Debate: Implementation of the Sixth VAT Directive
Date: MONDAY, 14 FEBRUARY 2022
Speaker: Kadri Simson
Language: EN

A Commission study estimated the VAT gap, measured as the difference between VAT revenues and the revenues actually collected in EU Member States, at EUR 134 billion in 2019 alone. The report is thus very much welcomed, and we will totally take it into account in our actions to fight against VAT fraud and evasion.  As you rightfully state, there is a need to increase the transparency and robustness of VAT gap estimates. The Commission intends to work with national administrations to produce more targeted analyses of the components and reasons for the VAT gap at a national and EU level.  The idea would be to segment the overall VAT gap into separate elements that could be quantified and further analysed. I can also confirm that expert groups composed of experts from national administrations are meeting regularly to exchange good practices and improve a harmonised methodological approach as regards the analysis of the VAT gap.  I can also underline the collective work and achievements of EU Member States with the support and involvement of the Commission in the framework of the European multidisciplinary platform against criminal threats and its operational action plan, designed to disrupt the capacity of criminal networks and individual criminal entrepreneurs involved in missing trader intra community fraud.  As concerns the definitive system of VAT, I would like to underline that the Commission remains committed to its proposal. However, discussions in the Council have shown that a significant number of Member States have concerns on this proposal. The Commission stands ready to further support Council discussions in addressing these concerns. Further measures will also be put forward in order to strengthen the VAT system in the future.  As announced in the 2020 action plan for fair and simple taxation supporting the recovery, the Commission plans to adopt a proposal in the second half of 2022 concerning the VAT in the digital age package. One of the elements in this proposal will be taking advantage of digital technologies and policies to modernise VAT reporting obligations. It will in particular consider the implementation of real-time and transaction-based information, including on cross-border transactions.  The use of digital technologies and policies will not only reinforce the fight against VAT fraud and collection, but also reduce the VAT administrative burden and compliance costs. Digital reporting requirements have helped reduce the VAT gap in those Member States that have introduced them. The implementation of an EU-wide system for the reporting of transactions is thus expected to significantly contribute to the fight against VAT fraud, while also reducing the administrative burden that taxable persons operating in different Member States are facing due to the disparity of reporting obligations.  The expansion of the use of e—invoicing and the distributed ledger technology will be analysed in the framework of this initiative. The initiative will also adapt the VAT rules to new business models, in particular the platform economy.  Finally, another part of the initiative will be the single VAT registration in the EU, which will extend and further improve the newly introduced one—stop shop and import one-stop shop. This will allow businesses to supply goods and services across the entire EU without the need to have multiple VAT registrations. Registration in one Member State where the business is established will suffice.  Let me now briefly mention the proposal on the modernisation of the system of VAT rates on which negotiations in Council have concluded – the result of marathon negotiations. It shows that where there is a will there is a way, a European way forward. As you know, this proposal is important to ensure that all Member States can apply the same rules when it comes to VAT rates.  I fully agree that we need to avoid revenue erosion, and I am pleased that strong safeguards, notably a maximum number of reduced rates in a given Member State, have been agreed to that effect. A fine balance has been achieved, ensuring equal treatment of Member States without proliferation of lower rates, which would be harmful to fiscal consolidation in the post—COVID-19 era.  The new rules will also be aligned with our new health and environmental priorities, as well as better adapted to the digital transition. The European Parliament is being re-consulted on this proposal, given that the Council has introduced substantial changes and I look forward to hearing your position. I would like to conclude by thanking you once again for the excellent suggestions in your report and to assure you that the Commission is committed to using all the means at its disposal to continue fighting VAT fraud and evasion.