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 the treatment of insurance and financial services COM(2007) 747 final — 2007/0267 CNS
Date: 2008-05-29
Institutions: European Economic and Social Committee
Subjects: VAT, financial institution, insurance, provision of services, tax exemption, tax harmonisation

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Official Journal of the European Union

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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, as regards the treat-
ment of insurance and financial services

COM(2007) 747 final — 2007/0267 CNS

(2008/C 224/28)

On 18 December 2007 the Council decided to consult the European Economic and Social Committee,
under Article 262 of the Treaty establishing the European Community, on the

Proposal for a Council directive amending Directive 2006/112/EC on the common system of value added tax, as
regards the treatment of insurance and financial services

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 30 April 2008. The rapporteur
was Mr Robyns de Schneidauer.

At its 445th plenary session, held on 28 and 29 May (meeting of 29 May 2008), the European Economic
and Social Committee adopted the following opinion by 98 votes to none with three abstentions.

Conclusions and recommendations

1.
The EESC welcomes the efforts made by the European
Commission to adapt the VAT rules on financial and insurance
services to the requirements of the Single Market. The EESC
especially appreciates the cooperation with directly involved
stakeholders (1) in this respect as well as the public consultation
that has been held on the Internet. Nevertheless, for future VAT
reviews, the EESC recommends the direct involvement of all
interested parties in the legislative process.

2.
The EESC agrees that the proposals are a significant step
towards a modern and more competitive VAT framework for
financial and insurance services. However,
the EESC would
welcome a more thorough legislative approach to eliminate the
remaining interpretation difficulties and unsolved problems. It
cannot be stressed enough that the European Commission has
to act very carefully when drafting VAT legislation on insurance
and financial services. The interests of both sectors and their
customers, in particular the private consumers, should not be
put at stake. Besides the fact that it involves two sectors which
are key to a well functioning economy and generate jobs for
many European citizens, it is also a very technical matter that
should leave no room for guesswork. Since one of the main
concerns is increased legal certainty and the reduction of admin-
istrative burden for economic operators and national tax autho-
rities, the meaning of the wording should be self-evident.

3.
As regards the issue of VAT neutrality, the EESC is pleased
about the introduction of cost sharing arrangements and the
broadening of the option to tax. Given the right wording and
implementation, the EESC is convinced that those instruments
will reduce the impact of hidden VAT in costs of insurance and

(1) These stakeholders are the financial operators, the insurance operators

and the National Tax Authorities.

financial services providers. This will not only improve the effi-
ciency and competitiveness of the sector, but will also be benefi-
cial in terms of availability of services through dedicated provi-
ders and keeping jobs onshore. Nevertheless, as the aim is to
create more VAT neutrality and a level playing field for the
insurance and financial sector, there are still a number of chal-
lenges. Notably a further clarification and more robust defini-
tions are needed for a number of exemptions and concepts such
as the ‘specific and essential character’ of exempt services as well
as the scope of exempt intermediation. An acceptable solution
should be found to extend the scope of the cost sharing provi-
sions to as many operators as possible and to avoid inap-
propriate differences between Member States in the implementa-
tion for the option to tax. And finally, ways to avoid that VAT
would come on top of other similar taxes must be explored for
those services that are subject to specific domestic taxes such as
notably insurance premium taxes, and that would become
subject to VAT when the option to tax is used by the supplier of
these services. Otherwise, the interests of consumers will be
jeopardised.

Reasons

1. Towards a more competitive Single Market for insurance and finan-

cial services (2)

According to the current VAT legislation no VAT is
1.1
charged to the customers of most
financial and insurance
services. Yet, this generates undue obstacles to the achievement
of an integrated, open, efficient and competitive Single Market
for insurance and financial services companies. There are two
main problems (3).

(2) MEMO/07/519, ‘Modernising VAT rules applied on financial and insur-
ance services — Frequently Asked Questions’, Brussels, 28.11.2007,
pp.1-4.

(3) COM(2007) 747 final, ‘Proposal for a Council Directive, Explanatory

Memorandum’, Brussels, 28.11.2007, pp. 2-4.

