COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT Accompanying the document Proposal for a Council Directive amending Directive 2006/112/EC on the common system of value added tax as regards a standard VAT return
Date: 2013-10-23
Institutions: European Commission
Subjects: VAT, domestic market, tax harmonisation, tax return













EUR-Lex - 52013SC0427 - EN











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52013SC0427

COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT Accompanying the document Proposal for a Council Directive amending Directive 2006/112/EC on the common system of value added tax as regards a standard VAT return /* SWD/2013/0427 final */









TABLE OF CONTENTS
Executive Summary Sheet............................................................................................................. 3
1........... Introduction.................................................................................................................... 7
2........... Procedural issues and
consultation................................................................................... 9
2.1........ Studies........................................................................................................................... 9
2.2........ Consultation of stakeholders........................................................................................... 9
2.3........ Stakeholder views........................................................................................................ 10
3........... Problem Definition and
Subsidiarity............................................................................... 11
3.1........ The starting point.......................................................................................................... 11
3.2........ The main cross-border drivers of
the problem requiring action....................................... 14
3.3........ The main domestic drivers of the
problem requiring action.............................................. 16
3.4........ Evolution of the problem............................................................................................... 17
3.5........ Analysis of subsidiarity.................................................................................................. 19
4........... Objectives.................................................................................................................... 21
4.1........ General policy objectives.............................................................................................. 21
4.1.1..... Main policy objectives.................................................................................................. 21
4.1.2..... Specific objectives........................................................................................................ 22
4.2........ Consistency of objectives with
other EU policies........................................................... 23
5........... Policy Options.............................................................................................................. 25
5.1........ Possible options............................................................................................................ 25
5.1.1..... No EU action (benchmark)........................................................................................... 25
5.1.2..... Non-regulatory option (discarded)................................................................................ 25
5.1.3..... Legislative approach in the
context of extending the mini-one-stop-shop (discarded)...... 26
5.1.4..... Stand-alone legislative approach
(pursued further)......................................................... 26
5.2........ Options (with sub-options)
retained............................................................................... 26
5.2.1..... Type of legislation......................................................................................................... 26
5.2.2..... Implementation timing................................................................................................... 27
5.2.3..... Scope of a standardised VAT
declaration..................................................................... 27
5.2.4..... Contents of the standard VAT
declaration..................................................................... 28
5.2.5..... Periodicity and due date................................................................................................ 28
5.2.6..... Annual VAT return....................................................................................................... 28
5.2.7..... Other issues (E-filing, corrections)................................................................................. 29
5.3........ Options considered....................................................................................................... 29
6........... Assessment of Impacts................................................................................................. 31
6.1........ Background figures characterising
the baseline (Option A)............................................. 31
6.2........ Basic characteristics of the
retained options................................................................... 32
6.3........ Administrative burden for
businesses – including for SMEs............................................ 34
6.4........ Costs of managing VAT returns for
Member States....................................................... 37
6.5........ Integration within the Single
Market............................................................................... 40
6.6........ Macro-economic and employment
effects..................................................................... 41
6.7........ Other impacts............................................................................................................... 41
6.8........ Potential obstacles........................................................................................................ 43
7........... Comparison of Options................................................................................................. 44
7.1........ How impacts have been weighted................................................................................. 44
7.2........ Trade-offs with each option.......................................................................................... 46
7.3........ Ranking of the options for the
various evaluation criteria................................................. 46
7.4........ Preferred option........................................................................................................... 47
8........... Monitoring and Evaluation............................................................................................. 47
9........... Annexes....................................................................................................................... 49
9.1........ Agenda planning........................................................................................................... 49
9.2........ Links to external studies................................................................................................ 51
9.3........ Stakeholder groups and
consultations............................................................................ 52
9.4........ Business and Member State views................................................................................ 53
9.5........ Standard VAT declaration (PwC model)....................................................................... 57
9.6........ Administrative burdens.................................................................................................. 59
9.6.1..... Recurring cost.............................................................................................................. 60
9.6.2..... Set up costs.................................................................................................................. 63
9.6.3..... Summary of cost savings............................................................................................... 64
9.6.4..... Periodicity savings........................................................................................................ 66
9.7........ Background figures....................................................................................................... 67
9.8........ Preferred option E........................................................................................................ 70
               Executive Summary Sheet 
 Impact assessment on a proposal amending Directive 2006/112/EC on the common system of value added tax (VAT Directive) as regards a standard VAT return. 
 A. Need for action 
 Why? What is the problem being addressed? 
   The main difficulty businesses face in completing VAT returns in different Member States is the complexity. This comes from providing different information, the information not having consistent definitions, the lack of good guidance in how to complete the VAT return, different rules and procedures for the submission, and the need to complete it in the national language. This also comes from the level of information required, which in several Member States, is very demanding.   Moreover, the lack of clear and concise information on how to submit the VAT return, the information that should be completed for each box and having that information in an understandable language all add to the complexity for business.   This complexity in turn leads to the following two main problems. 1. Restricts cross border trade 2. Increase in burdens on business     
 What is this initiative expected to achieve? 
   The objective of the proposal is twofold; first to reduce obstacles to cross border trade by standardising information requirements and second to ease the burden on business, and specifically on SMEs and micro-businesses, by simplifying obligations.   Indirect benefits may also result in: ·        Reducing the VAT gap by improving the exchange of information between Member States' tax authorities. ·        Improving the accuracy and timeliness of VAT declarations ·        Facilitating the broadening of the scope of the mini-OSS     
 What is the value added of action at the EU level? 
   As Member States would not voluntarily move to align their VAT returns, a common VAT return is unachievable through their actions alone. Consequently no changes, either positive or negative, can be envisaged in respect of meeting the primary targets of reducing both obstacles to cross border trade and administrative burdens in the short term.   Longer term a lack of action may have a higher negative impact on cross border trade. Increasingly as EU trade grows and specifically that of cross border e-commerce, disparate VAT returns may, as an obstacle to cross border trade, have a higher negative impact in the future.     
 B. Solutions 
 What legislative and non-legislative policy options have been considered? Is there a preferred choice or not? Why? 
   The following policy options have been considered and one option discarded. 1. No EU action (benchmark) 2. Non-regulatory option (discarded)   3. Legislative approach In a legislative approach 4 options have been considered. a) Compulsory standard EU VAT declaration (business and Member States) b) Standard VAT declaration optional for all business (compulsory for Member States) c) Standard VAT declaration optional for those businesses submitting VAT returns in more than 1 Member State (compulsory for Member States) d) Compulsory standard VAT declaration with limited flexibility for Member States to determine the information from a standardised list   The preferred option is legislation for a compulsory standard VAT declaration with limited flexibility for Member States to determine the information from a standardised list.   This approach is selected because it best satisfies the trade-off between more flexibility for business which reduces cross border obstacles to trade and administrative burdens against the cost and complexity for Member States or providing that change.   
 Who supports which option? 
   Business is very supportive of standard VAT return. In Member States with a lot of VAT return boxes they prefer a single mandatory VAT return in all Member States. In Member States with simple national VAT returns an optional standard VAT return is preferred. A mandatory standard VAT return with flexibility for Member States to reduce the reporting information is supported as a second best solution. Doing nothing or limiting the standard VAT return to businesses submitting VAT returns in more than one Member State was not preferred.   Member States are in most cases supportive of a standard VAT return but mindful of the impact in terms of having to change their national VAT return and the cost that will entail. It is crucial for them to have only one VAT return as the cost to implement and manage a double scheme would be prohibitive, and there needs to be scope to take on board different levels of information needed for risk analysis and control.     
 C. Impacts of the preferred option 
 What are the benefits of the preferred option (if any, otherwise main ones)? 
   The beneficial economic impacts were measured against meeting the main objectives of removing obstacles to cross border trade and reducing administrative burdens on business. There are other secondary benefits including economic, social and environmental impact. The benefits accrue to business.   Removing obstacles to cross border trade: EUR 3 to 6 billion Reducing administrative burdens: EUR 9 billion   Social impact: Small improvement in overall employment Environmental impact: No significant impact   
 What are the costs of the preferred option (if any, otherwise main ones)? 
   The cost of the standard VAT declaration is borne by Member States. Those providing information suggest the cost of implementing a standard VAT declaration is between EUR 150 000 to EUR 120 million with the average of replies being EUR 30.5 million.   For businesses they will incur set-up costs of changing from national VAT returns to the standard VAT declaration. This is estimated at EUR 2.9 to 4.25 billion and would take between 8 months and 2.5 and 4 months to recover set-up costs through lower administrative burdens.   
 How will businesses, SMEs and micro-enterprises be affected? 
   The VAT system generally requires businesses to apply VAT and submit and pay it through a VAT return. As the standard VAT declaration would see estimated benefits to businesses of up to EUR 15 billion there is no specific need to target additional measures at SMEs.   However, for micro enterprises they should be allowed less frequent VAT return filing, which can reduce compliance costs further as submitting a quarterly VAT return is not three times more burdensome than submitting a monthly VAT return. These savings are EUR 1.8 billion.   
 Will there be significant impacts on national budgets and administrations? 
   The costs for Member States of implementing the standard VAT declaration are estimated on average to be EUR 30.5 million.   There should be beneficial effects on Member States tax receipts through a reduction in the VAT gap (around 12% of VAT is uncollected) as the proposal would: ·        Improve the exchange of information between Member States' tax authorities to help tackle fraud and evasion ·        Improve the accuracy and timeliness of VAT declarations through standardisation and easier compliance     
 Will there be other significant impacts? 
   There may be other impacts although less significant than reducing obstacles to cross border trade and administrative burdens. These impacts may include: ·        Facilitate the broadening of the scope of the mini-OSS by establishing a standard VAT return (longer term solution for facilitating e-commerce) ·        Improve competitiveness of business as "red tape" is reduced ·        Attract non-EU businesses through simpler EU standardised rules   
 D. Follow up 
 When will the policy be reviewed? 
   TAXUD is looking at establishing a methodology to measure tax compliance. Any adopted proposal can be evaluated within that tax compliance study, say two years after the standard VAT declaration enters into force.   
COMMISSION
STAFF WORKING DOCUMENT
IMPACT ASSESSMENT
Accompanying the document
Proposal for a Council Directive
amending Directive 2006/112/EC on
the common system of value added tax as regards a standard VAT return
1.           Introduction
The common EU VAT system is a valuable and
growing source of revenue which contributed 22% of total taxes for Member
States in 2010, a rise of 3.4 percentage points since 1995. It is a consumption
tax to be borne by the final consumer but whose collection is falling on
businesses, which act as the "unpaid tax collector" of the Treasury.
However, it is also a complicated system with
more than half of the 400 plus articles of the VAT Directive dealing with
derogations and sector or product-specific exemptions or special rates and
schemes. Also, while tax legislation through its design features might be able
to encourage voluntary compliance, it cannot guarantee voluntary compliance.
Thus, and given the enormous sums at stake, compliance must be enforced and
monitored.
So, it should not be a surprise that the VAT
scheme is seen as burdensome by both tax payers and tax authorities. On the one
side, over the last decades there might have been a tendency of piling up
additional information requests by tax authorities while on the other side the
cost-saving potential of new information and communication technologies might
have been overlooked to some extent by both tax payers and tax authorities.
Indeed, when having tried to identify
unnecessary reporting and information requirements in the context of the
Commission's Action Programme for Reducing Administrative Burdens in the
European Union, VAT related burdens ranked at the top. Of the 13 legislative
areas covered, VAT obligations represented 2/3rd of the administrative costs
(EUR 79 billion out of EUR 124 billion) as measured in a 2009 report[1].
Of the EUR 79 billion annually of
administrative costs for VAT, EUR 69 billion were classified as administrative
burdens[2].
Of this, three areas represented more than 80% of the VAT administrative burden;
VAT bookkeeping, returns and invoicing. As regards the administrative burden on
completing VAT returns in the EU, these were estimated at EUR 19 billion.
The target of the Commission's Action Programme
was to reduce the administrative burden stemming from EU legislation by 25% by
2012 and this has been fully achieved. Of the measures taken the VAT Directive
on invoicing accounted for burden reductions of EUR 18 billion in the medium
term for businesses. However, it was highlighted by the High Level Group on
Administrative Burdens (the so-called "Stoiber" group), that more
work was needed particularly in the tax area.
For this reason the suggestions from the
Stoiber group concerning burden reduction measures were included in the public
consultation on the Green Paper on the future of VAT[3]. They were also covered in the
accompanying recommendation from a study[4]
for the Stoiber Group on reducing administrative costs from VAT returns for
businesses; namely "consideration could be given to implementing a uniform
VAT return throughout all 27 Member States".
This recommendation was suggested as the VAT
Directive on the common system of VAT, while requiring taxable persons to
submit a VAT return, currently allows the Members States to determine the
content and submission. This results in 27 very different periodic VAT returns
with anything from less than 10 boxes to 100 boxes to be completed and for small
businesses and those businesses submitting VAT returns in more than one Member
State it is considered particularly burdensome.
Importantly the "Retrospective evaluation
of the elements of the VAT system"[5]
estimates that a reduction of 10% in the dissimilarity of the general VAT
administrative procedures between countries could yield a rise of 3.7% in
intra-EU trade, while real GDP and consumption would increase by 0.4% and 0.3%,
respectively. Thus, a standardised VAT return could have real positive effects
on the EU economy.
The Stoiber Group and its report on the
baseline measurement of administrative burdens formed the basis of the review
of VAT obligations included in the Green Paper on the future of VAT[6]. It is from this fundamental
review on the future of VAT towards a simpler, more robust and efficient VAT
system that the need to reduce burdens on business and particularly in terms of
the obligation to submit VAT returns was confirmed.
The Commission therefore committed itself, in
its Communication on the future of VAT[7],
to put forward a legislative proposal in 2013, so that a standard VAT
declaration "is available in all languages and optional for business
across the EU". 
The objective of the present proposal is
twofold; first to reduce obstacles to cross border trade by standardising
information requirements and second to ease the burden on business, and
specifically on small and medium sized enterprises (SMEs) and micro-businesses,
by simplifying obligations.
This Impact Assessment looks at the possible
options and how they respectively meet these two objectives. Moreover, it is also
in line with the ECOFIN conclusions[8]
of May 2012 and given the current imperative of fiscal consolidation, minimizes
costs on Member States and also business for the implementation and management
of the required changes.
It has been redrafted in line with the opinion
of the Impact Assessment Board. In particular the problem definition has been
clarified in respect to the cross border and national problems of submitting
VAT returns, the links to the One Stop Shop and e-filing have been further
explained as well as why action is needed at EU level and more information has
been provided on the impacts on Member States although this still remains limited
given the general lack of replies for quantitative information. 
2.           Procedural
issues and consultation
DG TAXUD is the lead Directorate General. Other
DGs were consulted through an Impact Assessment Steering Group that included DG
MARKT, DG ENTR, DG CNECT, SG and OLAF. In addition the Legal Service and ESTAT
were kept informed although they did not participate in the Steering Group. 
The Steering Group met on four occasions
between 3 July 2012 and 23 May 2013.
The details of the agenda planning are included
in Annex 9.1.
2.1.        Studies
Two studies of note have been completed on VAT
returns and an evaluation of the VAT system is also of relevance (see Annex 9.2
for links).
a) Deloitte study (2009)
This study was completed for the Stoiber Group
and was the initial study measuring burdens associated with VAT returns.
b) PwC study (2013)
This study was focused on the feasibility, the
scope, the comprehensiveness and impact of a common EU standard VAT return. The
focus was on the definition of the information needed for a standard VAT
declaration and guidance on how to complete the declaration, including how, when
and how often the standard VAT declaration should be submitted and how
corrections could be made.
c) Institute of Fiscal Studies (2011)
The retrospective evaluation of elements of the
EU VAT system provides a broad evaluation of the EU VAT system including estimates
of the administrative burden and compliance cost for fulfilling VAT obligations
with particular attention to the effects of the dissimilarities between the
Member States. Extensive analysis was done comparing a harmonised EU VAT system
and the present system with Member States given flexibility to apply the VAT
system differently in terms of for instance VAT obligations.
2.2.        Consultation
of stakeholders
The following types of stakeholders have been
consulted. More details of the stakeholder groups can be found in the Annex 9.4.
i) All stakeholders (Member States, business,
tax practitioners, citizens, academics etc.)
All stakeholders were consulted initially
through a public consultation on the Green paper on the future of VAT[9] which included an accompanying
staff working document. Section 9.7 of the staff working document[10] raised the specific point of a
standardised EU VAT declaration.
The public consultation was launched on 1
December 2010 and closed on 31 May 2011.
ii) Business
Business was consulted not only through the
public consultation but through workshops held to define the standard VAT
declaration during the PwC study. The business consultation in the study was
undertaken approximately from January 2012 until June 2012. The result of the
business quantitative and qualitative information is contained in the PwC final
report.
Following the final report from PwC, business
was again consulted through the VAT Expert group[11] set up by Commission Decision[12]. This met on 25 January 2013. 
SMEs were also consulted specifically at a
Small Business Act follow up meeting held on 17 April 2013 (10 SME business
organisations were present). 
iii) Member States
Member States' tax authorities were consulted
through a Fiscalis seminar held by Portugal on 2-4 October 2012. Information
from Member States was included were appropriate in the study by PwC. 
As well Member States were consulted through
the Group on the Future of VAT (GFV) following publication of the PwC final
report. The GFV meeting was held on 28 January 2013.
2.3.        Stakeholder
views
Business views
The views of business came from four sources;
the Green paper on the future of VAT public consultation, the PwC study, Small
Business Act meeting (SMEs) and the VAT Expert group. 
In summary, business is very supportive of
standard VAT return[13].
In general businesses from Member States where the VAT return includes a lot of
boxes to complete prefer the same mandatory VAT return in all Member States.
For businesses in Member States with simple national VAT returns an optional
standard VAT return is preferred with the option to continue using the national
VAT return.
Business would also welcome a mandatory standard
VAT return with flexibility for Member States to reduce the reporting
information. This was seen as a second best solution.
The options of doing nothing or limiting the
standard VAT return to businesses submitting VAT returns in more than one Member
State was not preferred.
SMEs unanimously endorsed the idea of a
standard VAT declaration, while at the same time being consciousness of the
need to reduce the frequency of VAT returns for smaller businesses.
Member States' views
The views of Member States were received
initially from the ECOFIN conclusions of 15 May 2012, and then subsequently
from the Fiscalis seminar in October in Portugal and finally through a Group on
the Future of VAT meeting.
