European Commission plans to make VAT simpler

The European Commission has presented an action plan setting out ways to improve the EU VAT system to make it simpler.

The plan will introduce key principles for a single European VAT system; look at how to tackle fraud; update the framework for rates and grant member states more flexibility in setting them; and simplify the rules for e-commerce.

On giving member states increased autonomy on applying zero or reduced rates the commission proposes two options. One would be to maintain the minimum standard rate of 15% and to review regularly the list of goods and services that can benefit from reduced rates based on member states’ input.

The second option would abolish the list of goods and services that can benefit from reduced rates. This would however require safeguards to prevent fraud and avoid unfair tax competition in the single market. It could also increase...