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1.2
The first problem is that the definitions for VAT purposes
of exempt insurance and financial services are out of date. More-
over, there is a lack of a clear delineation between exempt and
taxable supplies and no Community-wide accepted method to
determine recoverable input VAT. Hence, the exemption is not
applied uniformly by the Member States. As a result, the last
years the number of court cases submitted to the European
Court of Justice (ECJ) has increased substantially. Therefore, it is
the legislative gap and clarify the rules
necessary to fill
governing the exemption from VAT for insurance and financial
services. As the Commission intends, it is wise also to allow for
future developments in the financial services industry.

2. The common system of value added tax: legislative approach (5)

2.1
For over thirty years the Sixth VAT Directive (77/388/EC)
has represented the foundation of the common European frame-
work for VAT. However, numerous amendments made it
complicated to read and hard to access for practitioners. As
from 1 January 2007,
the new European Community VAT
Directive entered into force (2006/112/EEC), enhancing clarity,
rationality
entailing
and simplification without, however,
content changes.

The second problem is that

1.3
there is a lack of VAT
neutrality. The suppliers of financial and insurance services are
generally unable to recover the VAT they pay on the goods and
services they purchase to run their businesses (‘input-VAT’). This
is different from non-financial businesses for whom input-VAT
is not a cost: it is a tax that they collect from consumers (hence
‘consumption tax’)
to subsequently pass it on to the State
without affecting their own income. While VAT represents an
important source of revenue for Member States Tax Authorities,
businesses suffer the cascading effect. ‘Hidden’ irrecoverable VAT
becomes a cost component of financial and insurances supplies.
In the end this increases the cost of goods and services for
consumers in general (4).

1.4
As part of the general trend towards integration of Euro-
pean financial markets and the global race towards increased
efficiency and competitiveness, financial and insurance compa-
nies are adopting new business models. This allows them to
centralise or outsource crucial back-office and support functions
to so-called ‘centres of excellence’ that perform these functions
horizontally for groups of operators. Such business models
notably allow more effective use of know-how and investments,
resulting in higher-quality products at lower cost. However, this
generates the problem that additional costs are created when
such services are invoiced with VAT to financial and insurance
operators. Hence the cascading effect as described above.

1.5
The objective of the VAT legislation review is to provide
on the one hand an updated and more uniform application of
the VAT rules, creating more legal certainty and reducing the
administrative burden for economic operators and administra-
tions. To address the issue of VAT neutrality, the proposal (VAT
Directive) on the other hand invites financial and insurance
institutions to reduce the costs of non-deductible VAT by
allowing them to opt to provide services under VAT and by
allowing them to avoid the creation of irrecoverable VAT by
clarifying and extending the tax exemption for cost sharing
arrangements, including those which are cross-border.

(4) Battiau P., (2005), ‘Letter from Brussels. VAT in the Finance Sector’, in:

The Tax Journal, 28.11.2005, pp. 11-14.

services,

financial

and insurance

2.2
As part of its drive to modernise and simplify taxation
the European
rules
for
Commission proposed another amendment to the EU's VAT
legislation in November 2007 (6). The proposals are part of the
Commission's Strategy for the Simplification of the Regulatory
Environment (Section 66 of COM(2006) 690). The new defini-
tions also aim to create more consistency with internal market
rules (e.g. investment funds, credit rating, derivatives).

the

relevant

The current proposal

2.3
for a Council Directive on the
common system of value added tax, as regards the treatment of
insurance and financial services, provides amendments on Arti-
cles 135(1)(a) to (g) and 137(1)(a) and (2) of the VAT Directive
(2006/112/EC). This proposal is accompanied by a proposal for
a Regulation (7)
(VAT Regulation) that consists of provisions
implementing
articles of Council Directive
2006/112/EC of 28 November 2006 on the common system of
value added tax for insurance and financial services. It lists the
financial,
insurance, management and intermediation services
that qualify and that do not qualify for VAT exemption as well
as the services which have the specific and essential character of
an exempt service and that therefore qualify for exemption in
the financial
their own right.
services and insurance markets and the continued development
of new products, these lists are not exhaustive.

the complexity of

In light of

3. Consultation of interested parties and impact assessment (8)

Stakeholders were consulted from 2004 till 2007 and an
3.1
independent
the European
Commission, all confirming the need for a VAT legislation

commissioned by

study was

(5) COM(2007) 747,

‘Proposal

for a Council Directive, Explanatory

Memorandum’, Brussels, 28.11.2007, pp. 2-4.

(6) COM(2007) 747: Proposal for Council Directive amending Directive
2006/112/EC on the common system of value added tax, as regards the
treatment of insurance and financial services.

