# C_2011051EN.01006701.xml

| 17.2.2011 | EN | Official Journal of the European Union | C 51/67 |
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17.2.2011

EN

Official Journal of the European Union

C 51/67

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Opinion of the European Economic and Social Committee on the ‘Proposal for a Council directive amending Directive 2006/112/EC on the common system of value added tax, with regard to the duration of the obligation to respect a minimum standard rate’

COM(2010) 331 final — 2010/0179 (CNS)

2011/C 51/13

Rapporteur: Edgardo IOZIA

Edgardo IOZIA

On 24 June 2010, the Council decided to consult the European Economic and Social Committee, under Article 113 of the Treaty on the Functioning of the European Union, on the:

Proposal for a Council Directive amending Directive 2006/112/EC on the common system of value added tax, with regard to the duration of the obligation to respect a minimum standard rate

Proposal for a Council Directive amending Directive 2006/112/EC on the common system of value added tax, with regard to the duration of the obligation to respect a minimum standard rate

COM(2010) 331 final — 2010/0179 (CNS).

On 13 July 2010, the Committee Bureau instructed the Section for Economic and Monetary Union and Economic and Social Cohesion to prepare the Committee's work on the subject.

Given the urgent nature of the work, the European Economic and Social Committee appointed Mr Iozia as rapporteur-general at its 466th plenary session, held on 21 October 2010, and adopted the following opinion unanimously.

1.   Summary and comments by the Committee

Summary and comments by the Committee

| 1.1 | The EESC notes that the so-called transitional system for the application of the minimum standard rate of VAT, set at 15 %, which was adopted back in 1992 and is due to expire on 31 December 2010, needs to be extended – it is to be hoped for the last time – by a further five years. The EESC welcomes the adoption of the proposed directive. |
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1.1

The EESC notes that the so-called transitional system for the application of the minimum standard rate of VAT, set at 15 %, which was adopted back in 1992 and is due to expire on 31 December 2010, needs to be extended – it is to be hoped for the last time – by a further five years. The EESC welcomes the adoption of the proposed directive.

| 1.2 | Failure to extend the system could further distort the operation of the internal market. The different standard rates in force in Europe already vary by 10 percentage points, ranging from 15 % in Cyprus and Luxembourg to 25 % in Denmark, Hungary and Sweden. The Commission has rightly proposed on two occasions that a maximum limit be set; however, the Council has not given its consent, owing to the Treaty requirement for unanimity in this field. |
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1.2

Failure to extend the system could further distort the operation of the internal market. The different standard rates in force in Europe already vary by 10 percentage points, ranging from 15 % in Cyprus and Luxembourg to 25 % in Denmark, Hungary and Sweden. The Commission has rightly proposed on two occasions that a maximum limit be set; however, the Council has not given its consent, owing to the Treaty requirement for unanimity in this field.

| 1.3 | The EESC welcomes the Commission's decision to issue, by the end of this year, a Green Paper on the new VAT strategy and the possibility of gradually harmonising rates. The EESC, which will be duly and specifically consulted on the Green Paper, believes that a fully harmonised system of European taxation should be achieved as quickly as possible, and the transitional scheme should be abolished. |
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1.3

The EESC welcomes the Commission's decision to issue, by the end of this year, a Green Paper on the new VAT strategy and the possibility of gradually harmonising rates. The EESC, which will be duly and specifically consulted on the Green Paper, believes that a fully harmonised system of European taxation should be achieved as quickly as possible, and the transitional scheme should be abolished.

| 1.4 | In many of its opinions on the subject, the EESC has highlighted the need for a simple, harmonised indirect taxation system, reducing the administrative burden and bringing patent benefits for businesses and individuals, guaranteeing fair taxation and certain revenue for public finances, reducing the risks of tax fraud, and contributing to the development and completion of the internal market. |
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1.4

In many of its opinions on the subject, the EESC has highlighted the need for a simple, harmonised indirect taxation system, reducing the administrative burden and bringing patent benefits for businesses and individuals, guaranteeing fair taxation and certain revenue for public finances, reducing the risks of tax fraud, and contributing to the development and completion of the internal market.

| 1.5 | The EESC is aware that maintaining the requirement for unanimity on taxation has compromised the possibility of any swift approval of a definitive system for taxation in the country of origin. The lack of agreement concerning the amendment of the Treaties will lead to a burdensome increase in the time taken to reach decisions in this area. Forty-three years after the process for a European system of indirect taxation began, we have progressed no further, due to the principle of unanimity. |
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1.5

The EESC is aware that maintaining the requirement for unanimity on taxation has compromised the possibility of any swift approval of a definitive system for taxation in the country of origin. The lack of agreement concerning the amendment of the Treaties will lead to a burdensome increase in the time taken to reach decisions in this area. Forty-three years after the process for a European system of indirect taxation began, we have progressed no further, due to the principle of unanimity.

| 1.6 | ‘It is an indictment of the Member States that a concept which was accepted in principle thirty-three years ago still seems as far from realisation as it was then. The history of VAT legislation in Europe is a catalogue of failure, not on the part of the Commission, which has acted with commendable consistency and unrelenting effort in attempting to move the situation forward, but on the part of the Member States, who have continually frustrated these efforts’ (1). These were the words of the EESC in 2001 – and they are just as relevant today! |
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1.6

‘It is an indictment of the Member States that a concept which was accepted in principle thirty-three years ago still seems as far from realisation as it was then. The history of VAT legislation in Europe is a catalogue of failure, not on the part of the Commission, which has acted with commendable consistency and unrelenting effort in attempting to move the situation forward, but on the part of the Member States, who have continually frustrated these efforts’ (1). These were the words of the EESC in 2001 – and they are just as relevant today!

