Brussels, 21/08/2007 (Agence Europe) - On 15 October the Commission launched a public consultation on the impact of the internal market on an EU-wide introduction of a reverse charge mechanism for fight value added tax fraud (VAT). According to this mechanism, which will only apply if a minimum tariff threshold applies, the company subject to tax and receiving goods in a transaction carried out in national territory will be subject to VAT and not the company delivering. In its consultation document, the Commission questions economic operators what impact an optional reverse charge mechanism would have on their administrative costs, cash flows and competitiveness. The latter are invited to reply to these questions by imagining that they are in a member state where the mechanism exists as well as in a member state that does not introduce the mechanism.
The consultation is based on an external study carried out by PriceWaterhouseCoopers and presented to the European institution at the end of June. According to the conclusions of this study, the introduction of a generalised reverse mechanism would lead to additional single and recurring administrative costs mainly resulting from the obligation to provide specific invoices for deliveries and the application of tariff thresholds. The study considers two scenarios: one with a minimum tariff threshold set at €5000 and the other consisting of several thresholds. It also considers that the impact on financial flows depends on business models for companies and that it could prove positive for companies starting from a threshold of €9000. the impact on competitiveness does not appear to be any different, according to the twenty companies consulted which are active in four of the member states identified: Belgium, Hungary, Netherlands, United Kingdom. The panel is concerns about the lack of uniformity of rules and inspections in the EU and said that alternative solutions could exist to combat tax evasion that might be more efficient than the reverse charge mechanism.
This consultation exercise in part of the work the Commission is carrying out. The June Ecofin Council asked it to analyse the impact on the EU of a generalised VAT reverse charge mechanism for the end of June (EUROPE 9439). The Commission will also have to explain budgetary impact on member states from such a system, as well as its coherency withy European legislation. In the event of a positive appraisal by the Commission and Council, Austria might test the mechanism as a pilot study. Legislative proposals are also expected before the end of the year in an effort to strengthen cooperation between national authorities. (mb)