(7) COM(2007) 746: Proposal for a Council Regulation laying down
implementing measures for Directive 2006/112/EC on the common
system of value added tax, as regards the treatment of insurance and
financial services.

(8) COM(2007) 747 final, ‘Proposal for a Council Directive, Explanatory

Memorandum’, Brussels, 28.11.2007, pp. 2-6.

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review for
the insurance and financial sector. The options
considered are described extensively in the impact assessment (9)
of DG TAXUD.

In 2004 a Fiscalis seminar for national tax administra-
3.2
tions of Member States took place in Dublin. The seminar
discussed the various problem areas for economic operators, in
particular the global and Internal Market evolutions explaining
especially the outsourcing phenomenon. During 2005 the
dialogue with the main stakeholders was intensified. Regular
contacts were established with representative groups such as the
European Banking Federation (FBE), the Comité Européen des
Assurances (CEA), the European Federation of Insurance Inter-
mediaries (BIPAR) and the European Fund and Asset Manage-
ment Association (EFAMA) as well as professional advisors and
other interested parties.

3.3
In the follow-up to the first Fiscalis Seminar, DG TAXUD
commissioned a study with an independent expert to increase
the understanding of the economic effects of the VAT exemption
for financial and insurance services (10). The final report was
presented to the Commission in November 2006 and
concluded, amongst other things, that (11):

3.4
A subsequent series of consultations with Member States
and DG MARKT resulted in the elaboration of a basic docu-
ment, Working Document TAXUD 1802/06 that was discussed
with stakeholders and Member States in the Tax Conference in
Brussels in May 2006. The Working Document outlines the
basic problems as well as possible technical measures to address
them.

3.5
From 9 May 2006 to 9 June 2006, an open consultation
was held over the Internet. The European Commission received
82 responses (12). The contributions made by stakeholders in
the public consultation on financial and insurance services have
led to three main conclusions. Firstly, whatever options are
chosen for modernising the VAT treatment of financial and
insurance services, they should lead to more legal certainty and
clarity and reduce the administrative charges for providers,
subcontractors,
Secondly,
economic operators from the insurance sector and those from
the financial services sector essentially share the same concerns
but might prioritise the measures to address these issues differ-
ently. Thirdly, the interests of economic operators for ‘business-
to-business’ (B2B) supplies differ considerably from their interest
regarding ‘business-to-consumer’ (B2C) supplies.

intermediaries

customers.

and

a) EU financial institutions are less profitable than their equiva-
lents in other highly developed economic regions such as the
US. The EU financial institutions suffer more embedded —
non-recoverable and cascading — VAT. This increases their
costs;

In June 2007, the working documents containing first
3.6
legal drafts were published on the Directorate General's website.
Draft legislation was extensively discussed with all stakeholders
during several meetings. A VAT Stakeholders Roundtable was
organised on 31 July 2007. On 28 November 2007, The Euro-
pean Commission adopted and communicated the above-
mentioned proposals as well as the impact assessment.

b) there is evidence that due to divergences between Member
States in interpreting the VAT Directive on what constitutes
exempt or non-exempt financial services, economic operators
face considerable legal uncertainty in making commercial
decisions. This appears to be a significant issue in deciding
what is outsourced and what is not;

c) differences in the interpretation of the decisions of the ECJ
and in the calculation of recovery rates were seen as sources
of distortion which contribute to a lack of VAT neutrality.
The study concluded that
the current VAT treatment of
financial services will in the medium term become ‘a source
of unfair competitive advantage’ and ‘frustrate the realisation
of a Single Market for financial services’.

(9) SEC(2007) 1554, Commission Staff Working Document, ‘Accompa-
nying document to the Proposal for a Council Directive amending
Directive 2006/112/EC on the common system of value added tax, as
Impact
regards the treatment of insurance and financial services:
Assessment’, Brussels, 28.11.2007, pp. 1-61.

(10) Price Waterhouse Coopers, Tender no Taxud/2005/AO-006, ‘Study to
increase the Understanding of the Economic Effects of the VAT Exemp-
tion for Financial and Insurance Services’, Brussels, 2006, pp. 1-369.
(11) SEC(2007) 1554, Commission Staff Working Document, ‘Accompa-
nying document to the Proposal for a Council Directive amending
Directive 2006/112/EC on the common system of value added tax, as
regards the treatment of insurance and financial services: Impact
Assessment’, Brussels, 28.11.2007, pp. 12-13.

