VAT system based on taxation in country of origin?
It says that in the long run a VAT system based on taxation in the country of origin of goods would be a solution to VAT fraud in cross-border supplies, but this would require a clearing system for sharing revenue. The best solution, say MEPs, would be to impose a 15 per cent tax on intra-community supplies (they are presently exempt with tax charged when they are sold on in the destination country). A decentralised clearing house system for rebalancing payments between Member Sates (because of the differential rates of VAT) could be rapidly developed.
Caution over the reverse charge mechanism
Another much discussed proposal to tackle missing-trader fraud in the VAT system (where the company selling goods or services, which should pay VAT receipts to the tax system, is a sham organisation which vanishes) is to make the customer account for the tax instead of the supplier, except where the customer is a private individual. This “reverse-charge” mechanism would indeed solve this missing-trader problem, MEPs note, but they are concerned it might create new opportunities for fraud elsewhere as well as a heavy administrative burden for businesses and are cautious about introducing it on a wide scale.
The report also calls for more cooperation between Member States’ tax authorities in tacking fraud.
Remove loopholes in Savings Tax Directive; eliminate tax havens
Turning to taxation of savings and other financial income, MEPs want to see action against tax avoidance, a widening of the scope of the Savings Tax Directive and action through the OECD to tackle uncooperative tax havens. The EU should keep the elimination of tax havens at worldwide level on the agenda.
Parliament regrets that Member States are hindering reform of the Savings Tax Directive and says it needs to be updated to remove loopholes and deficiencies. They ask the Commission to investigate some widening of its scope regarding legal entities and sources of financial revenue.
