EN Official Journal of the European Union C 214/20

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 as regards a standard VAT return’

COM(2013) 721 final — 2013/0343 (CNS)

2014/C 214/04

Rapporteur: Mr Páleník

On 8 November 2013, 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 as regards a standard VAT return

COM(2013) 721 final — 2013/0343 (CNS).

The Section for Economic and Monetary Union and Economic and Social Cohesion, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 13 February 2014.

At its 496th plenary session, held on 26 and 27 February 2014 (meeting of 26 February), the European Economic and Social Committee adopted the following opinion by 130 votes to 1 with 5 abstentions.

1. Conclusions and recommendations

1.1 The EESC welcomes the introduction of a standard VAT return. This is a new instrument that, if properly implemented, could cut red tape for companies in the EU and thereby better capitalise on the potential of the single market, as well as improving the efficacy of tax collection and the fight against tax fraud. At the same time, the Committee calls on the Commission not to let up in its efforts when it comes to implementation.

1.2 The EESC supports maximum standardisation of the manner and form of submitting a standard VAT return, which will yield a reduction in red tape, especially for companies operating internationally, thus making them more competitive. Reining in distortion of competition will also prevent jobs being lost. However, this proposal is just a first small step in tackling the many differences between Member States on VAT rules and formalities. The costs and benefits of changing the VAT reporting scheme (and internal procedures) for enterprises — especially SMEs — need to be carefully considered.

1.3 The EESC refers to the proposal announced by the Commission in its working programme entitled ‘Towards a definitive VAT system’ and stresses the fact that the many differences in VAT rules and formalities between Member States originate from the different options provided for in the VAT Directive. The EESC welcomes the proposal put forward, which constitutes a first and very necessary step forward in making the fight against tax evasion and fraud more effective and cutting the red tape entailed in implementing the directive. When working towards a definitive VAT system, the impact on reporting systems and changes to internal procedures (creating extra costs for companies and authorities) have to be taken into account.

1.4 The EESC backs the Commission's initiative with regard to establishing the technical details, procedures and definitions, as well as the methods of electronic submission of the standard VAT return. It is perturbed, however, by the attempt to use the comitology procedure also to establish the principles for making corrections to the return. It therefore proposes that the details of this actually be enshrined in the final version of the directive.

1.5 The EESC calls on the Commission to communicate some aspects of the proposal more clearly, especially the possibility for Member States to collect interim VAT payments while extending the VAT return period to a quarter for microenterprises with a turnover below EUR 2 0 00 000 and the reduced requirement for administrative capacity this will entail for countries' tax authorities.

1.6 The EESC endorses the ‘once only’ principle, which would ensure that businesses supply certain information to national authorities only once. Data should be collected in such a way that national authorities can use them for both inspection (preventing tax evasion and fraud) and for statistical purposes. This would avoid a double obligation on businesses to fill in various forms and VAT declarations.

1.7 The EESC recommends better application by Member States of mechanisms to improve the functioning of the business environment, especially making tax due only after the invoice has been paid by the purchaser — which would avoid a situation in which honest businesses are in effect lending to the state — and maintaining appropriate deadlines for refunding of excess VAT deductions. The introduction of such mechanisms must not, in the EESC's view, entail additional red tape.

1.8 The EESC thinks it absolutely essential that the Commission also embark upon effective standardisation of timeframes and deadlines for the whole spectrum of VAT-related payments (instalments, payment of tax, return of excess payments) and corrections to tax returns so that the aims of the proposal are met to the full.

2. Background

2.1 Reducing red tape for the benefit predominantly of SMEs is an important issue, above all because it lets companies concentrate on actually doing business. The EESC welcomes the proposal for a directive, which aims to boost the international competitiveness of EU companies and improve the functioning of the single market. The benefits this would have on company operations can be subsequently reflected in gains for tax collection, public-sector and national budgets, funding for social cohesion, greater accessibility of public services and more effective public administration. Its overall impact is expected to benefit the average European Union citizen, as well as SMEs.

2.2 As the Commission's proposal states, value-added tax (VAT) provides on average around 21 % of national tax revenue, making it an important source of revenue for Member States' budgets. However, the Commission estimates that around 12 % of potential VAT receipts remains uncollected each year. It is vital, therefore, that the EU and its Member States seek to make VAT collection and the battle against tax fraud and evasion more effective, while at the same time supporting any initiative that helps retain jobs.