Member States[14]
are generally open to the idea of standard VAT declaration. Two Member States
were expressly against a standard VAT declaration because they considered it
would prevent them from collecting the information they need. Several other
Member States had a cautious approach and stressed the impact in terms of
having to change their national VAT return and the cost that it will entail. 
Two elements seem however crucial for all
Member States; firstly there should only be one type of VAT return as the cost
to implement and manage a double scheme (European and national) would be
prohibitive, and secondly there needs to be scope to take on board different levels
of information needed for risk analysis and control. 
3.           Problem
Definition and Subsidiarity
3.1.        The
starting point
The VAT Directive lays down the rules by which
Member States must require a VAT return from their taxable persons. Those rules
are contained in Chapter 5 of Title XI and they require every taxable person to
"submit a VAT return setting out all the information needed to calculate the
tax that has become chargeable and the deductions to be made…".
These VAT declarations are a core tool of
managing payment and revenue streams and they are having legal status by
defining the financial liability positions of companies vis-à-vis the Member
State to which they are submitting the returns. Subsequent auditing is then
benchmarked against declarations in the VAT returns submitted.
Save for some details regarding supplies of
goods to other Member States, Member States are free to set the type of information
they deem necessary for the calculation of the VAT that is due according to the
VAT Directive. For the periodic VAT return (typically monthly or quarterly)
this may vary from 6 boxes in Ireland to up to 99 boxes of information in
Hungary to be completed (see table 9.7.1 for more details). In addition summary
annual VAT returns are required in eight Member States (Austria, Germany,
Greece, Italy, Luxemburg, Malta, Portugal, Spain), and in certain Member States
this can include 200 or more boxes to be completed (see table 9.7.1 for more
details). 
The same goes for the periodicity of VAT
returns for which Member States have implemented different rules. Most require
monthly returns although for Cyprus, Malta and the UK it is quarterly
reporting. All Member States except Bulgaria and Estonia allow micro
enterprises to file at longer periods than monthly (see table 9.7.1 for more
details). 
The study by PwC (2013) identified eight Member
States (EU8) where the businesses would not opt for an EU standard VAT
declaration as the national return was deemed easier[15]. These Member States are
Cyprus, Denmark, Finland, Ireland, Malta, Netherlands, Sweden and the UK. For
the other Member States (EU19) the standard VAT declaration is deemed easier.
In most cases returns can only be filled in in
the local language (the Commission does not interfere with Member States right
to use their national language), which represents a specific burden for
non-established businesses or shared service centres established outside the country.
The effect of VAT return obligations generally
falls disproportionately on SMEs. Indeed even the requirement to submit a VAT
return is more administratively costly on an SME that generally does not have
the sufficient resources or knowledge to deal with tax matters in comparison to
a large business with more detailed internal controls and staff dedicated to
taxation issues. Thus, SMEs have to purchase specialised services on the market
which could be more costly and definitely have a negative cash-flow
implication.
VAT return and VAT Gap
Certain Member States seem driven by the
assumption "the more information we ask the higher will be the compliance
by tax payers". This assumption is, however, not supported by evidence, as
there is for example, no apparent negative correlation between the number of
boxes to be filled out in a VAT return and the VAT gap in a given country. 
Indeed, there seems even to be a slight
positive correlation between the level of fraud (as measured by the VAT gap) in
a particular Member State and the number of boxes on a national VAT return. The
more complex a VAT return the higher the VAT gap, which seems to suggest that
national approaches based on complex VAT returns are not very effective.
Figure 1 below shows the number of boxes on a
VAT return plotted against the percentage of VAT gap for the Member States
(Italy is excluded). This highlights there is a slight positive correlation
between the number of boxes on a VAT return and the VAT gap.
Figure 1: Correlation between the number of
boxes on a VAT return and the VAT gap by Member State
Source: VAT Gap – Reckon Study 2009, N° boxes
on VAT returns – PwC Study 2013
First it should be stressed that such a
positive correlation does not mean that more VAT return boxes is a factor which
increases the VAT gap. Nevertheless it does mean that increasing the number of
boxes is totally ineffective in reducing the VAT gap.
This positive correlation might be explained by
the following reasons:
- it might be that the more complex the returns
are the more taxable persons, notably small companies or companies linked to
economic activities more exposed to the risk of shadow economy, might shy away
from declaring properly.
- it might be that Member States confronted
with more fraud have a tendency to ask for more information to address the
problem.
- it could be that Member States with poorer
risk management systems, based more on return information than on other sources
(registration information, information from other administrations) are less
effective in tacking VAT fraud.
Of course the VAT Gap does not just measure
fraud. It measures the difference between the theoretical VAT receipts that
could be collected based on a country’s VAT regime applied to household
consumption against actual VAT receipts collected. It therefore includes fraud,
errors, tax planning, insolvencies as well as cross border shopping.
In looking at Luxembourg for instance, with a
very low VAT gap but a high number of boxes on its VAT return (an apparent
outliner), the low VAT gap is in part due to VAT receipts being high because of
the inclusion of, for instance, e-service providers being located in Luxembourg
for cross border shopping and therefore inflating Luxembourg VAT receipts. It
is not that a large number of VAT return boxes necessarily reduces fraud.
Lack of EU dimension
Member States have designed their VAT returns
for purely domestic control, organisational and risk management purposes and
therefore there is no EU dimension playing a role. The result is different
systems, different rules and therefore overall a high burden in terms of
compliance costs in the Internal Market. Certain Member States have minimised
information requirements on the VAT return but are relying more on information
through registration or other third party reliable sources, whereas others have
designed a risk management system which is largely based on detailed VAT
returns. The difference in approach is large as seen by national VAT returns.
Member States have little incentive in trying
to reduce national differences in VAT returns or create a standard VAT return.
Left to their own devices the differences between VAT returns and their
complexities would at best remain the same.
There is a cross-border dimension to the
problem affecting both large and small businesses as well as a more domestic
dimension to the problem, mainly affecting SMEs and micro enterprises. However,
as more and more domestically-oriented small businesses are expected to go
international in the coming years (notably in the Eurozone as there is no
longer an exchange-rate risk involved), tackling today the domestic problem for
SMEs would also have positive knock-on effects and would facilitate them going
international and, thus, strengthen the effectiveness of the Single Market.
3.2.        The
main cross-border drivers of the problem requiring action
The main difficulty businesses face in
completing VAT returns in different Member States is the complexity and
different language regimes[16].
This comes from having to provide different information, the information not
having consistent definitions, the lack of good guidance in how to complete the
VAT return, different rules and procedures for the submission, and the need to
complete it in the national language. This complexity also comes from the level
of information required, which in several Member States, is very demanding.
This complexity in turn leads to the following
two main problems:
1. It restricts cross border trade
The public consultation on the Green paper on
the future of VAT found that "certain sectors encounter specific problems
with cross-border transactions which they considered an obstacle to the single
market. This is the case for companies involved in distance sales, resulting in
VAT registrations and subsequent VAT obligations in several Member States. It
has been pointed out that because of this traders often may not offer internet
or mail-order business to customers from other Member States."
For SMEs, when doing business cross border, the
problem is magnified for two clear reasons.
i) There is less financial capacity to set up
local companies with local staff to submit VAT returns in another Member State.
ii) There is less financial capacity to hire
specialised staff or pay outside consultants with knowledge of foreign rules
and languages necessary to complete a VAT return in another Member State.
The result is that there is a specific barrier
to trade and many SMEs simply don't trade cross border for these reasons. In
the recent top 10 inquiry about SME's concerns in relation to regulatory
burdens, SMEs tell us that "the system is very complex, with different
national procedural rules and the lack of a simple, uniform VAT declaration.
This discourages SMEs from trading across borders."
This is particularly true in relation to
electronic commerce, for which different VAT rules are often an obstacle to
selling beyond the domestic market, although no estimate is available to
measure this obstacle.
Removing this barrier could increase business
expansion in the internal market and it may also increase the choice of
consumers and strengthen price competition particularly in on-line shopping.
As estimated in the "Retrospective
evaluation of the elements of the VAT system" a reduction of 10% in the
dissimilarity of the general VAT administrative procedures between countries
could yield a rise of 3.7% in intra-EU trade, while real GDP and consumption
would increase by 0.4% and 0.3%, respectively.
Thus businesses have through consultations
stated to the Commission that completing VAT obligations in different Member
States is a barrier to cross border trade and thereafter the economic
evaluation of the VAT system has indeed confirmed this to be the case showing
increases in trade and growth with a more harmonised VAT system.
2. It increases the burden of doing business
across borders
In terms of assessing the number of businesses
affected and the associated cost, there are an estimated 29,8 million
businesses completing VAT returns in the EU with about 3,8 million of those
submitting VAT returns in more than one Member State. 
A detailed analysis of the businesses
submitting VAT returns in more than one Member State is set out in Figure 2
(those affected are highlighted in grey: non-established 0.3 million, branch
0.3 million, subsidiary 3.2 million). 
Figure 2: Number of businesses submitting
VAT returns in more than one Member State 
Source: PwC study (2013)[17]
Although figures are not available for
non-established businesses or branches, of the 3.2 million businesses that are
subsidiaries of a group company around 56% are SMEs and 44% are large companies[18]. 
Even assuming the cost for completing VAT
returns domestically was the same as that for completing VAT returns in another
Member State, it could be estimated that VAT returns would cost at least annually
EUR 4 billion for business being active across borders in the single market
(13% of EUR 30 billion – see Annex 9.6, table 9.6.2). In fact the PwC study
estimates that the cost for non-established businesses is much higher[19] and therefore for all
businesses submitting VAT returns in more than one Member State (non-established,
branches and subsidiaries) a conservative figure of 2 to 3 times higher than
EUR 4 billion could be assumed.
The increase in cross border costs is not in contradiction
with the PwC study (2013) finding that 54% of large businesses do not think the
standard VAT return would reduce their costs[20].
This statistic represents business views in cases where the national VAT return
is seen as simpler or much the same as the standard VAT return and therefore
use of the standard VAT declaration provides no or little benefit. It does not
represent the benefits of cross border standardisation nor advantages through
reduced frequency of submission or abolition of the annual VAT return.
3.3.        The
main domestic drivers of the problem requiring action
The cost of submitting VAT returns (e.g. time
to record and collate information, filling in VAT return boxes, submission, etc.),
while substantial for large businesses in absolute terms because they have a
larger number of transactions, more complex VAT issues and more extensive
internal controls, are, as a percentage of annual turnover, significantly
higher for SMEs.
In the Communication on Smart regulation -
Responding to the needs of small and medium - sized enterprises[21], the findings show that VAT
legislation is seen by individual SME businesses as the most burdensome area of
EU legislation. The burden for all businesses was evaluated as part of the
Stoiber Group’s work on reducing administrative burdens and was estimated at
around EUR 69 billion annually, of which VAT returns are EUR 19 billion[22].
The study for the Stoiber Group, in measuring
the cost of VAT returns in six Member States, found that Hungary with the
highest number of VAT return boxes required the most amount of time to submit
the VAT return. For comparison, in Hungary (99 boxes) large businesses spent 2
044 minutes completing the VAT return whereas in Cyprus (11 boxes) and the
lowest number of boxes of the sample countries it took 369 minutes (5 ½ times
less). 
The number of boxes it concluded was a key
factor in businesses spending more time, and by consequence having a higher
burden.
Furthermore, the Deloitte Study (2009) for the
Stoiber Group, based on recommendations from stakeholder consultations,
provided suggestions for burden reduction in 4 areas:
a) harmonising frequency and thresholds for the
submission of VAT returns
b) discarding the need for nil returns 
c) uniform VAT return
d) eGovernment solutions using easier
applications (i.e. easier, more interoperable e-filing solutions)
The annual VAT return was not part of the study
since this is an option in the VAT Directive and only VAT Directive obligations
imposed on Member States were evaluated. However, with the online and offline
consultations that helped form the High Level Group opinion businesses cited
the annual VAT return as burdensome.
Of the measures mentioned by the Stoiber Group,
they are all considered except the nil-filing because of the risk of fraud. This
suggestion is too risky as the difference between a missing trader and one not
trading has huge implications for fraud.
3.4.        Evolution
of the problem
Underlying market developments
The past decades have seen a dramatic change in
the international division of labour triggering an intensified international
fragmentation of value chains, including SMEs and mid-cap companies. This also
holds for Europe where trade in goods and services has intensified and more and
more SMEs discover and make use of supplies and demand across national borders.
This has been largely facilitated by the intensified approximation of laws
within the European Union and the emergence of an ever growing Eurozone
evaporating exchange-rate risks within this zone. Thus, more and more companies
will be exposed to having to fill in VAT returns in more than one Member State.
Changing legislative environment at the
European level 
i) One Stop Shop
At EU level the Commission is working with
Member States towards the implementation of a mini-One Stop Shop (MOSS) in 2015
and this, should it be enlarged, could help non-established businesses. As
planned it will allow businesses supplying telecoms, broadcasting and
electronic services to private individuals to declare and pay the VAT due in
other Member States through the Member State where the business is established.
The details for the declaration of the MOSS has been harmonised through a Commission
Implementing Regulation[23].

The mini-One Stop Shop has a targeted
population which is at the very maximum the 1% (307 654 companies[24]) of enterprises registered for
VAT as non-established in another Member State increased by a further 2% as a
result of the place of supply changes from 2015 (so 3% in total).
A full One Stop Shop, under a system of taxing
supplies cross border at the rate in the Member State of destination, could
include up to 1,2 million business that are required to submit recapitulative
statements in the EU for their cross border transactions.
However, the implementation of a full One Stop
Shop must be seen as a long term goal. First the mini-One Stop Shop needs to be
evaluated in the years after 2015. This review could be completed in 2017 and
accompanied by a Commission proposal for an enlarged One Stop Shop to all
Business to Consumer (B2C) supplies. Agreement needed in Council and the time
required for implementation by Member States could see an effective start date
of 2020. Difficulties to address for Business to Business (B2B) supplies,
involving issues such as the right to deduct, would probably mean a much later
introduction of a full One Stop Shop.
Nevertheless, the One Stop Shop only addresses
cross border trade for non-established businesses. A business established in
several Member States (branches or subsidiaries) would still be required to
submit national VAT returns in each Member State of establishment. Most of the
targeted population would therefore in any case be excluded from such a
simplification.
ii) e-filing
The Stoiber Group in its May 2009 opinion[25] on taxation, based on
stakeholder suggestions, stated that in relation to VAT obligations there was a
need “to facilitate and promote the fully electronic interaction between
businesses and tax authorities, to make the respective e-government solutions
simple and to create incentives for businesses to use them”.
Findings from the Deloitte study (2009) had
quantified burden reduction at EUR 3.4 billion if Member States introduced
simple, easy to use, time-saving e-government solutions for this purpose. Of
course, the e-filing of VAT returns are only a part of the potential saving.
Furthermore, electronic solutions in other
Commission proposals, such as e-invoicing in public procurement[26] can dovetail with electronic
VAT reporting. The Impact Assessment on e-invoicing in public procurement
states that “if e-invoicing is integrated with tax reporting, it can reduce
administrative burden, as tax declarations can be generated automatically.”
Thus businesses see a need for exploiting
electronic solutions and doing so has been quantified as reducing burdens on
business. Any initiative on a standard VAT return should therefore look to
address this issue of e-filing. In the end, a common standard for electronic
returns (single signature to e-sign different declarations or a standard alternative
solution accepted by all Member States) would enable companies to fully exploit
the benefit of e-filing.
3.5.        Analysis
of subsidiarity
Article 113 of the Treaty on the Functioning of
the European Union (TFEU) provides that:
"The Council shall, acting unanimously
in accordance with a special legislative procedure and after consulting the
European Parliament and the Economic and Social Committee, adopt provisions for
the harmonisation of legislation concerning turnover taxes, excise duties and
other forms of indirect taxation to the extent that such harmonisation is
necessary to ensure the establishment and the functioning of the internal
market and to avoid distortion of competition."
The national VAT returns can be seen, due to
the differing amounts of information to be provided in the national language,
as adding complexity for businesses which in turn create barriers for
businesses supplying goods or services cross border and thereby hampering the
functioning of the internal market.
It is therefore necessary to legislate in this
area at EU level to remove these barriers and ensure a smooth functioning of
the internal market.
Subsidiarity principle
The objectives cannot be sufficiently achieved
by the Member States. Standardisation of the VAT return obligation can only be
achieved through the EU's legislative process by amending the VAT Directive
which sets out general rules on the VAT return. 
The current VAT Directive already includes
rules on returns (articles 250 to 261). It is these rules which provide Member
States with only minimum requirements and offer them the option to add national
requirements. This initiative is therefore not about creating new rules in the VAT
Directive but simply about amending those existing rules. 
On the other hand, reducing the frequency of
filling in VAT returns, notably for micro enterprises, could be decided at the
national level. However, for micro enterprises it is justified to provide a
common reporting period so there is legal certainty when submitting VAT returns
in different Member States as to those rules. To require different national
filing periods to those standardised at EU level would add unnecessary
complexity and undermine the very objective of this initiative.
Likewise, allowing Member States to retain an
annual summarising VAT return would equally undermine the legal certainty for
businesses and undermine the objective of creating a common standard since this
would lead to divergent approaches and information requirements by Member
States. Moreover, as at present certain Member States require more information
on annual VAT returns over that contained in a periodic VAT return there is a
risk that standard information is circumvented with additional information
required on annual VAT returns.
Also, past experience has shown that Member
States, if it was left to their own individual initiative, do not show an appetite
to reduce the frequency and comprehensiveness of the VAT returns they require
from their business community. Over the last two decades, and despite all the good
intentions for a reduction in administrative burden, there were few incidences
reported to the Commission where a Member State has decided to reduce the
frequency of VAT returns (e.g. for micro-enterprises) or to reduce the scope of
VAT returns themselves. 
Thus, changes for simplification and the
reduction in administrative burden must be initiated at the European level. Indeed
Member States have been broadly supportive of an EU initiative. This has the
benefit of being a coordinated and agreed approach by all Member States requiring
changes to be implemented at a given date.
However, concerns from those Member States with
few boxes on their VAT returns have made it clear that administrative burdens
should not increase through a harmonised EU VAT return with more boxes. The aim
though is not harmonisation but the setting of minimum standards above which
Member States may introduce or keep simplification measures that go beyond the
standard EU VAT return. For instance, quarterly filing for micro enterprises
could be extended to SMEs or even all businesses and a common EU e-filing
solution can be supplemented by other e-filing solutions. Thus flexibility will
continue for Member States.
