagreed on how to combat VAT tax fraud effectively (see EUROPE 9316). Germany and Austria had restated their wish to extend application of the self-liquidation mechanism throughout their territory. According to these two countries, the mechanism has shown its worth at sectoral level, for example in the building sector in Germany, and does not have an impact on the other Member States. The Commission, on the other hand is not convinced of the measure's advantages as it would complicate the situation for businesses and the functioning of the internal market. (mb)