Latest attempts to integrate VAT doomed says Mazars

THE latest attempt at the European “holy grail” of VAT harmonisation is likely to go the way of previous failures, a Birmingham tax analyst has predicted.

Terri Bruce, senior manager for indirect tax at Mazars, said such a step would mean the threat to add VAT to the likes of newspapers and children’s clothing would collapse.

“In my view it is unlikely that any of the proposals will ever come to fruition. Many attempts have been made to harmonise the VAT system since its introduction in Europe in the 1950s but to date, most have been filed on the ‘too difficult’ pile, presumably as even Europhiles welcome their tax independence,” she said.
 
Nevertheless, commenting on the European Commission’s Green Paper on the future of VAT and how a simpler more robust and efficient system might be developed, she cautioned that the trend was upwards.

“The harmonisation of VAT across the EU is the holy grail for the Commission,” she said.

“The concept promises unity, cohesion and fairness; in short a real European single market.  

“The Green Paper is yet another attempt at achieving this nirvana, but are its aims realistic or achievable and has it addressed the necessary issues which would help to achieve agreement?  Indeed, given the current precarious state of the Euro zone, is a more cohesive Europe desirable in any event? Those are the questions being asked.”

VAT receipts account for more than 21% of the national tax revenues of EU Member States, a key source of income for most.  However, VAT is expensive to administer, and, as a self assessed tax, the bulk of the cost falls upon the taxpayer.

And a business trading across international borders incurs even higher costs due to the fact that each Member State has its own interpretation of the legislation.

The Green Paper is seeking to eradicate the differences and asking whether this might better be done by regulation, in the process removing the rights of Member States to have their own variations.

“If this part of the Green Paper is accepted, it could mean that the Commission is able to exert more influence over the UK and its taxing mechanisms.

“The Green Paper specifically asks for suggestions on which exemptions should be withdrawn, which indicates that the VAT bill will only rise,” added Ms Bruce.
 
Areas which may be affected could be public transport, food, newspapers and children’s clothing, all of which are currently zero-rated in the UK.