It remains of course that for those Member States
currently requiring more boxes on their national return than the new standard
VAT return, important changes will be needed in terms of risk management,
information collection and information exchanges between administrations. This
will require time and some assistance, which can be offered through exchanges
of best practices financed by the Fiscalis programme. For this reason, time
will be needed between the entry into force and implementation of the new
rules.
At the same time certain minimum standards are
needed for simplification to achieve its objective of reducing barriers to
cross border trade and administrative burdens on business and this will entail
some restriction on Member States. For instance, without a ceiling on the
number of possible boxes on a VAT return the complexities for a business to
report in different Member States would remain so high as to continue to
restrict cross border trade.
Nevertheless any reduction for some Member
States on the number of VAT return boxes will not adversely affect their
ability to tackle fraud. No evidence has been found to suggest any correlation,
and certainly no causality, between limiting the number of boxes on a VAT
return and the VAT Gap increasing. In fact there is a slight positive
correlation suggesting those Member States with fewer VAT return boxes have a
lower VAT Gap.
Despite this it would seem business at national
level have been unsuccessful at pushing the tax authorities to reduce
administrative burdens on VAT returns. In part this may be down to the fact
that as most businesses only submit one VAT return in the Member State where
they are established they have become accustomed to the local rules and accept
them as they are. It may in part be because the dialogue between business and
tax authorities does not allow business to assert their views to draw change.
Or perhaps businesses see change in the common VAT system being more
appropriately addressed at EU level and it is through this avenue that they
have made their views known through the various consultations.
Proportionality principle
To remove obstacles to the proper functioning
of the internal market and to reduce burdens on business, limiting the
information requirements to that needed for the control and collection of VAT
by Member States would be necessary. This would need to be done through amendments
to the VAT Directive 2006/112/EC aiming at a standardisation of VAT returns.
A proposal would therefore comply with the
proportionality principle.
4.           Objectives
4.1.        General
policy objectives
4.1.1.     Main
policy objectives
a) Reduce obstacles to cross border trade
Under the country of destination principle, certain
supplies are taxable in the Member State where the supply to a consumer takes
place and require the supplier to register and declare the VAT in that Member
State. This is the case for Business to Consumers (B2C) cross border supplies
of goods above the distance selling threshold (distance sales) as well as
certain B2C supplies of services e.g. short term hiring of cars (place where
the car is put at the disposal of the customer), property (location of
property), and cultural, artistic sporting etc. events (where the event takes
place).
Should the EU VAT system move to taxing all cross
border supplies at the rate applicable in the Member State of destination, then
obstacles to cross border trade would increase significantly without a One Stop
Shop having a standard VAT declaration.
Without the simplification of a One Stop Shop
(OSS) where the supplier could submit his VAT declaration in his own Member
State for supplies taxable in another Member State, the supplier is required to
submit a VAT declaration direct to the Member State where the tax is due.
Clearly, this is a significant administrative burden to the supplier in terms
of providing a different set of information in possibly a different language,
and it discourages cross border sales. This acts as a barrier to the internal
market, which is particularly worrying in the context of promoting e-commerce.
The problem exists too for businesses which
have an establishment in more than one Member State, for instance an EU or
foreign business with branches or subsidiaries in different Member States. It
would be easier to expand EU businesses or attract inward investment in the EU
if those businesses were faced with the same VAT declaration in each Member
State where they had an obligation to submit a VAT return rather than different
VAT returns in each Member State. 
Equally important, both for foreign businesses
as well as EU businesses that trade in different Member States, is the ability
to exploit cost savings through shared service centres[27]. These typically large
businesses could save money through economies of scale by having a shared
service centre which would complete the VAT obligation of submitting the same
VAT return for all Member States. The differences and hence the complexity of
the national VAT returns discourages the setting up of an EU wide shared
service centre.
Allowing businesses to complete a standard VAT
declaration in all Member States where they would normally have to complete a
national VAT declaration would reduce an obstacle to cross border trade and
promote trade in the single market.
b) Reduce burdens on domestic businesses
in order to support growth and competitiveness
The standard VAT declaration is a key action
point of the strategy for the future of VAT by helping move towards a simpler
VAT system and thereby reducing compliance costs for business. As such it helps
reduce burdens on business, an important element of the Better Regulation
Agenda, and helps improve the competiveness of EU businesses and thereby
stimulate growth and jobs.
Indeed, administrative burdens on businesses
for submitting VAT declarations have already been estimated in two studies[28], one by Deloitte (2009) at EUR
19 billion and another by PwC (2013) at EUR 39 billion. This administrative
burden can be significantly reduced by a standard VAT return allowing the
development of standard reporting and automation of processes.
Furthermore, given that 99% of businesses are
classified as SME in the EU the administrative burden reduction will
principally affect these smaller businesses.
4.1.2.     Specific
objectives
Growth friendly fiscal consolidation[29] is one of the five priorities of the Annual Growth Survey 2013[30]. As VAT represents around 21%
of national tax revenues[31],
and with 12% of VAT receipts uncollected[32],
a more efficient fraud proof VAT system is needed. The exchange of timely
information between Member States is a key element in reducing fraud and
improving compliance.
A standard VAT declaration should facilitate
cooperation of tax authorities across borders by making it easier for
all Member States to know when, how and what information has been declared by
businesses in all Member States. This should facilitate a better sharing of
information between the tax administrations.
Voluntary compliance should be
facilitated as the differences between the VAT
declarations in different Member States as well as the complexity of national
returns in individual Member States presently leads to errors and mistakes when
submitting VAT declarations nationally or in different Member States.
Consequently Member States do not receive the correct amount of VAT at the
correct time, and this is in part reflected in the VAT gap (12% of VAT due is
uncollected). 
The broadening of the scope of the mini-OSS to
allow VAT registration, declaration and payment of VAT in the Member State
where the business is established will in the long term help to reduce burdens
on business involved in cross border trade. The OSS could utilise the agreement
of a standard VAT declaration as the basis for the OSS VAT declaration. The
standard VAT declaration could prepare for smoother future reforms of the
VAT system.
4.2.        Consistency
of objectives with other EU policies
Communication on the future of VAT
On 6 December 2011 the Commission adopted a Communication
on the future of VAT setting out the fundamental characteristics that must
underlie the new VAT regime. It lists the priority actions that are needed in
the coming years to create a simpler, more efficient and more robust VAT system
in the EU tailored to the single market. 
The Communication follows the Green paper on
the future of VAT which was itself followed by an extensive six month public
consultation on how the EU VAT system can be strengthened and improved to the
benefit of all stakeholders. The Commission received 1 726 replies from
businesses, academics, citizens and tax authorities, a record response to a tax
consultation.
The European Parliament (EP), the European
Economic and Social Committee (EESC) and the Tax Policy Group (who are the
personal representatives of the EU's finance ministers) welcomed the Green
Paper and confirmed the need to reform the VAT system.
The Communication sets out the commitment under
the move towards a simpler VAT system to "propose in 2013 that a standard
VAT declaration should be available in all languages and optional for business
across the EU". 
It is also a key element in satisfying the wishes
of Member States through the ECOFIN conclusions of 15 May 2012 that any
proposal is preceded by consulting all stakeholders and identifying the
advantages and disadvantages of all options concerned.
Action Programme for Reducing
Administrative Burdens in the EU
The Commission's Action Programme for Reducing
Administrative Burdens in the EU aims at reducing the administrative burden
stemming from EU legislation by 25% by 2012.
VAT legislation is a key area for further
burden reduction and the Communication on the future of VAT mentions that
compliance costs for business represent 2% to 8% of VAT receipts. The
compliance costs are significantly higher when businesses are involved in cross
border trade. Furthermore compliance costs are disproportionately higher for
small businesses.
The Final Report on the measurement and
reduction of administrative costs in relation to the Tax Law (VAT) of 5 March
2009 makes recommendations on how administrative burdens can be reduced for VAT
declarations. In addition to harmonising the frequency and the threshold for
submission, as mentioned by the Stoiber Group, it suggests that consideration
should also be given to "implementing a uniform VAT return throughout all
27 Member States".
Single Market Act II
Recent economic developments in the EU have
further emphasized the need for a new growth initiative aimed at further
deepening, modernizing and strengthening the Single Market. This initiative has
been in particular called for by the Spring European Council. The Commission
presented a Communication on the Single Market Act II[33] entitled "Together for
new growth" on 3 October 2012. One of the initiatives mentioned in the
Single Market Act II was the proposal for a standard VAT declaration as a means
to further improve the business environment.
Annual Growth Survey 2012
The deepening of the Single Market was also
recommended in the Annual Growth Survey 2012[34]
in the section on "Growth Friendly Tax Policies in Member States and
Better Tax Coordination in the EU" through the revamping of the VAT
Directive, as presented in the Communication on the Future of VAT, which
includes the proposal for a standard VAT declaration. 
Digital agenda
A standard VAT declaration would look to
increase the efficiencies of using technology to deal with tax authorities by
setting a minimum standard for the use of electronic submissions. This should
be flexible enough to provide for submission either through a web portal hosted
by the Member States or by allowing electronic file transfers.
Equally the standard VAT declaration should
build on work undertaken by DG CNECT on the interoperability of advanced
electronic signatures. A solution to electronic filing of VAT returns
throughout the EU could be based on electronic signatures whereby an electronic
signature authorised in one Member State can be used to submit VAT returns in
all Member States.
Tackling fraud and evasion
At the March 2012 European Council, Member
States asked the Commission "to rapidly develop concrete ways to improve
the fight against tax fraud and tax evasion, including in relation to third
countries and to report by June 2012". The Commission issued a
Communication to the Council on concrete ways to reinforce the fight against
tax fraud and tax evasion in readiness to the EU Summit at the end of June and
pledged to publish an Action Plan[35]
before the end of 2012.
The Communication on an Action Plan to
strengthen the fight against tax fraud and tax evasion mentions giving Member
States' tax administrations direct access to relevant areas of each other's
national data bases together with an extension of the scope of automated access
in the VAT area should also be envisaged. The standard VAT declaration can
provide a basis for which an easier exchange of information is possible. This
is notably due to the fact that all Member States will collect from all
business standardised information, which will be comparable from one Member
State to another.
Communication on Smart Regulation
In the Communication on Smart Regulation – How
to respond better to the needs of small and medium-sized enterprises, the
Commission sets out the areas where EU legislation is most burdensome for SMEs,
action that has been taken to address those burdens and the future priority
files in the Commission Legislative Work Programme (CLWP) 2013 to help reduce
red tape for SMEs. This should especially hold for micro enterprises.
As far as individual SMEs replying to the
questionnaire are concerned, VAT is the most burdensome EU legislation for
them. A key measure included in the CLWP to reduce burdens on business is a
proposal for a standard VAT declaration.
5.           Policy
Options
5.1.        Possible
options
The following policy options have been
considered. However, some of them have been discarded at an early stage.
5.1.1.     No
EU action (benchmark)
Member States would continue to require a
national VAT return for the information they would set and with their own rules
for submission. This means that large divergences between the 27 different
national VAT returns will continue to apply, meaning the complexity for
businesses and the associated administrative burden would not diminish. At the
same time, and as a consequence of the foreseeable intensification of
cross-border activities in a further globalising world, more and more
companies, including SMEs and mid-cap companies would be confronted with a
plethora of different requirements for filling in non-approximated VAT returns.
In the limited area of cross border supplies of
telecom, broadcasting and e-services to private consumers the mini-One Stop
Shop has a standard exchange between Member States of VAT return information[36].
5.1.2.     Non-regulatory
option (discarded) 
The EU could consider as well making Member
States aware of their differing information requirements on VAT returns and look
to agree through an exchange of best practices on a standard VAT declaration by
means of working groups in the Fiscalis programme. 
Indeed Member States have already acknowledged
that large differences exist between their national VAT returns and this was
highlighted recently at the Fiscalis seminar in Portugal in October 2012.
Nevertheless, Member States gave no indication that they would be willing to
move towards a common VAT return through their own initiatives but rather each
defended their national returns.
What is difficult to overcome in a
non-regulatory action is the incentive or the driver for change. At present
each Member State designs its VAT return, including the content, submission and
corrections, based on national considerations such as how internal control is
organised, the structure of businesses (large or small, trade classification,
etc.) and risk management systems.
Typically, the design of the returns has been
"path dependent", i.e. whenever new information needs occurred they
were simply added without checking for the necessity of old information
requests to be maintained or not. The EU dimension, as well as the specific
needs of foreign companies, has so far not been a relevant factor influencing
the design of national VAT returns. 
This leads to divergences that only legislation
at EU level can address. In fact the problem today is exactly that the EU
legislation clearly leaves the option open to all Member States to design
national VAT returns based on national characteristics and preferences, and
there does not seem to exist any incentive to check whether all the information
requests imposed on businesses are still fit for purpose or serving any longer
any purpose at all.
For these reasons, it is unlikely that any
"soft law" would be successful; the option has thus been discarded
already at this stage.
5.1.3.     Legislative
approach in the context of extending the mini-one-stop-shop (discarded)
In principle, when extending the mini-OSS (MOSS)
to all other sectors, there would be a need to agree on a standard declaration
as well. However, there are two drawbacks to achieving a standard VAT
declaration through an extended MOSS.
The first is that Member States would not agree
to any enlargement before first being able to evaluate the MOSS and so any
changes would be unlikely before 2020 to allow a two year evaluation of the
MOSS, a further year for a Commission proposal and adoption by Council, and
then two more years for the necessary IT changes before businesses could begin
using an enlarged MOSS.
Secondly, the scope of the One Stop Shop is
essentially only concerned with businesses involved in selling goods or
services in other Member States. Thus it addresses situations in which the
business is not established in the Member State where the tax is due but does
not address the national VAT return. Consequently, two distinct VAT returns
could possibly co-exist, a national VAT return for businesses established in
the Member State where the tax is due and a One Stop Shop VAT return for
non-established businesses.
5.1.4.     Stand-alone
legislative approach (pursued further)
In the light of the above, the only option that
could really deliver on simplification and administrative-burden reduction
within an acceptable timeframe would, thus, be a stand-alone legislative
approach prescribing a simplified and standardised VAT declaration at the EU
level. 
5.2.        Options
(with sub-options) retained
There are various options to consider in a
legislative approach such as in which areas legislation is needed and how the
proposal is framed. The VAT Directive already covers some areas such as the
information required, as well as the period of the VAT return, the due date and
when the corresponding payment is made, and electronic submission. It does not
cover how corrections should be made.
5.2.1.     Type
of legislation
The following legislative changes could be
proposed.
VAT Directive
•        The VAT directive could be amended to
require Member States to offer the standard VAT declaration
Implementing Regulation (to the VAT
Directive)
•        It can set out the detailed
information for the standard VAT declaration 
•        It can determine how corrections, etc.
should be treated
•        It could define electronic submission
methods
The Implementing Regulation would be proposed
only once agreement was reached on the amendment to a VAT Directive.
5.2.2.     Implementation
timing
Time will be needed between the entry into
force and implementation in order to adopt the necessary secondary legislation,
but also for Member States to adapt their IT systems as well as their
collection and control methods.
5.2.3.     Scope
of a standardised VAT declaration
There seem essentially four options that can be
considered. The options a) to c) have been considered in the PwC study, and
following discussions with business stakeholders and Member States on these
options a further option d) has been developed.
a) Compulsory standard EU VAT declaration (for
both business and Member States)
All Member States and all businesses would be
required to use the standard VAT declaration and any national VAT return would
be abolished.
b) Standard VAT declaration optional for all
business (compulsory for Member States)
An alternative to a compulsory use of the
standard VAT declaration would be to allow businesses (domestic and international)
the choice between this declaration and the national VAT return. Not opting for
the standard VAT declaration could be advantageous for businesses who for
instance only submit one national VAT return which is less burdensome to
complete than the standard VAT declaration. Opting in would only be possible
for the standard EU VAT declaration. Once a company has opted in it would no
longer be allowed to switch back to the national model. Under this system,
Member States would be obliged to keep in parallel procedures and
infrastructures in place for both their traditional national VAT return and for
the new standardised return.
c) Standard VAT declaration optional for
those businesses submitting VAT returns in more than 1 Member State (compulsory
for Member States)
As a variant of the previous option it could be
considered to restrict the standard VAT declaration to only those businesses
that have a need for a common VAT return because they submit VAT returns in
different Member States. This option therefore focuses solely on the single
market aspect and would offer no simplification for purely domestic businesses.
d) Compulsory standard VAT declaration with
limited flexibility for Member States to determine the information from a
standardised list
This is an alternative based on a compulsory
standard VAT return in which the standard VAT declaration is obligatory for
both businesses and Member States but the level of information is determined by
the Member States with the maximum of information required limited by the
standardised return. There is a standard list of boxes with some optional for
the Member State not to require. Having this additional flexibility would
mainly be attractive for Member States and businesses in Member States that
already have a more simplified return in place to the one proposed as the
standard model.
5.2.4.     Contents
of the standard VAT declaration
Various options could be considered. One could be
to choose an existing simple VAT return, such as the Irish VAT return which has
the fewest number of boxes or that of Finland considered easy by business to
complete. At the other extreme the content could be a compilation of all the
information required on all VAT returns, leading to a VAT return with
substantially more than 100 boxes to be filled in. These have been discarded in
favour of the approach of starting without any preconceptions.
The method suggested in the PwC study was to
provide information to help business self-assess the VAT due and to provide
Member States information for risk and control. This model was then proposed to
both the business community and Member States for comments and suggestions. The
idea had been to find a good balance between the preferences of business to
reduce administrative burden and the need of Member States to receive
information for proper tax collection and effectively fighting tax fraud, and,
thus, to learn from best practices applied in Member States. This approach resulted
in a draft VAT declaration consisting of 36 boxes to be filled in. The model
standard VAT return of PwC is in Annex 9.5.
In terms of analysing the impact the model
designed by PwC has been used as the comparison with national VAT returns.
5.2.5.     Periodicity
and due date
Again various options could be considered. All current
national legislation could remain allowing Member States to set the return
period at one month or any longer period up to one year. Alternatively, it
could be harmonised at a set period, say calendar months or quarters, or longer
periods for smaller businesses.
The maximum time for submitting the VAT return
is currently set in the VAT Directive at a maximum two months after the end of
the return period. This flexibility could continue, be extended or standardised
at a set maximum time for all businesses with additional flexibility for
smaller businesses.
The approach suggested in the PwC study and
being at the core of this impact assessment is a standardised period of one
month with micro enterprises allowed quarterly filing, and payment required on
submission of the VAT return. The impact of periodicity is nevertheless
evaluated separately.