3.7
In the impact assessment, DG TAXUD enumerates the
expected impact of the proposal for private consumers, business
consumers, the European financial and insurance companies,
and the national tax administrations. This assessment (13) was
notably based on the results of the study on the understanding
of the economic effects of the VAT exemption for financial and
insurance services. Depending on various factors — such as the
standard VAT rate, the existing VAT treatment of financial and
interdependency with other taxes such as
insurance services,
payroll taxes, the impact on social security and unemployment
costs, etc. — the budgetary impact is expected to vary from one
EU Member State to another. Nonetheless, based on the PwC-
study (14) the following expectations can be listed up (15):

(12) The public consultation document (Consultation Paper on moder-
nising Value Added Tax obligations for financial services and insur-
ances) and a detailed summary of the views expressed by respondent's
(Summary of results — Public consultation on financial and insurance
services) can be found at: http://ec.europa.eu/taxation_customs/
common/consultations/tax/article_2447_en.htm.

(13) Price Waterhouse Coopers, Tender no Taxud/2005/AO-006, ‘Study to
increase the Understanding of the Economic Effects of the VAT Exemp-
tion for Financial and Insurance Services’, Brussels, 2006, pp. 162-
174.

(14) See footnote 10.
(15) MEMO/07/519,
Insurance
28.11.2007, pp. 2-4.

‘Modernising VAT rules applied on Financial and
services — Frequently Asked Questions’, Brussels,

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3.7.1
Budgetary impact for private and business consu-
mers: at present insurance and financial services are generally
VAT exempt. A wider access to the option to tax should in no
way increase the final cost of financial services for consumers.
For financial services transactions, the non-recoverable VAT part
of the price of products is a so-called ‘hidden tax’. The option to
tax would remove this hidden tax and should allow businesses
to become more efficient and therefore allow products to be
lower cost. The same logic applies for the cost
offered at
sharing arrangements. This is however only an assumption
based on experience with the option to tax in countries such as
Belgium. Additional work will be done to further assess what
the actual impact of the option to tax on the business models
and cost of
financial products will be in various market
segments. Private retail consumers should benefit from the most
favourable option and suffer no disadvantage from the applica-
tion of VAT to the other market segments.

3.7.1.1
For business customers, it would be highly unlikely
that an option to tax would have adverse consequences, as they
can in principle recover input-VAT. The possible budgetary
consequences for private consumers in the unlikely event that
the option to tax would be applied to B2C operations are less
clear. Since private consumers can not deduct VAT, a problem
of VAT coming on top of other similar taxes might specifically
arise as regards to the payment of insurance premiums. Today,
those premiums are invoiced with national based taxes and
parafiscal charges for the specific reason that the National Tax
Authorities can not levy VAT on insurance services. However,
the eventual outcome depends on the extent to which financial
and insurance companies will effectively use the option to tax in
a B2C environment.

impact:

Employment

is important

3.7.2
to note that
it
budgetary impact does not only refer to the amount of the VAT
revenue. The EESC is keen to ensure that VAT solutions like
option to tax and cost sharing arrangements will contribute to
attracting and keeping key industry sectors in the Member
States. On the one hand, this guarantees direct employment in
the financial services and insurance industry. On the other hand,
this generates indirect employment
in the Member States.
Indirect employment can be created in other sectors such as ICT
and other providers of outsourcing services. This also includes
the suppliers of goods and services to the financial and insur-
ance institutions (e.g. providers of hardware, security services,
catering, suppliers of construction and real estate services …).
The proposals should prevent European operators from off-
shoring their operations
to countries
outside Europe) as, if designed and implemented effectively, the
new rules would create an attractive proposition for businesses
to centralise or outsource activities within the EU. This is based
on analysis of normal business practice taking into account the
importance of local knowledge and control chains. Still, it does
obviously not guarantee that European operators will
in the
future not decide to move any activities off shore. Therefore, the

(i.e. move functions

EESC is particularly sensitive to the right balance between
competitiveness and job quality.

for

Expected impact

the European financial and
3.7.3
insurance companies: the European Commission expects that
the clarification of the definitions of exempt financial and insur-
ance services will reduce compliance costs. Nowadays businesses
have to ascertain the interpretation of the exemption with each
individual Member State and are often forced to rely on the
European Court of Justice. This is not only a major cost; it is
also a barrier to European integration and international compe-
titiveness. Consistent interpretation will mean that an interpreta-
tion applied in one Member State will be valid elsewhere. In
addition, the wider access to cost sharing arrangements and the
option to tax will help financial and insurance companies to
better manage the impact of non-recoverable VAT on their
internal cost structure. This will
increase the profitability of
financial and insurance operators, allowing them to better
compete in the global marketplace and to lower the cost of
capital and insurance for the European economy and for consu-
mers in general.