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| 1.7 | The EESC believes that it is no longer realistic to postpone the adoption of a new taxation system that will make it possible to combat tax fraud effectively, leading to an increase in revenues for Member States and the EU, fewer administrative burdens and the development of the internal market. |
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1.7

The EESC believes that it is no longer realistic to postpone the adoption of a new taxation system that will make it possible to combat tax fraud effectively, leading to an increase in revenues for Member States and the EU, fewer administrative burdens and the development of the internal market.

2.   Background

Background

| 2.1 | According to the second subparagraph of Article 12(3)(a) of Directive 77/388/EEC, at the proposal of the Commission and after consultation of the EP and EESC, the Council is to unanimously decide on the level of the VAT rate. |
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2.1

According to the second subparagraph of Article 12(3)(a) of Directive 77/388/EEC, at the proposal of the Commission and after consultation of the EP and EESC, the Council is to unanimously decide on the level of the VAT rate.

| 2.2 | As the required unanimity was not achieved, the Commission was restricted to four extensions, on the basis of the only unanimous decision reached: the setting of a minimum rate of 15 % in Directive 92/77/EEC. Every proposal to definitively harmonise taxation has failed to achieve the required unanimity. |
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2.2

As the required unanimity was not achieved, the Commission was restricted to four extensions, on the basis of the only unanimous decision reached: the setting of a minimum rate of 15 % in Directive 92/77/EEC. Every proposal to definitively harmonise taxation has failed to achieve the required unanimity.

minimum rate of 15 %

definitively harmonise taxation

3.   The Commission's proposal

The Commission's proposal

| 3.1 | In the light of the forthcoming time limit of 31 December 2010 set down in Directive 2006/112/EC, the Commission has proposed yet another extension, setting the normal rate at no less than 15 % and valid from 1 January 2011 until 31 December 2015. |
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3.1

In the light of the forthcoming time limit of 31 December 2010 set down in Directive 2006/112/EC, the Commission has proposed yet another extension, setting the normal rate at no less than 15 % and valid from 1 January 2011 until 31 December 2015.

normal rate at no less than 15 %

| 3.2 | According to point 9 of its proposal, the Commission plans shortly to publish a Green Paper on the new VAT strategy which will launch a consultation on the future fiscal harmonisation. In the light of the outcome of this consultation of the Member States, an appropriate decision will be taken by the Commission on the level of standard rates of VAT in the EU. |
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3.2

According to point 9 of its proposal, the Commission plans shortly to publish a Green Paper on the new VAT strategy which will launch a consultation on the future fiscal harmonisation. In the light of the outcome of this consultation of the Member States, an appropriate decision will be taken by the Commission on the level of standard rates of VAT in the EU.

4.   Comments by the EESC

Comments by the EESC

| 4.1 | Given the current tax situation in the 27 Member States, particularly when it comes to VAT, the Committee can only agree with the Commission's proposal, which it considers necessary, as in the past. |
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4.1

Given the current tax situation in the 27 Member States, particularly when it comes to VAT, the Committee can only agree with the Commission's proposal, which it considers necessary, as in the past.

| 4.2 | The EESC fully supports the Commission's decision to issue a Green Paper on the matter, with the aim of definitively abolishing the transitional system and embarking on a process to harmonise the jungle of rates, derogations, reduced schemes, ‘parking’ rates and all legislation on the subject, despite the fact that, in the past, narrow national interests have stymied simplification and full completion of the internal market. |
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4.2

The EESC fully supports the Commission's decision to issue a Green Paper on the matter, with the aim of definitively abolishing the transitional system and embarking on a process to harmonise the jungle of rates, derogations, reduced schemes, ‘parking’ rates and all legislation on the subject, despite the fact that, in the past, narrow national interests have stymied simplification and full completion of the internal market.

| 4.3 | Tax fraud across Europe is worth between 200 and 250 billion euros. The EESC agrees with the European Parliament that it is necessary to fight tax fraud much more effectively, as it ‘affects not only the financing of Member States' budgets but also the overall balance of the European Union's own resources in so far as reductions in VAT own resources have to be compensated for by an increase in the gross national income own resources’ (2). |
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4.3

Tax fraud across Europe is worth between 200 and 250 billion euros. The EESC agrees with the European Parliament that it is necessary to fight tax fraud much more effectively, as it ‘affects not only the financing of Member States' budgets but also the overall balance of the European Union's own resources in so far as reductions in VAT own resources have to be compensated for by an increase in the gross national income own resources’ (2).

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| 4.4 | To this end, the EESC believes that the Member States must act in a coordinated, convergent manner, in order to achieve various objectives simultaneously: cutting red tape, higher tax revenues thanks to effective combating of tax evasion and harmonisation of rates, leading to the development of the internal market but without giving anyone competitive advantages or disadvantages as a result of tax levels. |
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4.4

To this end, the EESC believes that the Member States must act in a coordinated, convergent manner, in order to achieve various objectives simultaneously: cutting red tape, higher tax revenues thanks to effective combating of tax evasion and harmonisation of rates, leading to the development of the internal market but without giving anyone competitive advantages or disadvantages as a result of tax levels.

Brussels, 21 October 2010.

The President of the European Economic and Social Committee

Staffan NILSSON

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(1)  EESC Opinion on ‘Improving the operation of VAT within the internal market’, OJ C 193/45 of 10.7.2001.

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(2)  Legislative resolution for the European Parliament of 4 December 2008 at the proposal of Council directive modifying the Council Directive 2006/112/CE relative to the common system of VAT to fight against the tax evasion connected to the intracommunity operations.

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