5.2.6.     Annual
VAT return
The annual summarising VAT return could be
kept, abolished or standardised. 
However, any decision on the annual VAT return
should consider its purpose. The annual summarising VAT return, as set out in
Article 261 of the VAT Directive, provides the periodic information already
submitted aggregated for the year to allow annual adjustments to be made. Given
the standard VAT return, as devised by PwC, provides a box for adjustments any
annual VAT return is redundant.
Moreover, current practices of Member States
requiring an annual VAT return are to typically demand more information. This
circumvents the objective of creating a standard VAT return.
Thus, given the content of the standard VAT
return and the need to establish a common standard the option would be to
abolish the annual VAT return.
5.2.7.     Other
issues (E-filing, corrections)
The VAT Directive requires all Member States to
allow e-filing and provides that it can be made mandatory. There
is no rule on the format of e-filing.
Options could include keeping the current
rules, making e-filing compulsory or requiring Member States to require a
minimum format e.g. XML. A common security measure, such as a logon and
password or e-signatures could be considered.
No rules currently exist on how VAT returns
should be corrected. Examples of options chosen by Member States
include re-submitting the VAT return, providing a separate form detailing the
changes or making adjustments on subsequent VAT returns. The method chosen can
affect any penalties or interest that may be due.
In the area of corrections further work on a
common standard is needed through implementing rules.
5.3.        Options
considered
In the light of the above, 4 main options have
been developed, with sub-options e.g. periodicity, annual VAT returns, that are
all having in common that the content of the standard VAT declaration is based
on the model developed by PwC, after consultation with businesses and Member
States. The options also have in common that they foresee more use is made of
e-filing and common rules will be developed for submission and corrections. 
However, the four options first differ in terms
of the scope along the scenarios presented under section 5.2.3. Moreover, for
each of these four options two sub-options are analysed: one, where the
frequency for the submission by micro-enterprises is not altered and a second
one where it is assumed that the frequency of submission by micro-enterprises
is limited to a quarterly submission in those countries where it is not the
case yet.[37]
In this second sub-option there can exist once again different sub-options,
e.g. whether this reduction to quarterly submissions is mandatory or voluntary and
whether quarterly submissions are accompanied by monthly interim payments or
not. Also, these four options differ with respect to the need or not to also
submit an annual VAT return on top of the monthly and quarterly returns.
Nevertheless, all these options have in common in
their basic version that the "standardisation" consists of three
elements:
·              
a simplification and standardisation of the
content of the VAT return itself,
·              
a standardisation of monthly returns with the
option of quarterly periodicity for micro-enterprises so as to make sure that
the benefits of the standardisation element is not partially lost in having
different periodicities throughout the EU,
·              
an abolishment of the summarising annual VAT
return so as to avoid that the simplification and standardisation achieved on
the normal monthly and quarterly VAT returns will be offset by non-standardised
and more complicated annual VAT returns.
It should also be stressed that the two last
elements are for each option only "offered" to those businesses for
which the declaration is the new standardised one, as they are closely linked
to the first element (the standardisation one).
The analysis in chapter 6 will, however, break
down cost and cost savings for each individual element so that policy makers
could make an informed choice in case they wanted to opt for variants of the
different options.
Table 5.3.1: Summary description of the
various options
 Option || Description || Member States || Business 
 A || Do nothing || No change || No change 
 B || Compulsory standard EU VAT declaration || Compulsory (instead of national) || Compulsory for all 
 C || Standard VAT declaration optional for all business || Compulsory (on top of national) || Opt-in for all 
 D || Standard VAT declaration optional for those businesses submitting VAT returns in more than 1 Member State || Compulsory (on top of national) || Opt-in for international businesses only 
 E || Compulsory standard VAT declaration (option B) with flexibility for Member States to determine the information from a standardised list   || Compulsory (instead of national) || Compulsory for all 
As can be seen from the above table all four legislative
options would oblige Member States to provide a standard VAT declaration. This
is because experience has shown (see section 2.3) for the options B to E, if
Member States were given the option whether or not to apply the standard VAT
declaration the result would be the same as option A and there would be little
or no change.
6.           Assessment
of Impacts[38]
6.1.        Background
figures characterising the baseline (Option A)
There are about 30 million companies in the EU
that are obliged to fill in national VAT returns. About 0.2% of these companies
are large companies, 1.1% are so-called medium-sized companies, 6.5% are small
companies and the vast majority, and 92.2% are micro-enterprises with an annual
turnover of less than EUR 2 million (and with an average gross value added of less
than EUR 70 000). Around 65% of all companies declare an annual turnover of
less than EUR 100 000 and contribute less than 2% to all VAT revenue collected.
This group also comprises a large number of companies that in individual Member
States would have benefited from the SME exemption applicable but prefer to
submit VAT returns either because their net VAT liability is negative, i.e.
they get higher refunds from VAT paid on their purchased inputs than they have
to pay on their taxable output, or their customers are fully taxable so can
recover any VAT charged. About 13% of all companies have to submit VAT returns
in several Member States of the EU as they are economically active (in VAT
terms) in more than one Member State.
These 30 million companies are submitting
almost 150 million VAT returns annually, of which the vast majority (more than 130
million[39])
have to be submitted by micro-enterprises. At the same time, VAT revenues paid
by these micro-enterprises are a small percentage of total VAT revenues
collected.
Two studies, Deloitte (2009) and PwC (2013),
have quantified the annual cost for businesses submitting VAT returns in the
EU; the former study estimated the cost at EUR 20 billion and the latter at EUR
39 billion (EUR 43 billion including annual summary VAT returns). The
difference between these two studies is explained in Table 9.6.1 in Annex 9.6
and is largely due to the underrepresentation of SMEs in the PWC sample (of the
19 completed questionnaires for the standard cost model 18 were by large
businesses and 1 was by an SME). 
For the purposes of this Impact Assessment the
figures for large businesses are based on the PwC study as this forms the basis
of their sample and for SMEs the figures from Deloitte are taken adjusted for
the wage level used by PwC. It was possible to use the Deloitte study, which is
clearly not outdated in this field, as there has been little change to the
relevant national legislation and as the outcome of the two studies in average
number of minutes to complete a declaration are very close to each other.
The costs for submitting these 150 million VAT
returns are very significant, and are estimated to sum up to about EUR 30
billion annually.[40]
This corresponds to about 3.5% of annual VAT revenues and 0.25% of the GDP of
EU27. These costs consist of in-house recurring cost (such as gathering
information, preparing the VAT return, answering to questions from tax
authorities etc.) for submitting monthly or quarterly VAT returns, consultancy
fees for purchasing expertise and one-off cost such as the summarising annual
VAT returns.
Of these EUR 30.65 billion annually about EUR 0.48
billion (EUR 0.26 billion recurring, EUR 0.18 billion consultancy fees and EUR 0.04
billion for annual VAT returns) fall on large businesses, about EUR 5.98
billion (EUR 3.21 billion recurring, EUR 2.23 billion consultancy fees and EUR
0.54 billion for annual VAT returns) on SMEs and about EUR 24.19 billion (EUR 12.97
billion recurring, EUR 9.03 billion consultancy fees and EUR 2.19 billion for annual
VAT returns) on micro-enterprises.[41]
The cost for the 27 Member States to manage
these 150 million VAT returns consists of recurring costs (such as verifying
consistency and plausibility of information provided, gathering additional
information, etc.) and one-off cost (such as IT, training verifying annual
returns). They are, however, impossible to quantify, given that Member States
do not provide information on the cost-breakdown by such activities.
However, information from the UK is available
through the Annual Report and Accounts (2010-11) published by HM Revenue &
Customs[42]
on the general cost of VAT collection. For each £1 of VAT receipts the UK
estimates it spends 0.70 pence in collection costs. In the financial year
2010-11 the UK had VAT receipts of £90.3 billion, and therefore VAT collection
costs of £65 million. 
It is though difficult to know whether the UK
is typical of the EU as a whole. If this was the case then total EU VAT
receipts of EUR 860 billion in 2010 would equate to total VAT collection costs
of EUR 6 billion (EUR 860 billion x 0.007%).
6.2.        Basic
characteristics of the retained options
The four options retained all take as a
starting point that agreement is found on the content of a standard VAT
declaration requiring (a maximum of) 36 fields to be filled in. This is based
on the standard developed by PWC, which is suggested as the one which should be
included in the proposal. Although implementing rules will set the technical
details of the form, the level of information required will be set in the
directive. In case Council would adopt a final directive with more or less
boxes, all estimates would of course vary accordingly.
The question as regards the scope of
the use of this standardised VAT return is answered differently in the four
scenarios:
Under option B, all 27 Member States and all 30
million companies submitting VAT returns would have to switch to using the new
standardised VAT return. Old national VAT returns would cease to exist.
Under option C, all 27 Member States would be
obliged to accept both the new standardised VAT return and the old national VAT
returns. Businesses would then be able to opt for one of them. In consequence,
Member States would have to offer and manage both forms for their taxable
persons. It can be expected that only businesses for which the cost of the
baseline scenario (recurring cost of national VAT returns plus – where
applicable - cost of the summarising annual VAT return) are higher than the
cost of the standardised VAT return would switch. This is assumed to be the
case in 19 out of the 27 Member States that have more complicated VAT returns,
so that switching would make economic sense also for purely domestically
oriented businesses. 
It is first assumed that all of the
internationally active businesses from all Member States will switch to the new
system. However, as a result of inertia or because they consider one-off
switching costs are higher than longer lasting savings in recurring costs, only
80% of the purely domestically oriented businesses in these countries will opt
for the new system, while none of the domestically oriented businesses in the
other 8 countries will do so.
Under option D, all 27 Member States would be
obliged to accept both the new standardised VAT return as well as their old
national one. On the business side, however, only those companies submitting
VAT returns in more than one Member State (so-called "target
companies" in the PwC study) would be allowed to opt for the standardised
VAT return. It is assumed that in principle all companies with multiple VAT
registration will opt for the common EU standard VAT return because they will
gain from standardisation and they can achieve economies of scale at group
level. However, it might also be safe to assume that some (20%) of the
companies located in one of the 8 Member States already presently having
simpler VAT returns than the one proposed as an EU standard might be reluctant to
switch.
Under option E, all 27 Member States and all 30
million companies submitting VAT returns would have to switch to using the new
standardised VAT return. Old national VAT returns would cease to exist.
However, as compared to option B, Member States would not be obliged to request
from their companies to fill in all 36 boxes and to process this information.
Instead, they might want to opt for a return only comprising of a subset of
these 36 boxes. This might be attractive for those 8 Member States that already
process simpler VAT returns. It is assumed that all 8 Member States will limit
the information requests through the VAT declaration to those pieces of
information that they collect today.
Moreover, for each of the above four scenarios two
sub-scenarios are analysed with respect to the periodicity of having to
submit a VAT return:
In each sub-scenario it is assumed that the
periodicity for micro-enterprises is reduced – where applicable – to a
quarterly submission instead of a monthly submission. This would reduce the
annual number of VAT returns from about 150 million to about 120 million , as
presently almost all Member States (with the exception of Denmark, Italy,
Malta, Spain, Sweden and the UK ) request from at least a part of their micro-enterprises
the filing of VAT returns on a monthly basis. In this scenario, it is also
assumed that the periodicity of the filing of VAT returns is synchronised with
the periodicity of the payment/reimbursement of VAT.
In each sub-scenario it is assumed that the
periodicity does not change as compared to the status quo.
Finally, as regards the filing of summarising annual
VAT returns also the option is analysed where businesses in those seven
Member States that request the submission of such returns[43] would no longer have to do so.
6.3.        Administrative
burden for businesses – including for SMEs[44]
Under Option B all 27 Member
States and all businesses, be they simply domestically active or internationally
active would switch to the Standard VAT return where 36 boxes would have to be
filled in. Monthly VAT returns for micro-enterprises would – where applicable –
replaced by quarterly returns and the summarising annual VAT return would –
where applicable - be abolished. When not taking set-up and switching cost into
account, this would trigger annual gross benefits (estimated at EUR 15 billion[45] - including quarterly filing
for micro enterprises and abolishing annual VAT returns) linked to the
management of these returns for all businesses in EU19. These benefits would be
triggered by time savings generated by having to fill out less complicated
returns standardised (across borders) and by a reduced need to "buy
in" consultancy services. Also, internationally active businesses could
benefit from some economies of scale where they concentrated the tasks in an
in-house coordination centre. On the other hand, for domestically oriented businesses
in EU8 that presently benefit from even simpler VAT returns annual
administrative costs would increase somewhat (estimated at EUR 3 billion). The
net saving would therefore be at EU level EUR 12 billion.
However, these benefits (and costs) do not come
for free in all instances, as at least some switching cost for businesses in
all 27 Member States can be expected. Some of these switching costs can be
assumed to be absorbed in the context of normal updates of software or other
regular adjustments of procedures, while other costs might be assumed by Member
States themselves when providing the necessary IT tools for VAT returns for
free to their clients. When assuming additional set-up and switching costs at
about EUR 150 per company overall once-off set-up and switching costs for the
entire population of 30 million companies would add up to EUR 4.25 billion[46]. 
In a variant of Option B it is foreseen that only
the VAT return is standardised and that all micro enterprises that presently
have to submit VAT returns on a monthly basis would continue to do so (no
option for quarterly filing for all micro enterprises). This would affect about
4.3 million micro enterprises[47]
in 20 Member States. If 80% of those eligible would do so (while the other 20%
might prefer to continue submitting their VAT returns on a monthly basis as
they expect refunds) this could trigger lost cost savings in the order of
magnitude of EUR 1.8 billion[48].
In another variant of Option B it is foreseen
that the obligation of submitting summarising annual VAT returns would not be
abolished for all companies in those countries requiring such returns. This
variant would generate additional lost annual cost savings for affected
businesses in the order of magnitude of EUR 2.8 billion[49].
Under Option C only those
businesses would switch to the standard return for which the combined costs of
switching and of recurrent costs were lower than the benefits accruing from
time savings, standardisation (across borders) and less need to consult outside
experts. As it is assumed that all of internationally active businesses (about
3.8 million) and about 80% of those businesses that are registered in EU19 with
more complicated VAT returns will switch to the standard return, the expected
cost savings for recurrent expenditure would amount to EUR 7.2 billion[50], of which EUR 4.5 billion
would accrue to the internationally active businesses. Including savings from
consultancy costs (EUR 5.6 billion[51])
and abolishing the annual VAT return (EUR 1.9 billion[52]) the total savings are in the
order of EUR 15 billion. These benefits would be triggered by time savings
generated by having to fill out less complicated returns standardised across
borders, harvesting economies of scale and by a reduced need to "buy
in" consultancy services. 
However, also under Option C these benefits
(and costs) do not come for free in all instances, as at least some switching
cost can be expected. Under the same cost assumptions as for Option B, but
applied to a smaller population of businesses, overall set-up and switching
costs for the affected business population of 20.4 million companies (0.4
million large businesses, 1.4 million SMEs and 18.6 million micro enterprises) would
add up to EUR 2.9 billion. 
In a variant of Option C it is foreseen that
all micro enterprises that presently have to submit VAT returns on a monthly
basis would have to continue to do so. This would represent about EUR 1.8
billion in lost savings. 
In another variant of Option C it is foreseen
that also the obligation of submitting summarising annual VAT returns would not
be abolished for all companies in those countries requiring such returns. This
variant would generate additional lost annual cost savings for affected
businesses lower than those in scenario B, i.e. about EUR 1.9 billion.
Under Option D only
internationally active business would be allowed to switch to the standard
declaration, and they would benefit – where applicable – from having to submit
returns only on a quarterly basis and from no longer having to submit the
summarising annual return. For the business not being active internationally,
nothing would change under Option D. As it is assumed that all of the
internationally active businesses (about 3 million) will switch to the standard
return, the expected cost savings for recurrent expenditure (for these
enterprises) would amount to EUR 6 billion only. These benefits would once
again be triggered by time savings generated by having to fill out less
complicated returns standardised across borders, harvesting economies of scale,
by a reduced need to "buy in" consultancy services and by (where
applicable) no longer having to submit monthly and annual returns. In this
scenario, the switching cost would then be limited to EUR 500 million[53].
In a variant of Option D it is foreseen that
all micro enterprises that are being offered the standard declaration that
presently have to submit VAT returns on a monthly basis would have to continue
to do so. This would represent about EUR 0.8 billion[54] in lost savings compared to
the EUR 6 billion. Another variant of option D would be on the contrary to
offer the reduced periodicity to all micro-companies (even to those not
benefitting from the standard declaration), the additional saving compared to
the EUR 6 billion would then be of EUR 1 billion[55].
In a last variant of Option D it is foreseen
that also the obligation of submitting summarising annual VAT returns would be
abolished for all companies in those countries requiring such returns. This
would represent about EUR 0.8 billion[56]
in lost savings.
Under Option E all 27 Member
States and all businesses, be they simply domestically active or
internationally active would switch to the standard VAT return where (up to) 36
boxes would have to be filled in. When not taking set-up and switching cost
into account, this would trigger annual gross benefits (estimated at EUR 15 billion)
linked to the management of these returns for all businesses in EU19. These
benefits would be triggered by time savings generated by having to fill out
less complicated returns standardised across borders and by a reduced need to
"buy in" consultancy services. Thus, this part of the cost savings
would be similar to those under option B. Moreover, and in contrast to option
B, for businesses in EU8 that presently benefit from even simpler VAT returns
annual administrative costs would under this scenario (contrary to option B)
not increase as it is assumed that their countries of establishment would
simply ask to fill in those boxes that they would be obliged to fill in already
under the existing national forms.
Under this option, once-off switching costs for
the entire population of 30 million companies would at first glance – as in
scenario B - add up to EUR 4.25 billion. However, as measurable switching cost
might not occur in those countries that had simply requested the same
information (although under a standardised format) as before, overall switching
cost under this scenario might remain limited to EUR 2.9 billion[57]. 
In two variants of Option E it is – as under
the other options - foreseen that all micro enterprises that presently have to
submit VAT returns on a monthly basis would continue to do so and/or also the
obligation of submitting summarising annual VAT returns for all companies in
those countries requiring such returns. These two variants would generate
additional annual cost savings for affected businesses in the order of
magnitude of EUR 1.8 billion and EUR 2.8 billion respectively.
The below table summarises and compares the
effects of the different options and sub-options on administrative burdens on
the business community in the entire EU, and broken down by size class of
companies.