In addition,

Budgetary impact for national tax administrations:
3.7.4
the Commission is convinced that an increase of legal certainty
will secure the taxing rights of Member States and reduce
opportunities for aggressive tax planning.
the
administrative burden for national tax administrations should
decrease because of more obvious exemption rules. However, a
more consistent application of the exemption cannot exclude
that some Member States will have to exempt certain services
which they now consider as taxable and vice versa. Yet, based
on a high level assessment, the Commission assumes that the
overall effect of the revenue implications will be small or even
neutral. More profitable insurance and financial companies will
have to pay more direct taxes and accordingly will contribute to
the national budgets. Furthermore, much of the VAT that would
theoretically be lost in such cases of implementation of cost
sharing arrangements is not actually levied today as operators
minimise this cost of centralising functions by appropriate but
complicated and administrative burdensome organisational
measures.

3.7.4.1
Still, the European Commission indicates that it is
difficult to estimate the effect of these VAT solutions. Much will
depend on how the financial and insurance institutions will
react to the changes. For cost sharing, the reduction in the tax
collection depends on whether the arrangements are already in
place and subject to VAT or not. If the new rules encourage
financial and insurance companies to enter into efficiency-
driven arrangements which they would otherwise not have
the
contemplated,
arrangements are already in place and subject to VAT, which is
highly unlikely, then there may be a revenue loss because of
more extensive relief. As regards the changes in the rules on

there would not be any loss of VAT.

If

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option to tax, a net tax outflow in business-to-business (B2B)
operations may be expected because business customers are
generally able to recover the VAT they pay. On the other hand,
taxing business-to-customer (B2C) operations would theoreti-
cally produce tax revenue gains. It is however uncertain at this
stage to what extent operators would opt for taxation on finan-
cial and insurance products in a B2C environment. Financial
institutions and insurance companies would have to make sure
first that they will be able to increase their efficiency to a level
allowing them to charge VAT to private customers without
increasing the cost for these customers.

4.4
Consideration should be given to generate more certainty
in respect of the categories of payments services, derivatives,
securities and custodial services and the scope of the exemption
for specific services regarding management of investment funds.
As regards the services which are deemed to have the specific
and essential character of an exempt service, the EESC believes
that additional clarification might be required on the concept of
‘essential’ and ‘specific’ (16). The proposals do not always appear
to be giving a sufficiently clear view of which administrative
actions are actually considered to qualify as specific and essential
whereas the lists do not always appear to be fully consistent as
services belonging to the same value chain would sometimes
appear to be treated differently.

4. Observations regarding insurance and financial services

4.1
The EESC fully supports the European Commission in its
ambitious project to adapt the VAT rules on insurance and
financial services to the requirements of the modern market-
place. The proposals are clearly aimed at addressing the main
areas of concern for the finance and insurance industry and
their consumers whereas the approach that has been chosen, i.e.
a draft Directive with implementing measures in a draft Regu-
lation, seems sound and logical.

As regards intermediation, more clarity is needed as to
4.5
the definition of
‘standardised
‘contractual party’ and of
services’ (17). Intermediation should also be included in the defi-
nition of services that are ‘essential’ and ‘specific’ to an exempt
service (18). Otherwise, intermediaries would no longer be oper-
ating in a level-playing field. It would also be contrary to the
intended new philosophy of the proposed exemptions, which
look at the provision of the service and not to the person who
is providing it or to the means that are used to provide it.

financial services,

4.2
However, the EESC encourages the European Commis-
sion together with Member States to continue work on further
clarification of a number of definitions so as to address the
crucial concern of more legal certainty completely. Regarding
the definitions of
the EESC expresses its
concerns about some of the wording in the proposals, like the
granting of credit as defined in point (2) of Article 135 of the
VAT Directive and in Article 15 of the VAT Regulation. These
definitions are not entirely clear and seem too limiting. For
instance, only the ‘lending of money’ is covered in general terms
seemingly without dealing in a specific way with various kinds
of existing or
for providing finance,
including transactions involving securities. Therefore, the EESC
recommends that consideration would be given to further clari-
fication, while allowing for further developments in the financial
services industry, as the Commission is willing to.

