WRITTEN QUESTION E-1635/00

by Theresa Villiers (PPE-DE) to the Commission

(29 May 2000)

Subject: VAT proposals

In the light of the Commission's presentation on VAT to the Ecofin meeting of Monday, 8 May, would the Commission please answer the following questions:

1. Will the Commission clarify the status of its 1996 proposal, brought forward by Mario Monti, to move to a common system of VAT with full harmonisation of VAT rules and rates?

2. In the light of the Commission's admission that this plan is not politically or practically possible, will it formally abandon all plans for a common system of VAT based on the 1996 Monti paper?

3. If the Commission is not prepared to distance itself from the 1996 proposals, will it please clarify the following points arising from them:

(a) Will the full implementation of the common system of VAT require all countries to apply a uniform system of exemptions?

(b) Will it be possible for the UK to retain its system of zero-rating for certain products?

(c) Might there be any circumstances where the proposed new rules of a common system of VAT would require VAT to be levied in the UK on books, food or children's clothes?

Answer given by Mr Bolkestein on behalf of the Commission

(5 July 2000)

It should be pointed out from the outset that it is still the Commission's opinion that the internal market could and would function better with a VAT system based on taxation in the Member State of origin as this would be easier to administer (and consequently less costly for business) and less susceptible to fraud (providing a better guarantee for stable tax revenue). When it adopted the current transitional arrangements, the Council also confirmed its commitment to such a system.

Therefore, it is not in any way the Commission's intention to abandon the idea of a definitive system of taxation along the lines described in its 1996 programme for a common system of VAT(1). However, it must also be recognised that in the current climate the conditions are not propitious for rapid progress towards the necessary closer harmonisation of VAT rates and legislation, nor is it likely that significant progress will be made in the immediate future. This is the reason why, in the interest of improving the functioning of the internal market in the short term, the Commission considers it necessary to reappraise the programme it put forward in 1996 and to define a viable strategy based on four main objectives: simplification and modernisation of current rules, more uniform application of current rules and closer administrative co-operation.

The objective of such an exercise is to create fresh impetus within the Council to achieve the necessary improvements to the present system as quickly as possible. This will of course only be possible if all Member States are prepared to consider changes to their national VAT systems and, if necessary, agree to a reduction of the large number of special schemes or options and derogations, which exist at present.

The Commission will need to reconsider, at the appropriate time, what conditions will be necessary to move to the definitive system. It is clearly too early to say what these will be, but it should be stressed that the zero-rating system applied in the United Kingdom is a transitional measure pending the adoption of the common VAT system.

(1) COM(96) 328 final.