Table 6.3.1: Administrative burden for
businesses (billion €)
 Option || A || B || C || D || E (with max savings) 
   ||   ||   ||   ||   ||   
 Total annual cost || 30 || 18 || 15 || 24 || 15 
   ||   ||   ||   ||   ||   
 Total annual net saving (*) || 0 || 12 || 15 || 6(**) || 15 
   ||   ||   ||   ||   ||   
 Split per size ||   ||   ||   ||   ||   
 Large || 0 || 0.1 || 0.1 || 0.1 || 0.1 
 SMEs || 0 || 1.3 || 1.5 || 0.7 || 1.5 
 Micro || 0 || 11 || 13 || 5.8 || 13 
 Total annual net saving (rounded) || 0 || 12 || 15 || 6 || 15 
   ||   ||   ||   ||   ||   
 Split per type of business ||   ||   ||   ||   ||   
 With activity in 1 MS ||   ||   ||   ||   ||   
 - in simple MS (EU 8) || 0 || -3 || 0 || 0 || 0 
 - in complex MS (EU 19) || 0 || 9 || 9 || 0 || 9 
 With activity in several MSs || 0 || 6 || 6 || 6 || 6 
 Total annual net saving || 0 || 12 || 15 || 6 || 15 
   ||   ||   ||   ||   ||   
 Split per type of cost ||   ||   ||   ||   ||   
 Regular return, including periodicity, simpler and standardised return || 0 || 4.4 (1.8 for periodicity micro)   || 7.2 (1.8 for periodicity micro)   || 4.5 (0.8 for periodicity micro)   || 7.4 (1.8 for periodicity micro)   
 Consulting fees || 0 || 5.3 || 5.6 || 1.2 || 5.3 
 Annual returns || 0 || 2.8 || 1.9 || 0.8 || 2.8 
 Total annual net saving (rounded) || 0 || 12 || 15 || 6 || 15 
   ||   ||   ||   ||   ||   
 Set up costs || 0 || 4.25 || 2.9 || 0.5 || 2.9 
 Large || 0 || 1.25 || 0.3 || 0.15 || 0.3 
 SMEs & micro || 0 || 3.0 || 2.6 || 0.35 || 2.6 
* Net saving is the saving taking into
account the extra-cost in MSs with simple returns but not taking into account
set up costs.
** Cost savings would be higher by EUR 1 billion
in this scenario (1.8 billion – 0.8 billion) in case Member States allowed all domestically-oriented
micro-enterprises to opt for quarterly instead of monthly returns (and not only
those who under option D would have the right to opt for the standard VAT
declaration).
6.4.        Costs
of managing VAT returns for Member States
The compulsory introduction of a standard VAT
return will require all Member States to change their national VAT return,
either by complementing it (options C and D) or by replacing it (options B and
E). This will result in costs in areas such as changing websites, IT systems,
informing all businesses of the changes and retraining staff. It may also impact
on audit and control with changes needed to risk analysis tools. This notably
holds for the 19 Member States that presently request a VAT return that is more
comprehensive and complicated to fill in than the standardised VAT return
proposed.
The latter impact is also relevant in the
context of the proposal to allow micro-enterprises to submit returns on a
quarterly basis only or to abolish summarising annual VAT returns. While the
first of these options could be applicable to about 4.3 million micro
enterprises in about 20 Member States, the latter could become relevant for 11
million enterprises[58]
in about 7 Member States. So as to offset the consequence of reduced
information provided or information provided less frequently some Member States
might be inclined to set up other information gathering infrastructures, which
would come at an additional cost both for Member States as well as for the
businesses affected.
Change-over costs for Member States
Of the eight Member States in scope of the PwC
study, four Member States provided information on the costs of change. The most
costly area, setting up the IT platform, was estimated to be in the range of
EUR 150 000 to EUR 120 million. Given the huge variation, and the fact that
only half the Member States in scope of the study could provide any figures, it
is hard to draw any inferences of the likely true cost. Of the four Member
States providing information the average cost of setting up the IT platform was
EUR 30.5 million. Extrapolating this information to all other Member States
affected by switching would give additional one-off IT costs of roughly EUR 800
million to EUR 1 billion.
It terms of trying to assess the distribution
of costs among the Member States those with a loss to the information could
face higher set-up costs. Principal factors could be changes to risk analysis
tools and training of staff that would be needed for those Member States where
the level of information changed. All Member States though would require
changes to adapt the presentation of their national VAT returns to the format
of the standard VAT return.
Simplification costs
Member States were also concerned in areas
other than cost but did not put a monetary value on them. For instance certain
of those Member States requiring more information on their national VAT returns
were concerned by the loss of information on risk analysis and audits, and
moreover the effect this would have on staff resources.
The Member States losing the most information based
on the PwC developed standard are the Czech Republic, Hungary, Luxembourg and
Romania. In addition Greece, Italy, Portugal and Spain would lose significant information
from the abolition of the annual summary VAT return. 
As already mentioned, the more information required
on a VAT return does not necessarily increase compliance by tax payers. There
is no evidence to support the correlation between the number of boxes to be
filled in in a VAT return and the VAT gap in a given country. 
Also, as information on VAT returns in some
Member States has no VAT relevance, but is used for gathering statistical
information other than that related to VAT collection, there could be indirect
costs on statistical offices and poorer statistical information. However, there
are no available figures from Member States on such additional costs.
It should be borne in mind that Member States
are satisfied with the level of information and effectiveness of their national
VAT returns which they say are tailored to national rules and are familiar to
national businesses. Thus change, even if it reduces administrative burdens in
the longer run or removes an obstacle to cross border trade, is seen as
unwelcome by Member States.
Support of other policies
That said Member States can acknowledge certain
advantages for them of a standard VAT declaration. Firstly, it would facilitate
an easier exchange of information and could facilitate a future automatic
exchange of information between Member States which would help identify fraud
quicker. Secondly, it could provide a greater accuracy of information with
fewer mistakes, particularly as regards non-established businesses, as the VAT
return would be standardised and in the majority of cases simpler than the
national VAT return. Third, it could encourage voluntary compliance, notably
for smaller businesses. And, finally, it could facilitate the changeover to the
One-Stop-Shop, a mid-term objective in the context of facilitating cross-border
trade activities both for goods and services.
Dual systems
With respect to options C and D, Member States were
also clear and unanimous in stressing that a dual VAT return, i.e. maintaining their
current VAT return (for one part of businesses) and in parallel a standard EU
VAT declaration (for the other part of businesses) would be too complex and
costly to manage. In terms of the cost, there is the cost of changing to allow
businesses to submit the standard VAT declaration but also the cost of keeping
and maintaining the national VAT return. 
Added to the cost element is the perceived complexity
for Member States of managing two VAT returns. There will be different levels
of information received, rules and procedures for businesses moving from one
VAT return to the other and the compatibility of historical data for risk
analysis. This was expected to have a negative impact on effectively fighting fraud
and aggravate the risk of VAT return shopping where businesses move from one
type of VAT return to another, which could exacerbate the problem of consistent
data.
Of course, also under options C and D Member
States would be free to replace their national VAT return with the standard VAT
declaration to avoid the dual system. This, in turn could then factually end up
in applying option B through voluntary action instead of being obliged to do so
through a change in the VAT Directive.
Option E would allow the eight Member States
with national VAT returns simpler than the standard VAT declaration to not
increase burdens on their businesses. It could also provide some flexibility
for Member States with specific information needs as regards certain regions,
territories or special regimes. This could be achieved through additional boxes
imposed by Member States in duly justified cases, but all standardised through
implementing rules to minimize administrative burdens. Thus it has the widest
appeal for Member States.
Nevertheless, there would still be a cost for
all Member States in achieving standardisation even if the level of information
remained the same. For instance, it would be preferable if the standard VAT
declaration had the information requirements set out in an agreed format so
that the box for say output tax was consistent in all Member States e.g. Box 1.
Thus there will still be a cost to set up or change IT systems.
Cost savings
Once the standardised system is up and running,
control and collection costs could be affected in the following way.
In those Member States (EU19) that presently
have to manage more complicated returns than the one proposed, options B and E
would mean a potentially small decline of collection costs due to less
information to be collected. In all other options however, the management of a
dual system would mean, overall, an increase in these costs. On the other hand,
control costs for these administrations could increase in options B and E as
less information would be available. In options C and D, the dual system could
impose constraints on risk management systems and could increase
risk-management costs (especially in option D where the condition for the
options would need to be checked).
On the other hand, for those Member States
(EU8) having already rather simple VAT returns in place, collection costs would
not change in option E and should also not increase in option B, although they
would receive more information than in the past but they might simply ignore
this information for collection purposes. This would hold also for options C
and D, while in option E they would simply go for the same information as under
their national regime. Nevertheless, under options C and D, collection costs
could increase somewhat due to the dual system. As to control costs, for the
same reasons they would not vary in option E and would decrease a little bit in
options B, C and D. This latter might be partly offset by the dual system.
Table 6.4.1: Cost of managing VAT returns
for Member States (qualitative)
 Option   || A || B || C || D || E (max) 
 Set up cost (IT and training) || 0 || < 1 || < 1 || < 1 || < 1 
 Recurring costs for collection and controls || EUR 6 bn || Collection costs: - EU 19 : - - EU 8 : 0   Control costs: - EU 19 : + - EU 8 : - || Collection costs: - EU 19 : 0 - EU 8 : 0/+   Control costs: - EU 19 : ++ - EU 8 : 0/+ || Collection costs: - EU 19 : 0 - EU 8 : 0/+   Control costs: - EU 19 : ++ - EU 8 : 0/+ || Collection costs: - EU 19 : - - EU 8 : =   Control costs: - EU 19 : + - EU 8 : = 
 Ranking || 1st || 3rd || 4th || 4th || 2nd 
6.5.        Integration
within the Single Market
All options retained for analysis are
characterised by positive impacts on the single market, as they make it easier
to carry out business across borders and in different Member States. However,
while options B, C and E have also a pro-active and encouraging effect, as they
would allow all business to benefit from cost savings, including those that are
not yet active in more than one Member State, option D would give this
advantage only ex-post, i.e. it is limited to those businesses that are already
active in more than one Member State.
While this option D still generates benefits to
about 3.8 million businesses (the so-called "targeted population"),
it misses the dynamic and encouraging element of the other options, and it does
not fully encourage businesses to begin trading across borders. For instance a
business operating only in the national market must submit a national VAT
return and can only benefit from a standard VAT declaration when it starts to
sell cross border. This means a transition from a national VAT return to a
standard EU VAT return at the time of trading in the EU, whereas options B and
C already provide a standard VAT return even before the business starts trading
across borders and thus the business can avoid reporting obligation changes as
a consequence of trading in the EU.
There may well be the added complexity for
business of complying with rules that only permit a standard VAT declaration
under certain conditions. This may involve the provision of extra information,
such as proof of submitting VAT returns in several Member States and the links
between holding companies and subsidiaries, to ensure a correct application. This
added complexity further reduces the administrative burden savings.
The standard VAT declaration does though support
other policies such as the One Stop Shop (OSS) and a move to cross border
taxation at destination, which needs an OSS to minimise burdens on business.
6.6.        Macro-economic
and employment effects
At first glance, the reduction in
administrative burdens and the reduction in the costs for Member States of
managing the systems of VAT returns seem to come at a negative employment
balance as less time and, thus, less man power is needed to provide the same
output.
However, where VAT compliance does not decline
as a result of these savings the "services" previously provided by
both businesses and administrations should be considered having been a deadweight
loss. As shown in section 6.4, there are strong indications available that this
has actually been the case.
In such a case, resources freed from no longer
being obliged to serve as a deadweight loss could be used for other,
productivity-enhancing purposes. Thus, cost savings of EUR 6 to 15 billion
annually could first have a macro-economic effect similar to a corresponding
reduction in (profit) taxes. Moreover, as there would be no need for a
corresponding reduction in the provision of public goods or public transfers or
a need for a corresponding increase in other taxes, the positive growth
implications would be much higher than in the case of a normal reduction in
taxes.
Model simulations have shown that a decline in
administrative burdens as a result of improving the efficiency of the
information collection regime by reducing deadweight loss would lead to an increase in GDP and employment corresponding to the
reduction in administrative burden. Thus, a reduction of deadweight by EUR 6 to
15 billion or 0.05 to 0.1% of GDP could trigger an increase in GDP between 0.09
and 0.19%, resulting in employment level after 10 years being 0.006 and 0.012%
higher than in the baseline scenario (Option A)[59].
6.7.        Other
impacts
Sector-specific and (regional) distributive effects
Simplification and standardisation, combined
with a reduction in the periodicity of VAT returns for micro-enterprises should
have an impact on the tax consultancy business, as demand for its services is
expected to decline substantially in the field of advice on VAT returns.
Also, different Member States and their
businesses might be affected differently in the different options analysed.
While all businesses in EU19 (comprising Member
States with rather complex VAT returns) might benefit from simplification in
options B, C and E, this would only hold for a smaller proportion of these
companies in option D, as this would only benefit those companies being active
in more than one Member State.
On the other hand, all or part of businesses in
EU8 (comprising Member States with rather simple VAT returns) might be exposed
to higher costs in options B and D, as their simple returns would be replaced
by more complex ones. This cost increase would not be valid for businesses in option
C, as in this scenario only those businesses from EU8 would opt for the
standardised VAT return that expect net cost savings. Nor for option E as
Member States in EU8 would be allowed to keep a simple return.
For administrations of EU 19, all options will
mean a loss of certain information, together with set up costs. For
administrations of EU 8, while options B and D (as well as C if the business is
opting) will mean more information to collect, option E will almost be equal to
the status quo as they have fewer boxes on the VAT return. In all options, they
will however incur set up costs. 
Environmental impact
There are no significant environmental impacts
expected.
Impacts on third countries
The VAT returns are only completed by
businesses that are taxable persons within the EU and not otherwise exempted
from the obligation of submitting VAT returns e.g. SMEs under the annual
turnover threshold to be exempt from VAT, businesses only making exempt
supplies etc. To the extent that the taxable persons submitting VAT returns are
non-EU businesses carrying out business activities within the EU, then the
impact will affect equally positively these non-EU businesses.
Promotion of EU trade
A difficulty often mentioned by businesses
trading, or wanting to trade, in the EU is the barriers created by divergent
VAT rules and obligations in the Member States. For instance, typically a
business using the internet to sell goods cross border to final consumers (B2C
supplies) will need to register, declare and pay the VAT in each Member State where
the customer belongs (subject to exceeding annual turnover thresholds of
typically EUR 35 000 in each Member State).
The possibility to submit an EU standard VAT
return, in a common electronic way, in all Member States reduces the burden of
trading cross border. The increase in EU trade would likely grow over time as
businesses became familiar with the advantages offered by a standard VAT
return. Even where businesses continued to choose to pay a consultant to
complete VAT obligations in other Member States the cost of doing so should be
reduced with standardised VAT returns.
This is particularly true for SMEs, reported
from the recent top 10 enquiry on regulatory burdens.
Impact on consumers
Because businesses would more easily trade
across borders, and notably distance sellers (e-commerce), the impact on
consumers will be positive through increased choice and improved price
competition. It is indeed today often the case that for VAT reasons, e-shops do
not offer sales beyond their domestic borders.
Sharing of information by Member States
Of major importance in tackling fraud is the
availability of timely and reliable information. While Member States make use
of the Regulation on Administrative Cooperation to request the exchange of
information this takes some time and can provide inconsistent results. An
approach that can be promoted through the standard VAT declaration is the
automatic exchange of information. This will provide Member States with timely
and precise information to allow the early detection of fraud.
Indeed, in the Communication on the future of
VAT the Commission states its aim to "examine ways to significantly
broaden automated access to information".
6.8.        Potential
obstacles
In order to achieve a standard VAT declaration
in the EU it is necessary to reach agreement with the Member States. As
mentioned, a non-legislative option is very unlikely to achieve a standard VAT
return given the large differences in the information contained on VAT returns
of each Member State because of the different approaches to the use made of the
VAT return; a simple declaration of the amount of VAT to pay or a risk analysis
tool with a broad range of information demanded. The challenge with any
legislative proposal in the area of taxation is to reach political agreement
with unanimity. 
While Member States are in general favourable
towards a standard VAT return, which can reduce obstacles to cross border trade
and substantially reduce burdens on business, they remain conscious of their
own information requirements from a VAT return and the cost of change. The
challenge is to reach a suitable compromise over the varying information needs
of Member States while removing cross border obstacles to trade and providing
sizeable burden reductions for businesses.
On the other hand, "simplification"
and "standardisation", while highly beneficial at the aggregate level
must not result in additional costs for individual countries (and their
administrations) that would not be clearly offset by benefits for the business
community of such countries. This cannot really be guaranteed for countries and
businesses of EU8 (countries with rather simple VAT returns) by options B to D.
For these countries and their businesses, option E would probably be the most
rewarding and the only one acceptable for distributive and, thus, political
reasons. 
Once adopted, a legislative proposal should not
thereafter present any difficulties in terms of compliance either from Member
States transposing the legislation (in the case of a Directive) nor for the
businesses that would see simpler VAT returns with reduced compliance costs.
The business compliance, like today, is a national competence and the
Commission would rely on Member States putting in place an adequate changeover
plan, where VAT returns needed to change.
A potential obstacle at the stage of
implementation could be that some Member States would still collect the same
information they used to collect over and above the new standard, but through
other legislation. This risk should however be minimized through clear legal
safeguards in the directive prohibiting Member States from collecting other
information for VAT collection purposes.
An Implementation Plan will accompany any
future proposal.
7.           Comparison
of Options
7.1.        How
impacts have been weighted
The weighting for the impact of the various
options was based equally on the positive effects on business in terms of the
removal of obstacles to cross border trade and the administrative burden
reduction, and the negative effect of the cost of implementing the change for
Member States. These were each given a ranking for each option and then an
overall ranking was obtained. Where ranking scores were equal then the
administrative burden reduction was given preference over the costs for Member
States.
i) Impact on removing obstacles to cross
border trade
The impact on removing obstacles to cross
border trade has been estimated by the burden reduction for those businesses
that submit VAT returns in more than one Member State.
ii) Reduction in administrative burdens
for business
This represents the total burden reduction less
the part estimated for the savings for those businesses with VAT returns in
more than one Member State. The once-off set-up cost of change have been
integrated by splitting them up into five annual instalments
Table 7.1.1: Ranking of the annual burden
reduction for businesses for each option
 Option || Cross border trade savings || Admin burden saving || Total savings* || Overall score (based on total savings) || 
   || EUR || Rank || EUR || Rank || EUR || Rank 
 A || 0 || 5th || 0 || 4th || 0 || 5th 
 B || 6 bn (max) || 3rd || 6 bn (min) || 3rd || 11.2 bn || 3rd 
 C || 6 bn || 1st || 9 bn || 1st || 14.4 bn || 1st 
 D || 6 bn || 1st || 0 || 4th || 5.9 bn || 4th 
 E || 3 to 6 bn || 3rd || 9 bn || 1st || 11.4-14.4 bn || 2nd 
* Total savings are the sum of "cross
border trade savings" and "admin burden savings" minus a fifth
of the one-off set-up cost
Source: Table 9.6.8, Annex 9
iii) Impact for Member States
The cost for the Member States has been
difficult to estimate. Figures have been provided by half of the eight Member
States in scope of the study by PwC. By far the largest cost identified was the
setting up of the IT platform for the standard VAT declaration, and in this
regard one Member State provided an estimate of EUR 120 million. The average
cost for the four Member States providing figures was EUR 30,5 million.