emerging solutions

The same recommendation applies for the proposal of
4.3
Regulation. The EESC would recommend further work to be
done to ensure that the list of examples used in the Regulation
is entirely clear and consistent. The EESC understands that, in
theory, the Regulation does not include exhaustive lists of defi-
nitions, but the EESC is concerned about the risk of confusion
and about the unknown implications in practice of the financial
and insurance services that are not specifically mentioned in the
list.

risk,

it will be insurance (19) or

Special attention should be paid to services such as
4.6
from exemption
pensions and annuities which will benefit
under different exemption categories. According to the presence
or absence of
financial
deposit (20). The problem is that the concept of related services
(the back office) will be developed separately and differently (21).
the unitary products at stake will have to be
As a result,
supported by two different VAT categories of essential and
specific services according to their qualification under the main
exempt supply.

4.7
The EESC welcomes the extension of the right for opera-
tors to opt for taxation of banking and insurance services and
the introduction of cost sharing arrangements as a mean to
reduce the impact of hidden VAT. However, the EESC fears that
the strict conditions for eligibility for cost sharing as well as the
strict scope of the services that could be supplied within a VAT-
neutral cost sharing arrangement will
in practice reduce the
potential benefit of cost sharing provisions to a very limited
number of situations.

(16) See Article 135, 1, (a) of the proposed VAT Directive and Article 14, 1

of the proposed VAT Regulation.

(17) See Article 135 a, (9) of the proposed VAT Directive and Article 10, 1-

2 of the proposed VAT Regulation.

(18) See Article 135, 1, (a) of the proposed VAT Directive.
(19) See Article 2, 1 of the proposed VAT Regulation.
(20) See Article 5, 1, h of the proposed VAT Regulation.
(21) See Article 14 and 17 of the proposed VAT Regulation.

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4.8
A general introduction of VAT Grouping (treating groups
of companies as one single tax payer for VAT purposes, as
provided for in the current VAT-Directive but only on an
optional basis) with appropriate anti-abuse provisions, could
prove a more appropriate and flexible solution allowing opera-
tors to integrate their core functions without incurring addi-
tional VAT. However, the EESC admits that support for the
implementation of VAT Grouping provisions is not unanimous
among Member States at this time and that also the Commis-
sion has reservations. It would therefore not appear to be a
solution in the short term.

4.9
The EESC welcomes the introduction of a generalised
is not currently available for insurance
option to tax that
services. The merits of this option are clear in B2B transactions,
where VAT is recoverable by the customer. Yet, the EESC fears
that additional taxation might arise under the new legislation
and have budgetary consequences for private consumers who
can not recover VAT. Whatever law applies to contracts, insur-
ance contracts are subject
taxes and parafiscal
charges on insurance premiums in the Member State in which
the risk is located. The rate of those taxes varies significantly
among Member States and between classes of insurance (e.g. life
insurance, motor liability, etc.). This gives rise to questions

to indirect

Brussels, 29 May 2008.

about the need of EU-wide coordination. The EESC doubts that
insurance companies will apply the option to tax especially in
B2C markets, as long as the national tax authorities levy other
taxes on insurance premiums. On the other hand, the EESC
considers it unlikely that national authorities will abolish, or to
at least, reduce in due proportion the premium taxes since this
will generate revenue losses for Member States. This is a matter
clearly to be addressed.

4.10
As regards the option to tax for insurance and financial
services, the EESC would also welcome a system allowing opera-
tors to opt on a transaction-by-transaction basis or on a per-
transactions or
client basis or for pre-defined categories of
clients. At the same extent, allowing operators to be able to
appropriately recover the input-VAT that relates to the VAT-able
output would be welcome. This would create maximal VAT-
neutrality in a B2B environment. However, it is crucial that a
uniform implementation of the option is safeguarded as from
2012, and that therefore Member States will not be given the
possibility to impose differing conditions for the use of the VAT
option. If the option to tax is not implemented in a similar way,
it is likely that distortions of competition between Member
States and economic operators will be created.

The President

of the European Economic and Social Committee

Dimitris Dimitriadis