2.3 If properly implemented, this proposal for a directive, which aims to introduce a standard VAT return, could improve the efficacy of tax collection and the fight against tax fraud. It can also help to tackle the difficulties of companies exporting within the EU single market.

2.4 At present, harmonisation on VAT returns is minimal and the Member States take into account their own specificities when deciding what should be included in returns. The way the VAT returns system is currently configured means that businesses operating internationally incur increased costs due to complicated red tape and return forms in different languages. The EESC supports maximum harmonisation in the way VAT returns are filed.

2.5 The aim of the present proposal is to introduce a standard VAT return to make it easier for all companies to do business and to reduce red tape. Businesses have given their backing to the idea and SMEs in particular are asking not to have to file returns so often. PwC estimates (1) put at EUR 17,2 billion the net savings for the EU-27 to be made from cutting red tape and introducing a compulsory standard VAT return for all Member States.

2.6 While harmonisation of VAT returns would mean savings for businesses, it would also mean that national tax authorities had to make an extra one-off investment. According to the PwC study (2013), tax authority expenditure on the IT needed to implement the standard VAT return would be around EUR 800 million to 1 billion. In the medium to long term, this expenditure should be offset by gains in the efficacy of tax collection and the fight against tax fraud and evasion. At the same time, it should be stressed that implementation of the proposal will also entail unavoidable costs for taxpayers (change of accountancy software).

3. General comments

3.1 The EESC welcomes the proposal for a Council directive introducing a standard VAT return. This would improve the business environment in the EU single market by reducing red tape and simplifying the filing of VAT returns in the various countries. Having the same form of VAT return in each country will make it easier for taxable persons to operate in several markets and will help the single market to become more competitive.

3.2 The EESC thinks this is a correct step to take in the endeavour to prevent distortion of competition, keep jobs and improve control mechanisms when tax authorities are exchanging information among themselves and with businesses. The introduction of a standard VAT return will make this achievable. It should only be possible to require additional information — beyond that provided for in the proposal — when this information is essential for tax inspection and combating tax evasion and fraud.

3.3 It must be said that the proposed modification is a complex change that will affect not just taxpayers, but also tax authorities in all the Member States and will require a change in the substance and form of their current VAT returns, especially with a view to e-filing. The EESC particularly wants to draw attention to the proposal entitled ‘Towards a definite VAT system’ and stress to the Commission that the aims of this should be taken on board, especially in the implementation of the present proposal, so that aspects relating to the single VAT return do not need to be radically altered.

3.4 The EESC points out that there may be difficulties in some cases incorporating the standard VAT return into the systems of tax authorities if the powers to set the technical details are delegated to the Commission, since different systems are used for the collection and processing of tax returns. The EESC supports those parts of the proposed Article 255a of the Commission's directive that transfer the following powers to the Commission: setting of technical details (letter (a)), establishing definitions and procedures (letter (b)), and electronic security methods (letter (d)). The EESC also draws attention to the possibility of using non-legislative measures, such as a voluntary approach or examples of best practice, to attain the proposal's aims. If powers are conferred on the Commission, the EESC would like to be consulted when the details of Article 255a are being drafted so it can take a position.

3.5 A standard VAT return will enable Member States to exchange information promptly and may be beneficial in reducing tax fraud. It may also help to make tax collection and budget consolidation more effective.

3.6 The EESC welcomes electronic filing (e-filing), while pointing out possible complications for some Member States when it comes to simplifying collection and processing of data from VAT returns and the proposed standard VAT return. It may also bump up costs for some businesses, so companies should have the option of making a return on paper, provided this does not make it more difficult to prevent tax evasion and fraud.

4. Specific comments

4.1 Businesses with an annual turnover below EUR 2 0 00 000 or equivalent in the national currency are eligible to submit quarterly returns. The EESC thinks this threshold is too high for some Member States and proposes the possibility of lowering it so that Member States can factor in the particular nature of their business environment. Regarding the proposed alterations to Article 206, permitting quarterly returns could be detrimental to public-sector budget cash-flows in some countries. For this reason, the EESC suggests that the Commission retain the option of using VAT instalment payments to compensate for potential shortfalls in VAT revenue due to an extension of the tax period for a large number of taxpayers.

