EP calls for VAT reforms to target fraud & help small firms

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EP calls for VAT reforms to target fraud & help small firmsPrioritising a crackdown on fraud, granting NGOs and small firms, exemptions and reducing rates for “green” products are some of the key proposals in a resolution passed in the European Parliament (EP) on the future EU value added tax system. MEPs also called for a stronger role for the European Commission to push through more harmonisation to increase efficiency and reduce red tape for businesses.

The report, a response to the European Commission’s December 2010 Green Paper on the future of VAT, will feed into the upcoming Strategy on the Future of VAT, which is expected by the end of this year.

Rapporteur David Casa said in the debate before the vote, “Some businesses I spoke to told me that they prefer to trade with non-EU countries because VAT procedures are more simple. This should not continue to be the case. We need to simplify and improve our infrastructures while at the same time giving a priority to fighting fraud which costs countries billions every year.”

The main goal of the resolution is to strike a balance between maintaining VAT revenues at the levels needed to provide a major source of income while at the same time ensuring that they do not choke off useful activity. This could be achieved chiefly by tackling fraud (which currently costs the EU €100 billion in lost revenue) and reducing the plethora of different exemptions and rates while, on the other hand, devising smart EU-wide systems that would make life easier for honest businesspeople and legitimate non-profit organisations in delivering their goods and services.

The resolution calls on the European Commission to propose a mechanism allowing Member States wishing to strengthen civil society to grant a general VAT exemption for all or most of the activities and transactions carried out by these organisations, particularly smaller NGOs.

It also asks the European Commission and Member States to consider introducing a Europe-wide VAT exemption threshold for SMEs, with a view to cutting red tape and costs and facilitating access to the internal market.

The resolution, adopted with 521 votes in favour, 50 against and 58 abstentions, calls for a “Green VAT strategy” which would provide for reduced rates on eco-friendly products thereby making them more competitive with unecological alternatives produced more cheaply.

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