Taking the average cost of the four Member
States in setting up the IT platform as representative of all EU Member States
would lead to an estimate of just less than EUR 1 billion. 
What is clear is that Member States will incur
significant costs in changing their systems to a standard VAT return. It is
equally clear that a Member State having to provide and manage two VAT returns
in parallel would have significantly higher costs than a Member State providing
only one VAT return, whether that was the national return or the standard VAT
return. Thus a critical factor for the Member States is the number of VAT
returns offered to business.
The number of VAT returns is also linked to the
impact on fraud. A single VAT return in all Member States is positive in that
the same information is given by all businesses in that Member State as
compared to two possible VAT returns which would encourage VAT return shopping[60] and therefore inconsistency of
historical data to analyse for risk assessments. This could reduce audit
capability and for Member States increase training costs in staff dealing with
two VAT returns. Thus, although hard to quantify these elements need to be
included as negative aspects for Member States of having two VAT returns. 
The second critical factor is the number of
Member States for which change is required. In the various options the impact
can affect no Member States, all Member States or only certain Member States.
Hence, the second critical factor is the number of Member States affected. For
those Member States which will have to impose or offer a standard return which
is simpler than the current one, they will also be impacted by a loss of
information. This was discussed in detail in the Fiscalis seminar in Portugal
and is at first glance considered as a negative impact. However, it should be
stressed here that the analysis shows that the more information that is
required by Member States on the return, the higher the VAT gap is.
In terms of option E a reduced number of Member
States are affected because 8 Member States have national VAT returns where the
level of information is lower than the standard VAT declaration. For these
Member States it has been assumed that they would continue to require the same
level of information as contained on their national VAT return and so would not
need major IT platform changes.
Of course, there may be changes required as
regards information being standardised to fit within the framework of a
standard EU VAT return such as the common numbering of boxes or other
presentational changes. Two aspects are important in this regard. Firstly,
there would be a cost associated with those changes, as there are with any IT
changes, but those changes would be less costly as compared to Member States
that have to reduce the number of boxes on their VAT return. Secondly, even if
option E was seen as affecting equally all 27 Member States it would remain as
ranked second and would not change the overall result or the ranking of other
options.
Finally, priority in terms of ranking is
firstly given to the number of VAT returns and secondly to the number of Member
States required to change.
Table 7.1.2: Ranking of the cost (qualitative)
for Member States for each option
 Option || Cost for Member State 
   || No. VAT return systems || No. Member States affected || Rank 
 A || 1 || 0 || 1st 
 B || 1 || 27 || 3rd 
 C || 2 || 27 || 4th= 
 D || 2 || 27 || 4th= 
 E || 1 || 19 || 2nd 
iv) Other criteria
Other factors, such as social effects or
changes to the environment are minimal, and can be discounted as having no
substantial effect on the decision as to which option is more favourable. 
7.2.        Trade-offs
with each option
The trade-off between the options is
principally between more flexibility for business which further reduces
administrative burdens against the cost and complexity for Member States or
providing that change. As can be seen clearly, option C gives the greatest
burden reduction for business but is the most disadvantageous for Member
States. Equally option A is the best for Member States but provides the least
(in fact zero) burden reduction for businesses.
It is within this framework that an alternative
compromise solution, option E, combines higher burden reduction for businesses
while having a low impact on Member States.
The worst case scenario is option D since this
has minimal advantages for business because it is limited to only around 10% of
those completing VAT returns yet at the same time effects all Member States by
requiring the provision of two VAT returns.
7.3.        Ranking
of the options for the various evaluation criteria
The five options have been ranked as follows:
1. Option E: Compulsory standard VAT
declaration with information flexibility for Member States
2. Option C: Standard VAT declaration optional
for all business 
3. Option B: Compulsory standard VAT declaration
4. Option A: No EU action (benchmark)
5. Option D: Standard VAT declaration optional
for those businesses submitting VAT returns in more than 1 Member State
Table 7.3.1: Overall ranking of the options
 Option || Total admin burden saving (cross border and domestic) || Cost for Member State || Overall score || 
   || EUR || Rank || No. VAT return systems || No. Member States affected || Rank || Rank 
 E || 12 to 15 bn || 2nd || 1 || 19 || 2nd || 1st 
 C || 15 bn || 1st || 2 || 27 || 4th= || 2nd 
 B || 12 bn || 3rd || 1 || 27 || 3rd || 3rd 
 A || 0 || 5th || 1 || 0 || 1st || 4th 
 D || 6 bn || 4th || 2 || 27 || 4th= || 5th 
7.4.        Preferred
option
Option E is preferred. 
Further details of the issues on content,
submission and corrections for any legislative proposal can be found in Annex
9.8.
8.           Monitoring
and Evaluation
For the two main objectives, indicators could
be set as follows:
a) Reduce obstacles to cross border trade
By reducing obstacles to cross border trade the
likely result is that the number of businesses involved in cross border trade
and the number of businesses registering for VAT in other Member State would increase.

An indicator of how the standard VAT
declaration has reduced obstacles to cross border trade would be the figures
from Member States of the number of non-established taxable persons registered
for VAT in their Member State. A comparison could then be made with the figures
before and after the introduction of a standard VAT declaration to determine if
indeed more businesses were trading cross border.
b) Reduce burdens on business
The preferred option E is a compulsory standard
VAT declaration.
Although at this stage preliminary work is only
beginning regarding the feasibility of measuring compliance costs, this future
work could be used to evaluate the level of administrative burdens, such as the
obligation to submit a VAT return.
1.1.    Secondary effects
As a consequence of a standard VAT declaration,
notwithstanding impacts on the two main objectives, impacts will also spill
over to other areas. These could also be monitored.
a) Reduce the VAT gap
The VAT gap is a measure of the actual VAT
receipts compared to the theoretical amount of VAT that should be collected
based on domestic consumption. The difference is due to many factors such as
fraud, tax avoidance or mistakes. It will not be possible to determine a direct
link between the standard VAT declaration and a change in the VAT gap.
Nevertheless the VAT gap is in part due to
mistakes made by taxable persons. This is to some extent influenced by the
complexity of the VAT system and by consequence the VAT return. A simpler
standard VAT return should reduce mistakes.
As well, the sharing of information between
Member States can be a factor in detecting mistakes, and tackling avoidance and
fraud. As mentioned in the Communication on the future of VAT more use needs to
be made of the automated access to data. A standard VAT declaration could
facilitate a move from an ad-hoc exchange of information on request to one
whereby information on a VAT return in one Member State could be made directly
available to another Member State.
The Reckon study on the VAT gap will in the
future be updated. A crude judgement of the success of the standard VAT
declaration could therefore be to compare the VAT gap before and after the
introduction of a standard VAT declaration. Of course this can only be a simple
indicator as many more factors affect the VAT gap other than the introduction
of a standard VAT declaration.
b) Facilitate broadening of the scope of the
mini-One Stop Shop (MOSS)
This is a longer term objective. The MOSS will
be available from 1 January 2015 based on a simple VAT return defined in a
Commission Implementing Regulation which details only standard and reduced
rated sales of e-services, telecoms and broadcasting. 
The standard VAT declaration allows greater
information than the MOSS declaration on different types of sales, e.g. exempt,
exports, reverse charge, intra-Community acquisitions etc. and information on
the deduction of VAT. The standard VAT declaration would then be a model should
the MOSS be enlarged to cover other types of transactions and even VAT
deductions.
The success of the standard VAT declaration
could be measured by any future proposal for an enlarged MOSS making reference
to the legislation already in place for the standard VAT declaration.
9.           Annexes
9.1.        Agenda
planning
 1 December 2010 || Launch Green Paper on the future of VAT for consultation with all stakeholders – includes idea of a standard VAT declaration 
 6 December 2011 || Communication on the future of VAT – includes the commitment to come forward with a proposal for a standard VAT declaration 
 14 December 2011 || Signature of contract for a study on the feasibility and impact of a common EU standard VAT declaration (PwC) 
 1 March 2012 || Invitation to DGs to appoint a representative to IASG (Impact Assessment Steering Group) 
 3 July 2012 || First IASG meeting 
 24 September 2012 || Approval of Interim report of the study (PwC) 
 2-4 October 2012 || Fiscalis meeting with Member States, business and PwC to discuss standard VAT declaration 
 23 October 2012 || Publication of the Roadmap (with CLWP for 2013) 
 28 November 2012 || 2nd meeting of IASG to discuss final report of the study (PwC) 
 25 January 2013 || Meeting with business in VAT Expert Group (VEG) 
 28 January 2013 || Meeting with Member States in Group on the Future of VAT (GFV) 
 6 March 2013 || Approval of PwC Final Report of study 
 11 April 2013 || 3rd IASG meeting to discuss Impact Assessment 
 23 May 2013 || 4th IASG meeting to approve Impact Assessment 
 27 May 2013 || Submission of draft Impact Assessment (IA) to Impact Assessment Board (IAB) 
 19 June 2013 || IAB meeting 
 July 2013 || Proposal sent to DG TAXUD Cabinet for approval 
 July 2013 || Launch inter-service consultation (ISC) 
 September 2013 || Proposal agreed and sent for translation 
 October 2013 || Adoption of proposal by Commission 
9.2.        Links
to external studies
1. Study on the feasibility and impact of a
common EU standard VAT return (PwC 2013)
http://ec.europa.eu/taxation_customs/common/publications/studies/index_en.htm
2. Final Report on the measurement data and
analysis as specified in the specific contract 5&6 on Modules 3&4 under
the Framework contract n° ENTR/06/061
Report on the Tax Law (VAT) Priority Area
EU Project on baseline measurement and
reduction of administrative costs (Deloitte 2009)
http://ec.europa.eu/dgs/secretariat_general/admin_burden/docs/enterprise/files/abst09_taxlaw_en.pdf
3. A retrospective evaluation of elements of the
EU VAT system
Final report
TAXUD/2010/DE/328
FWC No. TAXUD/2010/CC/104
http://ec.europa.eu/taxation_customs/resources/documents/common/publications/studies/report_evaluation_vat.pdf
9.3.        Stakeholder
groups and consultations
1. Consultation on the ‘Green Paper on the
future of VAT– Towards a simpler, more robust and efficient VAT system’
http://ec.europa.eu/taxation_customs/common/consultations/tax/2010_11_future_vat_en.htm
2. VAT Expert Group (VEG)
3rd meeting on 25 January 2013, business views
http://ec.europa.eu/taxation_customs/taxation/vat/key_documents/expert_group/index_en.htm
3. Group on the future of VAT (GFV)
Meeting of 28 January 2013, Member States'
views
http://ec.europa.eu/taxation_customs/taxation/vat/key_documents/discussions_member_states/index_en.htm
9.4.        Business
and Member State views
Business views
i) Views from the Green Paper on the future
of VAT
The stakeholder comments for questions 21 and
22 of the Green paper relate generally to VAT obligations dealing with
"Reducing red tape". This links to the Staff Working document and the
suggestion of a standardised EU VAT declaration.
The Green Paper replies of relevance to the
standard VAT declaration were as follows:
In summary, for the vast majority of
respondents the main problems with regard to the current rules on VAT
obligations arise from the lack of uniformity and of consistency across Member
States. The diverse implementation at national level of the rules on VAT
obligations makes VAT compliance very burdensome and is a source of legal
uncertainty for businesses with cross-border activities within the EU.
In particular, respondents strongly supported
the introduction of a standardised EU VAT return available in all EU languages.
In addition to easing administrative burdens for businesses (including SMEs), it
was suggested that an EU standard VAT return could also allow Member States to
exchange data more easily and swiftly.
Opinions differed as to whether reporting
periods and time limits need to be harmonised. Whilst some respondents took the
view that VAT return periods and filing deadlines should be standardised across
all Member States, others were of the opinion that if VAT returns in all Member
States were due on or around the same date each period, this could create a
serious resource bottleneck especially if use is made of a shared services
centre.
From the above it is clear business are
favourable towards the burden reduction potential from the standard VAT
declaration which would create uniformity and consistency of VAT return
obligations across the EU. On some of the details, such as the reporting period
and deadlines for submission, there was more of a mixed reaction.
ii) Views from the PwC study
The study provided more details on a standard
VAT declaration than was available in the Staff Working document. The
businesses consulted were generally supportive and most believed a uniform
approach to VAT returns in the EU would be beneficial in reducing compliance
costs and encouraging cross border trade.
Half of the businesses sampled stated that
there would be cost savings from a standard VAT declaration. The savings came
from standardising the preparation and submission of VAT returns, reduced
complexity in certain Member States of completing the standard VAT declaration,
and the possibility to complete VAT returns in-house rather than paying
consultants.
iii) Views from the VAT Expert Group (VEG)
The VAT Expert Group met on 25 January 2013 to
discuss the standard VAT declaration. 
The main conclusion was the unanimous support
for a legislative proposal to standardise VAT returns in the EU. The members
were, though, roughly equally split on how the standard should be applied. Some
were in favour of a single standard VAT return obligatory for all businesses in
all EU Member States. Others preferred the standard VAT return to be offered to
all businesses as an optional alternative to the Member States' national VAT
returns as in some cases the national VAT return was simpler than the EU
standard VAT return.
The paper discussed with the VEG also offered
alternatives of no legislative change or only making the standard VAT return
available to those businesses that submit VAT returns in more than one Member
State. No member supported these alternatives.
Although not included in the PwC study, a
further alternative, which takes into account the comments from Member States
at the Fiscalis seminar in Portugal, is to allow Member States flexibility to
dispense with some, but not all, of the information on the standard VAT return.
In this way those Member States offering a national VAT return with fewer boxes
than the standard VAT return could continue to offer a simpler VAT return. 
No member of the VEG supported as a first best
solution allowing Member Sates the flexibility to choose which boxes from the
standard VAT return they would require. The fear was twofold; firstly by giving
options to Member States the standard VAT return would end up containing too
much information, and secondly it would be more burdensome for business to
determine which Member States were demanding which information.
That said, the VEG acknowledged that as a
second best solution and a first step in the process towards a standard VAT
return applied equally in all Member States this approach could be supported.
Emphasis was placed on providing adequate information on the choices of the
Member States and ensuring that a maximum number of boxes remained low.
iv) Views from Small Business Act (SBA)
meeting
The initiative for a proposal for a standard
VAT declaration and the work done so far, particularly in drafting an Impact
Assessment to go in front of the Impact Assessment Board in June 2013, was
explained to the SMEs. It was important in this context for the SMEs to provide
their views.
The representatives of SME's organizations that
took the floor (ZDH, UEAPME, CECOP, EUROCOMMERCE and BUSINESS EUROPE) were
unanimously in favour of a standard VAT declaration. These views were
consistent with the views given by the same organisations during the VAT Expert
group meeting.
The same representatives considered a single
VAT return as the preferred option (either obligatory or optional) but stated
that the alternative of a common VAT return with optional boxes could also be
acceptable if the number of boxes was reasonably limited. The latter seemed a good
pragmatic approach to help achieve a Council agreement.
CECOP and UEAPME had concerns whether the
submission of the VAT returns would become more frequent than currently was the
case in the Member States, and they were of the opinion that the proposal should
establish a reasonable obligatory minimum threshold (e.g. EUR 2 million annual
turnover) for less frequent VAT returns. There was support to the Commission
suggestion that Member States should be allowed to use more favourable rules
than the ones established in the proposal but should not be allowed to use less
favourable rules.
Member State views
i) Views from the ECOFIN conclusions
In the ECOFIN conclusions of 15 May 2012 it was
agreed that the Council,
TAKES NOTE of the intention of the Commission to
present a proposal for creating a standardised VAT declaration, and in this
context CALLS ON the Commission to ensure a broad based dialogue and a thorough
cost-benefit analysis beforehand.
The thorough cost-benefit analysis focussing
both on business and tax administrations has been carried out through this
Impact assessment.
ii) Views from the Fiscalis seminar
The Fiscalis seminar held from 2nd – 4th
October 2012 in Portugal allowed the Member States to give a first reaction on
the standard VAT declaration presented in the PwC interim report. The two key
comments from Member States were:
1. The perceived cost and complexity of
providing two VAT returns, a national VAT return with the option of an EU
standard VAT declaration, was deemed too high. Equally some Member States were
concerned that having two VAT returns would result in "VAT return
shopping" where businesses were moving from one VAT return to the other.
Thus Member States favoured a single VAT return.
2. The use made of the VAT return divided Member
States. Some Member States saw the VAT return only as a declaration of the
amount to pay or to be refunded and therefore required little information.
Others saw the VAT return not only as a declaration but also as a risk analysis
tool and required more statistical information. Some Member States even require
statistical information that goes beyond what is relevant for VAT.
Reconciling the two key points expressed by
Member States, a single VAT return with different information requirements,
leads towards a VAT return obligatory for all Member States and businesses with
an optional list of information from which some or all information can be
required by Member States. 
iii) Views from the Group on the Future of
VAT (GFV)
A meeting was held with the Member States on 28
January 2013.
As was the case with the Fiscalis seminar in
Portugal, the Member States were unanimous in stressing the need to have a
single VAT return and so dismissed the scenario of an optional standard VAT
return in parallel with a national VAT return which was seen as too complex and
costly. 
A large majority of Member States preferred an
obligatory standard VAT return. There was widespread support for a single
standard VAT return, although most Member States thought the content outlined
in the PwC study would need to be flexible to take into account certain
national requirements for specific territories, regimes or transactions.
Equally there was good support for the
alternative scenario of allowing Member States flexibility over the information
on the standard VAT return since this would mean administrative burdens would
not have to increase in those Member States requiring few boxes to be completed
on a national VAT return. 