4.2 The EESC is in favour of standardising basic data in the return and welcomes the addition to the data and items of a box for tax deduction. The Committee welcomes the Commission's endeavour to avoid implementation of the proposal causing increased red tape when only the mandatory part of the standard VAT return is applied (under Article 250). The EESC calls on the Commission to oblige Member States to allow filing of the single VAT return in any Union language, which would cut red tape.

4.3 The EESC expresses its support for the introduction of a standard VAT return which would have the same standard form for all Member States. For this reason, the EESC proposes that the standard VAT return should have two parts and that the Member States would decide whether to use only the mandatory part in accordance with Article 250 of the proposal for a directive, or to also require completion of selected data in accordance with Article 251. At the same time, it is vital to enable tax authorities to require additional information in instances where this information will contribute to fighting tax evasion and fraud more effectively. The possibility of requiring further information for a limited period specified in advance would be based on an application made to the Commission committee established for this purpose. The EESC takes the view that this information should constitute a further part of the standard VAT return so that the mandatory part (Article 250) and the optional part (Article 251) have a standard form even if an exemption is applied regarding additional information required from taxable persons.

4.4 The EESC welcomes the proposal to cut red tape for businesses by not requiring them to provide tax information twice, which will be the effect of repealing Article 261 of the directive. The EESC calls on the Commission to disseminate examples of best practice to encourage Member States to collect and exchange information effectively.

4.5 When the amended standard VAT return directive is implemented in its definitive form, taxpayers must be given enough time to find out about and familiarise themselves with the new tax declaration form. The EESC thinks the standard VAT return is a matter of importance and so it is imperative to strike the right balance between the quality of the final form of the directive and how swiftly it is implemented. That said, the Committee would welcome a more ambitious deadline for implementation. At the same time, the Committee calls on tax authorities in the Member States to give taxpayers the utmost support in familiarising themselves with the various elements of the directive, for example by making online preparation courses available.

4.6 It must be stressed that there are a number of legal provisions (deadlines, rules, etc.) in force in the Member States for the refunding of VAT that the present proposal neglects to take sufficiently into account. The proposal for a directive also fails to reflect clearly enough the fact 1) that Member States have systems — linked to the structure of the tax return — for analysing risks, selecting businesses for tax inspection and uncovering tax fraud, and 2) that the structure of national tax returns is tailored to domestic circumstances. The EESC calls on the Commission to make it absolutely clear to the Member States that they should each do their utmost to improve the collection and exchange of information between national authorities (customs authorities, institutes of statistics, etc.).

4.7 The EESC supports the ‘once only’ principle, which would ensure that businesses only provide the same information once. Detailed data can be collected in particular justified cases so that checks essential for combating tax evasion and fraud can be performed. The proposal makes it possible to require information that will enable inspection to be carried out as well as it can be. It should also be possible to use the information provided for statistical purposes, thus preventing businesses having to provide the same information to several bodies and in different documents and formats.

4.8 In the view of the EESC, it would help to improve the workings of the EU single market if tax authorities refunded VAT at appropriate intervals while maintaining the fight against tax evasion and fraud at an adequate level. A similar effect could be achieved on SMEs by more effective implementation of the rule making tax payable only when the invoice has been paid. This would prevent the undesirable phenomenon of defrauded companies lending to the state. The EESC therefore calls on the Commission to urge the Member States to implement this rule, which would contribute to a transparent business environment.

4.9 The present proposal for a directive provides for the delegation to the Commission of implementing powers regarding correction of tax returns. At the same time, it gives Member States the right to enable correction of the standard VAT return and to set deadlines for making these corrections. Since, in the view of the EESC, the impact comitology has on particular Member States is unclear here, all matters regarding correction of the standard VAT return should be set out in the proposal for a directive itself and their subsequent performance fall within the powers of individual Member States. At the same time, the EESC asks to participate actively in the drafting of implementing acts related to this directive.

Brussels, 26 February 2014 The President of the European Economic and Social Committee Henri MALOSSE

(1) PwC (2013): Study on the feasibility and impact of a common EU standard VAT return.