On 21 January 2022, the European Commission announced the launch of a public consultation on the current VAT rules, whether they are adapted to the digitalage and how digital technology can be used to help Member States fight VAT fraud and benefit businesses.
According to the Commission, the EU-27 collected over EUR1 trillion (USD1.1 trillion) in VAT revenues in 2019, but revenue loss was estimated at EUR134bn. A significant part of this loss consists of fraud, in particular missing traderintra-community (MTIC) fraud, estimated in the range of EUR40-60bn. The consultation seeks feedback from businesses, academics, Member States and other stakeholders. Audience is invited to provide views on how technology can beused to reduce administrative burdens and related costs for businesses, and at the same time fight tax fraud. The feedback shows that VAT remains as a major sourceof revenue for Member States but is still not prepared to deal with the new digital reality, due to its complex rules for businesses and its proneness to fraud.
The consultation is intended to deliver the Commission's action plan for "VAT in the digital age", which looks to improve how tax authorities use technology to fight tax fraud and benefit businesses, and modernize the bloc's VAT rules to respond to the digitalization of the economy. In particular it will update VAT reporting obligations and facilitate e-invoicing, update the VAT rules for the platform economy, and move to having a single VAT registration process in the EU.
To achieve this, fair, efficient and sustainable taxation is key. That is why on15 July 2020, the European Commission adopted a new Tax Package. The Package reinforces the fight against tax abuse, helps tax administrations keep pace with a constantly evolving economy and eases administrative burdens forcitizens and companies. It also ensures improved cooperation with non-EUcountries, and strengthens the Commission’s support to developing countries.
In 2020, the Commission announced its Action Plan for fair and simple taxation supporting the recovery, a set of 25 initiatives to be implemented up until 2024 to make taxation fairer, simpler and more adapted to modern technologies. The Tax Action Plan is a set of 25 initiatives the European Commission will implement between now and 2024 to make taxation fairer, simpler and more adapted to modern technologies. The Tax Action Plan sets out measures to:
A.Reduce tax obstacles and unnecessary administrative burdens for businesses in the Single Market. Tax simplification will improve the business environment,enhance business competitiveness and contribute to economic growth.
B.Help Member States enforce existing tax rules and improve tax compliance,ensuring they can secure reliable tax revenues.
C.Help tax authorities better exploit existing data and share new data more efficiently, in a way which will improve the enforcement of tax rules and help combat tax fraud and evasion more effectively.
D.Promote taxpayers’ rights, by increasing their awareness of their rights under EU law,simplifying their obligations and facilitating their compliance.