More flexible VAT rates [EU Legislation in Progress]

Written by Ana Claudia Alfieri (1st edition),

VAT Concept with wooden block with stacked coins

© Art_Photo / Fotolia

Value added tax (VAT) is an important source of revenue for national governments and the European Union (EU) budget and, from an economic point of view, a very efficient consumption tax. However, the rules governing value added tax as applied to intra-Community trade are 25 years old and the current common EU VAT system is both complicated and vulnerable to fraud. Businesses doing cross-border trade face high compliance costs and the administrative burden of national tax administrations is also excessive.

The reform towards the definitive system is planned in several consecutive steps and will take some years. In the meantime, this proposal will amend the VAT Directive (Directive 2006/112/EC) and reform the rules by which Member States set VAT rates. The reform will enter into force when the definitive system is in place; it will give more flexibility to Member States to set VAT rates and will end the current arrangements and their many ad-hoc derogations.


Stage: National Parliaments opinion

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