A small minority of Member States outlined that
the option of no legislative change was their preference.
There was a general feeling that standardising
the submission and corrections would be difficult and that national preferences
should be kept to avoid either burdening businesses with more frequent VAT
returns or else reducing the frequency and causing cash flow difficulties for
Member States. An approach of setting an EU threshold to allow SMEs longer VAT
periods was considered problematic given the different economies and the
percentages of SMEs affected. 
Equally corrections would be difficult to
standardise due to the different procedures in the Member States as well as the
effect on business of any resulting interest or penalties.
9.5.        Standard VAT declaration (PwC model)
 1.General information 
 (11) Company name Intelligent box (12) VAT-identification number: country code of the relevant EU MS + VAT number of the relevant EU MS 
 (13) VAT period ||   
   || 2. Output transactions || 3. VAT due ||   || 4. Input transactions || 5. VAT deductible 
 Standard rate ||   || 211 ||   || 311 || Local purchases ||   || 41 ||   || 51 
 Reduced rate ||   || 212 ||   || 312 || IC acquisitions of goods ||   || 42 ||   || 52 
 Other rates ||   || 213 ||   || 313 || IC purchases of services ||   || 43 ||   || 53 
  IC supplies of goods ||   || 22 ||   ||   || Imports of goods ||   || 44 ||   || 54 
  IC supplies of services ||   || 23 ||   ||   || Domestic reverse charge ||   || 45 ||   || 55 
 Exports of goods ||   || 24 ||   ||   || Other cross-border reverse charges ||   || 46 ||   || 56 
 Other supplies with right of deduction ||   || 25 ||   ||   || SUBTOTAL || Intelligent box || 47 || Intelligent box || 57 
 Other supplies without right of deduction ||   || 26 ||   ||   || Adjustments (+/–) ||   || 58 
 SUBTOTAL || Intelligent box || 27 || Intelligent box || 32 || TOTAL || Intelligent box || 59 
 VAT due via reverse charge (including deferred import VAT) ||   || 33 || 
 TOTAL   || Intelligent box || 34 || 
 6.Balance 
   || Amount 
 (61) Net amount of current period = (34) – (59) || Intelligent box 
 (621) VAT credit brought forward from previous period ||   
 (622) Advance payments made ||   
 (63) Net VAT amount payable/refundable =  [61] – (621) – (622) || Intelligent box 
 (64) Amount claimed as refund ||   
 7. Corrections 
 Period || Under-declared VAT || Over-claimed VAT || Total 
 711 ||   || 721 ||   || 731 ||   || 741 || Intelligent box 
 712 ||   || 722 ||   || 732 ||   || 742 || Intelligent box 
 713 ||   || 723 ||   || 733 ||   || 743 || Intelligent box 
 71x[61] ||   || 72x ||   || 73x ||   || 74x || Intelligent box 
 Total || 75 || Intelligent box 
 8. Date and signature 
 (81) Signature || Intelligent box/data box 
 (82) Name and capacity of preparer/signatory || Intelligent box/data box 
 (83) Date || Intelligent box 
9.6.        Administrative
burdens
The estimation of administrative burdens and of
savings as a result of standardisation were based on an amalgamation of the
findings of the PwC study and the findings in the Deloitte study. While both
studies came to broadly the same findings as regards the number of VAT returns
and the characteristics of the business population (large, SME,
micro-enterprises) they differed significantly when it came to estimating costs
and potential cost savings.
While the PwC study had some strengths, as it
was based on more representative wage costs, it had tremendous shortcomings
when it came to covering the SME and micro-enterprise part of the business
population, which represent more than 98% of the total business population.
These shortcomings were triggered by the fact that the consultant investigated
in detail only a small sample of large international enterprises and neglected
the need for representative case studies for smaller and micro enterprises.
Also, the study suffered from some ad-hoc corrections that biased the results (notably
for estimated cost savings) towards one side, i.e. over-estimating cost
savings.
The PwC study is not the only recent study done
for the Commission as regards the cost of submitting VAT returns in the EU. As
mentioned previously, the High Level Group on Administrative Burdens (the
"Stoiber" group) received a study from Deloitte in 2009. Like the PwC
study it was based on the standard cost model.
While there are some similarities between the
two studies, such as the total number of VAT returns submitted each year, there
are also differences based on the assumptions made. For instance the PwC study
is based on the wage level using the ISCO 2[62]
(ISCO 2 being a more reliable wage level for the type of functions involved in
filling in VAT returns) whereas the study from Deloitte is closer to the ISCO 3
wage levels.
The final figures for the cost of submitting
VAT returns in the two studies are very different. Deloitte has an annual cost
of EUR 19 billion while PwC arrives at EUR 39 billion. An explanation of the
difference can be found in Annex 2 of the PwC report. An overview of the
difference is provided below.
Table 9.6.1: Summary
of the differences between the studies of PwC (2013) and Deloitte (2009)
   || Deloitte (2009) || PwC (2013) || Diff. (%) 
 Annual number of VAT returns in EU || 149,623,247 || 148,333,589 || 1 
 Time spent on submitting VAT returns (large businesses in France, Hungary, Poland) || 794 mins || 824 mins || 4 
 Average wage level || €14/h || €20/h || 43 
 Consultancy fees (6 Member States in scope of both studies) || €209 || €304 || 45 
 Explained difference ||   ||   || 91 
   ||   ||   ||   
 Average cost of VAT return || €128 || €265 || 107 
 Total cost || €19 197 bn || €39 347 bn || 105 
The total difference between the study of
Deloitte and that of PwC is 105%. This increases by a further 1%
(approximately) as the Deloitte study has a 1% higher number of VAT returns
submitted each year. Of the higher figures for the PwC study 4% is estimated to
come from a higher time spent on submitting VAT returns, 43% from higher wage
levels and 45% from higher consultancy fees. 
The remaining difference of 16% is not
explained. However, the explanations themselves are only based on available
comparative figures in the two studies e.g. large businesses for France,
Hungary and Poland for the time comparison, and consultancy fees in Cyprus,
France, Hungary, Latvia, Poland and Spain, and thus do not reflect the true
difference. Due to the extrapolations made in the two studies, for which this is
unknown in the Deloitte study, only an approximate explanation of the
differences can be made.
9.6.1.     Recurring
cost
The costs of submitting VAT returns as
estimated by PwC are based on a small sample of large businesses. Given that
these large businesses only represent 0.2% of the total number of businesses
completing VAT returns in the EU, the assumptions made on how estimates from
the sample of large businesses can indicate the costs for SMEs and particularly
for micro enterprises, which represent 92% of EU businesses, are critical in
determining an overall cost for submitting VAT returns.
The PwC study estimates that the cost for micro
enterprises submitting VAT returns are EUR 244, a reduction of 70% of the
estimate of EUR 826 for large businesses. This is significantly higher than the
figures, for instance, in the study of Deloitte. Of course the wage level used
by PwC is 43% higher than that of Deloitte, when comparing the large
businesses, but this notwithstanding, there remains a large cost disparity.
In the PwC study the recurring cost of micro
enterprises submitting VAT returns is based on an average cost per VAT return
of EUR 244. Using the figures from Deloitte (EUR 57 per return) as a guide a
more prudent approach should be taken for the estimate of the cost for micro
enterprises. 
A reasonable assumption is to use the
figures from the Deloitte study for micro enterprises and SMEs but adjusted by
the wage level used by the PwC study. This would
mean instead of a base cost per return of EUR 244 it would be reduced to EUR 82[63]. However, as the study by
Deloitte assumes half the businesses use consultants the internal time for VAT
return completion should equally only reflect half of the micro businesses.
While there is internal time for micro enterprises that use consultants this is
significantly reduced with the majority of the cost falling in the cost
category of "consultancy".
The consequence for the cost of the AS IS
situation (current costs for submitting VAT returns) would be to reduce by one
third half of the EUR 19.4 billion cost for micro enterprises submitting VAT
returns without using consultants. This results in a revised figure of EUR 13
billion, a reduction of EUR 6.4 billion (see table 9.6.2). 
Equally a comparison of SMEs shows that the
average cost under the Deloitte study is EUR 79.83. Adjusted for the higher
wage level in the PwC study would result in SME recurring costs of completing
VAT returns of EUR 3.2 billion, using the same methodology as done previously
for micro enterprises.
Consultancy fees show a marked difference
between the study of Deloitte and that of PwC. The figures from PwC regarding
large companies, which formed the sample base, should be seen as reliable.
However, for SME and micro enterprises an adjustment should be made to reflect
21% higher consultancy fees for these business types as compared to the
Deloitte study. This reduction results in consultancy fees of EUR 11.4 billion.
In line with a reduction for recurring costs of
completing VAT returns and consultancy fees for SMEs and micro enterprises, a
similar proportionate reduction should be made to annual summarising VAT
returns. This gives a revised figure of EUR 2.8 billion.
The total cost for submitting VAT returns is
then EUR 30 billion instead of EUR 43 billion.
Table 9.6.2: Cost
of submitting periodic VAT returns in the EU
   || PwC estimate (EUR bn) || Adjustment for micro enterprises of Deloitte (EUR bn) 
   ||   || Large business || SME || Micro enterprises || Total 
 Total recurring cost of VAT returns || 24.845 || 0.259 || 3.207 || 12.974 || 16.440 
 Total consultancy fees || 14.502 || 0.180 || 2.233 || 9.033 || 11.446 
 Total periodic VAT returns || 39.347 || 0.439 || 5.440 || 22.007 || 27.886 
 Annual VAT returns || 3.907 || 0.044 || 0.540 || 2.185 || 2.769 
 Total cost || 43.254 || 0.483 || 5.980 || 24.192 || 30.655 
Source: PwC Study (2013)
This will then change the savings for the
standard VAT declaration for the various options. Where the standard VAT
declaration is optional for all businesses (option C) the cost for micro
enterprises represents 44% of the total cost (EUR 9.8 billion out of EUR 22.63
billion). Reducing the cost for micro enterprises submitting the national VAT
returns should be reflected equally in the cost of the standard VAT return, and
this can be assumed to be a similar percentage reduction (62%). This reduction
should also be done for SMEs (67%), consultancy fees (79%) and the annual VAT
returns (71%) to arrive at new cost figures for an optional standard VAT return
(option C) 
Table 9.6.3: Cost
of Option C
   || PwC estimate Cost of Option C (EUR bn) || Adjustment for micro enterprises of Deloitte (EUR bn) 
 Large business || 0.191 || 0.191 
 SME || 3.964 || 2.457 
 Micro enterprises || 9.820 || 6.564 
 Total recurring cost of VAT returns || 13.975 || 9.211 
 Consultancy fees || 7.356 || 5.806 
 Total periodic VAT returns || 21.331 || 15.017 
 Annual VAT returns || 1.295 || 0.918 
 Total cost || 22.626 || 15.935 
A similar reduction is applied to the other
options. The effect of this change for the cost of submitting the standard VAT
returns in the different options and the consequential savings from an initial
cost burden of EUR 30 billion is as follows.
Table 9.6.4: Summary
of cost savings for each option
 Option || Description || Total annual cost (EUR bn) || Total annual savings (EUR bn)   
 A || Do nothing || 30 || 0 
 B || Compulsory standard EU VAT declaration || 18 || 12 
 C || Standard VAT declaration optional for all business || 15 || 15 
 D || Standard VAT declaration optional for businesses submitting VAT returns in more than 1 Member State || 24 || 6 
 E || Compulsory standard VAT declaration (option a) with flexibility for Member States to determine the information from a standardised list || Between 15 to 18 || Between 12 to 15 
This seems a more prudent approach to take
reflecting on the attributes of the two studies, Deloitte and PwC, for the
estimation of the cost and the potential effect for micro enterprises. In any
case these figures can only been seen as indicative.
9.6.2.     Set
up costs
As with the recurring costs of submitting VAT
returns the estimation of the cost of changing to a standard VAT return are
based on a small sample of large businesses. The effects however are largely
felt by SMEs and particularly micro enterprises that together represent 99.8%
of businesses.
The figures from the PwC sample show that 11
out of 12 sampled businesses (92%) believe there will be no cost to adjust to
submitting the standard VAT declaration through a web from, which would be
intuitively the most likely format for submission for SMEs other than paper.
Even for submission by structured files and the cost of training most sampled
large businesses expect no extra cost for the standard VAT declaration. These
findings need to be better reflected in total set up costs for the standard VAT
declaration particularly for the SMEs.
Leaving unchanged the average set up costs for
large businesses (average of EUR 42 000) but assuming only 50% are affected
would reduce by a half the set-up costs for large businesses.
Equally the set up costs need to reflect better
that most SMEs will likely face no set up cost changes based on the sample of
large businesses. The PwC study assumes the costs for medium sized businesses
will be reduced by 40%, small businesses by 80% and micro enterprises by 95%
compared to the large business set up costs. Given the predominance of micro
enterprises it could be assumed that all SMEs would see a reduction or 95%.
The fact that most SMEs would require no change
the set up costs should affect only about 95% of SMEs. Thus, 99.8% of the total
of 29.8 million businesses, these being SMEs, would in 95% of the cases incur
no set up costs and for the remaining 5% their set up costs would be around EUR
2 100 (5% of the cost of large businesses). This results in set up costs as
follows for Option B:
Large businesses: EUR 1.25 billion
SMEs: EUR 3 billion
Total set up costs: EUR 4.25 billion
This equates to just under EUR 150 per
business.
For the other options a similar percentage
reduction can be applied. This gives the following set-up costs for each
option.
Table 9.6.5: Summary
of set-up costs for each option
 Option || Description || Total cost to change (EUR bn) || Time to recover costs (months) 
 A || Do nothing || 0 || 0 
 B || Compulsory standard EU VAT declaration || 4.25 || 4 
 C || Standard VAT declaration optional for all business || 2.9 || 2.5 
 D || Standard VAT declaration optional for those businesses submitting VAT returns in more than 1 Member State || 0.5 || 1 
 E || Compulsory standard VAT declaration (option A) with flexibility for Member States to determine the information from a standardised list || 2.9 to 4.25 || 2.5 to 4 
9.6.3.     Summary
of cost savings
Using as an indicator figures from option C,
where the standard VAT declaration is optional, indications can be provided for
the effect of the various options for the different classes of business by
size. The estimates are based on the recurring costs for completing periodic
VAT returns and do not take into account the cost of consultancy fees or for
submitting annual VAT returns.
Table 9.6.6: Summary
of cost savings per type of business for Option C (excludes consultancy fees
and annual VAT return)
   || Cost of submitting VAT returns (EUR millions) || Option C - Cost of submitting standard VAT declaration (EUR millions) || Difference (EUR millions) || Share of saving per type of business (%) 
 Large businesses || 259 || 191 || 68 || 1% 
 SMEs || 3 207 || 2 457 || 750 || 10% 
 Micro enterprises || 12 974 || 6 564 || 6 410 || 89% 
 Total || 16 4401 || 9 2112 || 7 229 || 100% 
1 EUR 16 440
is from Table 9.6.2, revised total recurring cost of VAT returns
2 EUR 9 211
is from Table 9.6.3, revised total recurring cost of VAT returns under Option C
Using the rounded percentages of 1% for large
business, 10% for SMEs and 89% for micro enterprises the savings for options B,
C, D and E have been estimated. 
Table 9.6.7: Summary
of total cost savings per type of enterprise for each option (includes
consultancy fees and annual VAT return)
   || Option A (EUR bn) || Option B (EUR bn) || Option C (EUR bn) || Option D (EUR bn) || Option E (EUR bn) 
 Large businesses || 0 || 0.117 || 0.138 || 0.062 || 0.117 to 0.138 
 SMEs || 0 || 1.291 || 1.528 || 0.681 || 1.291 to 1.528 
 Micro enterprises || 0 || 11.032 || 13.054 || 5.820 || 11.032 to 13.054 
 Total || 0 || 12.440 || 14.720 || 6.564 || 12.440 to 14.720 
By way of summary, the table below shows a comparison
of the impact of the five options.
Table 9.6.8:
Summary of the impacts for the options (Euro billions)
 Option ||  A || B || C || D || E 
   ||   ||   ||   ||   || Min. || Max. 
   ||   ||   ||   ||   ||   ||   
 Total costs || 30 || 18 || 15 || 24 || 15 || 18 
   ||   ||   ||   ||   ||   ||   
 Annual savings || 0 || 12 || 15 || 6 || 15 || 12 
   ||   ||   ||   ||   ||   ||   
 Savings by enterprise size ||   ||   ||   ||   ||   ||   
 Large business || 0 || 0.1 || 0.1 || 0.6 || 0.1 || 0.1 
 SMEs || 0 || 1.3 || 1.5 || 0.7 || 1.3 || 1.5 
 Micro enterprises || 0 || 11 || 13 || 5.8 || 11 || 13 
 Annual savings || 0 || 12 || 15 || 6 || 12 || 15 
   ||   ||   ||   ||   ||   ||   
 Savings by type of enterprise ||   ||   ||   ||   ||   ||   
 Enterprises with VAT returns in more than 1 Member State (cross border) || 0 || 6 || 6 || 6 || 6 || 6 
 Enterprises with VAT returns in 1 Member State (standardisation) || 0 || 6 || 9 || 0 || 6 || 9 
 Annual savings || 0 || 12 || 15 || 6 || 12 || 15 
   ||   ||   ||   ||   ||   ||   
 Costs for enterprises completing more information on VAT returns in certain Member States || 0 || 3 || 0 || 0 || 0 || 0 
   ||   ||   ||   ||   ||   ||   
 Set-up costs for Member States || 0 || <1 || <1 || <1 || <1 || <1 
   ||   ||   ||   ||   ||   ||   
 Cost benefit analysis ||   ||   ||   ||   ||   ||   
 Set up costs || 0 || 4.25 || 2.9 || 0.5 || 2.9 || 4.25 
 Annual savings || 0 || 12 || 15 || 6 || 15 || 12 
 Time to recover set up costs (months) || 0 || 4 || 2.5 || 0.5 || 2.5 || 4 
9.6.4.     Periodicity
savings
There are an estimated 27.5 million
micro-enterprises completing nearly 128 million VAT returns in the EU at an
average cost of just over EUR 100 per VAT return (cost of recurring VAT returns
is EUR 12.974 billion for micro enterprises – Table 9.6.2).
A little over 4.25 million micro-enterprises
are required to complete monthly VAT returns. From the PwC Study[64] a comparison between the cost
of quarterly and monthly VAT returns for Hungary and the UK shows that on
average submitting 3 monthly VAT returns is 35% higher than submitting one
quarterly VAT return.
Therefore, if the 4.25 million
micro-enterprises completing 51.4 million VAT returns each year could submit
those returns quarterly an estimated EUR 1.8 billion could be saved (51.4
million VAT returns x EUR 100 x 0.35% = 1.8 billion)
9.7.        Background
figures
Table 9.7.1: Total
population and total number of VAT returns
 Member State || Periodicity for enterprises / No VAT returns each year || Number of VAT return boxes || Annual summarising VAT return (No boxes, No business) || Total number of VAT returns submitted each year ||
 Large || Medium-sized || Small || (1)           Micro ||   ||   ||
 Austria || 12 || 12 || 12 || 12 || 4 ||   || 54 || 63 || 7,080,000 ||
 1,340 || 7,370 || 43,550 || 497,740 || 120,000 ||   ||   ||
 Belgium || 12 || 12 || 12 || 12 || 4 ||   || 34 ||     || 3,543,956 ||
 1,366 || 7,513 || 44,394 || 48,228 || 581,486 ||   ||   ||
 Bulgaria || 12 || 12 || 12 || 12 ||   ||   || 30 ||     || 2,575,920 ||
 429 || 2,361 || 13,953 || 197,917 ||   ||   ||   ||
 Cyprus || 4 || 4 || 4 ||   || 4 ||   || 11 ||     || 344,000 ||
 172 || 946 || 5,590 ||   || 79,292 ||   ||   ||
 Czech Republic || 12 || 12 || 12 || 12 || 4 ||   || 76 ||     || 2,846,988 ||
 1,006 || 5,531 || 32,681 || 65,472 || 398,093 ||   ||   ||
 Denmark || 12 || 12 || 12 ||   || 4 ||   || 17 ||     || 1,937,456 ||
 838 || 4,609 || 27,235 ||   || 386,318 ||   ||   ||
 Estonia || 12 || 12 || 12 || 12 ||   ||   || 24 ||     || 856,632 ||
 143 || 785 || 4,640 || 65,818 ||   ||   ||   ||
 Finland || 12 || 12 || 12 || 12 || 4 || 1 || 25 ||     || 3,687,781 ||
   || 1,186 || 6,521 || 38,533 || 227,572 || 27,677 || 291,329 ||   ||
 France || 12 || 12 || 12 || 12 || 4 || 1 || 43 ||     || 24,087,097 ||
   || 6,209 || 34,149 || 201,789 || 1,221,762 || 1,626,551 || 13,985 ||   ||
 Germany || 12 || 12 || 12 || 12 || 4 ||   || 45 || 45 || 26,356,800 ||
   || 11,400 || 62,700 || 370,500 || 0 || 5,255,400 ||   ||   ||
 Greece || 12 || 12 || 12 || 12 || 4 ||   || 54 || 254 || 4,974,641 ||
   || 2,127 || 11,701 || 69,140 || 7,032 || 973,690 ||   ||   ||
 Hungary || 12 || 12 || 12 || 12 || 4 || 1 || 99 ||     || 2,792,969 ||
   || 1,101 || 6,055 || 35,778 || 84,428 || 280,524 || 142,541 ||   ||
 Ireland || 6 || 6 || 6 || 6 || 4 || 2 or 1 || 6 ||     || 1,168,120 ||
 487 || 2,681 || 15,842 || 124,806 || 59,013 || 40,897 ||   ||
 Italy || 1 || 1 || 1 ||   ||   || 1 || 586 || 586 || 5,132,249 ||
 10,264 || 56,455 || 333,596 ||   ||   || 4,731,934 ||   ||
 Latvia || 12 || 12 || 12 || 12 || 4 || 2 || 33 ||     || 624,298 ||
   || 174 || 959 || 5,669 || 34,161 || 20,107 || 26,151 ||   ||
 Lithuania || 12 || 12 || 12 || 12 ||   || 2 || 25 ||     || 728,912 ||
   || 148 || 815 || 4,815 || 52,298 ||   || 16,000 ||   ||
 Luxembourg || 12 || 12 || 12 || 12 || 4 || 1 || 89 || 109 || 377,900 ||
   || 118 || 648 || 3,829 || 19,906 || 16,500 || 17,900 ||   ||
 Malta || 4 || 4 || 4 || (14)  || 4 || 1 || 51 || 6 || 118,760 ||
   || 74 || 405 || 2,393 || 0 || 24,443 || 9,500 ||   ||
 Netherlands || 12 || 12 || 12 || 12 || 4 || 1 || 26 ||     || 7,530,000 ||
   || 3,130 || 17,215 || 101,725 || 92,930 || 1,200,000 || 150,000 ||   ||
 Poland || 12 || 12 || 12 || 12 || 4 ||   || 52 ||     || 17,440,000 ||
   || 3,200 || 17,600 || 104,000 || 1,255,200 || 220,000 ||   ||   ||
 Portugal || 12 || 12 || 12 || 12 || 4 ||   || 44 || 81 || 3,538,248 ||
   || 1,464 || 8,054 || 47,595 || 19,056 || 656,055 ||   ||   ||
 Romania || 12 || 12 || 12 || 12 || 4 ||   || 76 ||     || 3,757,984 ||
   || 1,136 || 6,250 || 36,932 || 141,334 || 382,537 ||   ||   ||
 Slovakia || 12 || 12 || 12 || 12 || 4 ||   || 37 ||     || 1,258,556 ||
   || 393 || 2,162 || 12,774 || 43,733 || 137,456 ||   ||   ||
 Slovenia || 12 || 12 || 12 || 12 || 4 ||   || 29 ||     || 729,824 ||
   || 206 || 1,133 || 6,694 || 31,703 || 63,248 ||   ||   ||
 Spain || 12 || 12 || 12 ||   || 4 ||   || 50 || 397 || 12,257,421 ||
   || 5,685 || 31,269 || 184,771 ||   || 2,620,905 ||   ||   ||
 Sweden || 12 || 12 || 12 || 12 || 4 ||   || 25 ||     || 4,549,619 ||
   || 2,061 || 11,333 || 66,967 || 0 || 949,898 ||   ||   ||
 UK || 4 || 4 || 4 || 12 || 4 || 1 || 9 ||     || 8,037,458 ||
   || 3,812 || 20,966 || 123,890 || 52,415 || 1,691,069 || 13,848 ||   ||
 TOTAL || 59,670 || 328,185 || 1,939,274 || 4,283,511 || 17,770,262 || 5,454,085 || Average No boxes (excluding Italy) || Average No boxes || 148,333,589 ||
 Out of which 127,258,841 by micro-companies ||
 29,834,986 ||
 39 || 57 ||
This table shows that almost 150 million
returns are submitted by EU enterprises each year, out of which almost 130
million are by micro-enterprises.
Based on these figures, offering to all micro-enterprises
the option to file quarterly would mean that 4.2 million enterprises would be
able to submit 4 declarations instead of 12 per year. If only 80% of those enterprises
take this option, this would mean around 120 million declarations instead of
150 EU wide.
Table 9.7.2: Enterprises
submitting annual VAT returns per Member State
 Member States requesting annual VAT returns || Number of enterprises 
 Large || SMEs || Micro 
 Austria || 1,340 || 50,920 || 617,740 
 Germany || 11,400 || 433,200 || 5,255,400 
 Greece || 2,127 || 80,840 || 980,722 
 Luxembourg || 118 || 4,476 || 54,306 
 Malta || 74 || 2,798 || 33,943 
 Portugal || 1,464 || 55,649 || 675,111 
 Spain || 5,685 || 216,040 || 2,620,905 
 Total || 22,209 || 843,924 || 10,238,127 
9.8.        Preferred
option E
The Commission would recommend to come forward
with a legislative proposal that requires all Member States to introduce a
standard VAT return but with the flexibility that the Member State can choose
the level of information, subject to a few mandatory boxes. In practice, a
fully standardised form would be available at EU level (standards included in
the PwC study), together with common definitions and guidelines, but certain boxes
would not be made mandatory. In order to allow Member States to introduce the
necessary legislative and IT changes, as well as to adapt the national risk
management system, the reform should be introduced in Member States within a
reasonable period of time.
This approach would offer the second greatest
burden reduction for business because it would achieve standardisation without
increasing burden in any Member State (8 Member States having a simpler
declaration today than the proposed standard VAT declaration). In order to
agree certain technical aspects some flexibility should also be allowed in
other areas, such as submission and corrections, but without undermining the
principal aims. With this in mind, the following aspects should, therefore, be
considered in a future legislative proposal under this option.
i) Content
To gain the administrative burden reduction
potential savings certain key elements are required in the content of the
standard VAT declaration.
a) Common definitions
All the information on the VAT return should be
provided in compliance with common definitions. For instance, if a VAT return
box was to declare the value of exports, then there must be a common definition
of the types of transactions that would be covered by the VAT return box
entitled "exports". For example, should this include the movement of
goods to a custom warehouse, supplies to an international organisation, or
goods supplied to vessels on the high seas?
The proposal should try to define as clearly as
possible the information to be included in each box on the VAT return but
further work would probably be needed. Thus, the proposal could allow through
the Comitology procedure advice to be given to the Commission to define an
Implementing Regulation for common definitions for all the VAT return boxes.
Although complete harmonisation would not be achieved, the declaration would be
fully standardised through the EU.
b) Level of information
The number of boxes on the standard VAT
declaration should be similar to that produced by the PwC study. This VAT
return was analysed with the help of business and was part of discussions with
Member States during the Fiscalis seminar in Portugal. Moreover, in the VAT
Expert Group of businesses and the Group on the Future of VAT with Member
States there was broad agreement on the level of information. In this way the
figures produced by the PwC study would remain valid.
c) Limited number of optional information
Member States use the VAT return for different
purposes. For some it is a declaration of the amount to pay or to be refunded,
while for others it is also a risk analysis tool for which more information is
required. These differences cannot be bridged through a standard VAT
declaration that requires a set number of boxes to be completed in all cases.
Member States requiring less information on their national VAT return would
object to increasing burdens on their businesses and those Member States
requiring more information would "fear" for an increase in fraud with
a loss of information.
The most suitable approach would be to require
a minimum number of boxes to be completed in all cases, which would be at least
the same as or below that for all Member States, with the option for addition
boxes to be required. At present Ireland has 6 boxes (VAT on sales, VAT on
purchases, the balance of VAT to pay or be refunded, value of goods sent to
other EU countries, value of goods received from other EU countries) although
it requires additional information via an annual VAT return with typically 4
boxes per applicable VAT rate, including exempt supplies, exports, domestic
zero rates, standard and reduced rates. 
The number of additional boxes should be
limited to around the number of boxes required in the standard developed by the
PwC study.
d) Specific information needs
Member States have indicated that there are
certain specific regions or special schemes for which a common standard set of
information would be inadequate. For instance, specific information is needed
on the French VAT declaration to correctly administer VAT in Monaco and other
Member States such as Finland (graduated tax relief) or Portugal (Madeira,
Azores) etc. may also require Member State specific information.
This specific information requirement is not
suitable for standardised information since the information is only relevant to
the Member State concerned. Thus, these specific information requirements
should be allowed only on request from the Member States and only in duly
justified cases.
ii) Submission
The submission covers the aspects of the
periodicity and deadline for submission as well as how to submit. In this
regard, the principle should be that there are certain common minimum standards
above which flexibility can be afforded to Member States.
a) Periodicity and deadline
In common with the general practice of most
Member States the VAT return should be submitted for a period covering one
calendar month with a deadline of the end of the following month. So for
instance the March VAT return would be submitted by the end of April.
In order to help the smallest businesses, those
classified as micro enterprises with an annual turnover of less than EUR 2 000
000, a longer VAT period of a calendar quarter would be allowed as an option
offered in all Member States. Businesses preferring monthly VAT returns could
choose to remain with that periodicity.
Nevertheless, where Member States want to
further reduce burdens on business this should not be hampered. So Member
States could choose to allow a greater number of businesses to file quarterly
returns or even allow longer periods of up to one calendar year so that
businesses are not required to submit VAT returns more frequently than they do
at present.
Typically the VAT payment is required by the
same deadline by which the VAT return must be submitted. Moreover, this is the
adopted rule for the submission of the MOSS VAT declaration. The rule on the
deadline for the payment of VAT should continue but equally Member States
should also be allowed a longer time period to further help businesses. 
b) Method of submission
To support the Digital Agenda the preferred
method of submitting VAT returns should be electronic. The VAT directive
requires that all Member States provide for electronic submission, and allows
Member States to require electronic submission. This provision should continue.
However, more should be done to ensure that the
electronic submission allows for file transfers and also provides for common
submission security, whether this is through advanced electronic signatures or
other security measures. Common technical rules in an Implementing Regulation
could be foreseen but with the principle that not only digital signatures
should be offered.
iii) Corrections
It is unlikely that all businesses will in all
cases declare the VAT correctly on a VAT return. There will be instances when
the business needs to notify the tax authorities of any amendments to a
previous declaration. As far as possible the way in which businesses make any
corrections to the VAT return should be standardised to avoid undermining the
standard VAT declaration itself. Also here common rules set out in an
Implementing Regulation could be foreseen.
There seem typically three ways VAT returns are
corrected; resubmitting the return again, using a separate form or making
adjustments on the subsequent VAT return. Some alignment towards standardising
these methods of correction could be further examined. 
[1]               http://ec.europa.eu/dgs/secretariat_general/admin_burden/meas_data/meas_data_en.htm

[2]               Administrative cost relates to the "normal"
business costs, administrative burden relates to the extra cost imposed by
legislation.
[3]               COM(2010) 695
[4]               http://ec.europa.eu/dgs/secretariat_general/admin_burden/meas_data/meas_data_en.htm
[5]               
http://ec.europa.eu/taxation_customs/resources/documents/common/publications/studies/report_evaluation_vat.pdf
[6]               COM(2010) 695 final and SEC(2010) 1455 final
[7]               COM(2011) 851
[8]               TAKES NOTE of the intention of the Commission to
present a proposal for creating a standardised VAT declaration, and in this
context CALLS ON the Commission to ensure a broad based dialogue and a thorough
cost-benefit analysis beforehand.
[9]               For further details see: 
http://ec.europa.eu/taxation_customs/common/consultations/tax/2010_11_future_vat_en.htm
[10]             SEC(2010) 1455 final
[11]             For further details see:
                http://ec.europa.eu/taxation_customs/taxation/vat/key_documents/expert_group/index_en.htm
[12]             Decision 2012/C 188/02
[13]             See annex 9.4 for more details 
[14]             See annex 9.4 for more details
[15]             PwC study (2009), Table 29, Appendix 1
[16]             See summary of replies to the Green Paper on the future
of VAT, questions 21 and 22
                http://ec.europa.eu/taxation_customs/resources/documents/common/consultations/tax/future_vat/summary_vat_greenpaper.pdf
[17]             Table 7, Appendix 1 of PwC study (2013 gives a
breakdown by Member State
[18]             PwC study (2013, Main report, Table 31
[19]             PwC Study (2013), paragraph 104, Appendix 1, EUR 1 971
for non-established businesses submitting VAT returns, PwC average for all
business EUR 265 (Table 9.61., annex 9)
[20]             PwC study (2013), Main report p143
[21]             COM(2013) 122
[22]             Deloitte Study (2009)
[23]             Commission Implementing Regulation (EU) No 815/2012
[24]             See figure 1, non-established 0.3 million.
[25]             http://ec.europa.eu/dgs/secretariat_general/admin_burden/docs/enterprise/files/hlg_opinion_taxation_09052009_en.pdf
[26]             COM(2013) 449 final
[27]             Shared service centres can fulfil VAT return
obligations both for business groups and independent businesses 
[28]             Table 9.6.1, Annex 9.6
[29]             Taxing consumption (e.g. VAT) is seen as less
distortive than taxing profits or labour, where higher rates can encourage
movement of capital and means of production.
[30]             COM(2012) 750 final
[31]             Table 8, Annex A, Taxation trends in the European
Union, 2012 edition, Eurostat, ISSN 1831-8789
[32]             Reckon Study, 21 September 2009
http://ec.europa.eu/taxation_customs/resources/documents/taxation/tax_cooperation/combating_tax_fraud/reckon_report_sep2009.pdf
[33]             COM(2012) 573 final
[34]             COM(2011) 815 final
[35]             COM(2012) 722 final
[36]             Annex III of Commission Implementing Regulation (EU) No
815/2012
[37]             These countries are Bulgaria and Estonia (Appendix 5,
PwC Study). .
[38]             The quantifications as regards numbers of VAT returns,
companies and costs and potential cost savings linked with the different policy
options in this chapter are largely based on two studies: Deloitte (2009) and
PwC (2013), who themselves based their findings on both official and public
sources (such as EUROSTAT) and non-public official information and information
provided by stakeholders in the run-up to this Impact Assessment. 
[39]             See Annex 9.7 for more details.
[40]             See Annex 9.6 for more details.
[41]             See table 9.6.2, Annex 9.6 for more details.
[42]             http://www.hmrc.gov.uk/about/annual-report-accounts-1011.pdf
[43]             These countries are AT, DE, GR, LU, MT, PT and ES.
Italy could also be included.
[44]             See Annex 9.6 for more details.
[45]             See Table 9.6.8
[46]             See Annex 9.6 for more details. 
[47]             See Table 9.7.1
[48]             See Annex 9.6.4
[49]             Table 9.6.2, cost of annual VAT returns (EUR 2.769
billion)
[50]             See Table 9.6.6
[51]             Difference between consultancy fees in Table 9.6.2 and
Table 9.6.3 (EUR 11.446 billion less EUR 5.806 billion)
[52]             Difference between annual VAT returns in Table 9.6.2
and Table 9.6.3 (EUR 2.769 billion less EUR 0.918 billion)
[53]             Table 9.6.5
[54]             Table 6.3.1, periodicity micro-enterprises
[55]             The costs saving for quarterly periodicity in option C
of EUR 1.8 billion less savings in option D of EUR 0.8 billion.
[56]             Table 6.3.1, annual returns
[57]             Table 9.6.5, set up costs for option C
[58]             See Annex 9.7 for more details.
[59]             Estimates based on European Economy, Economic Papers
number 282 (June 2007) on Quantitative Assessment of Structural Reforms
[60]             VAT return shopping would be moving between a national
VAT return and the EU standard VAT declaration and vice versa.
[61]             x = per VAT period to be corrected.
[62]             International standard classification of occupations
(ISCO)
http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Glossary:International_standard_classification_of_occupations_(ISCO)
[63]             EUR 57 increased by 43% is EUR 82.
[64]             Figure 19, Appendix 1, PwC
study (2013)