Alfred Sant warns against reducing member states’ flexibility on VAT rates
Maltese MEP Alfred Sant told the European Parliament in Strasbourg that proposed changes on taxation of trade between EU countries could eventually weaken the ability of member states to enforce VAT.
This situation, he said, could reduce their flexibility in deciding about zero rates or reduced VAT rates. The Maltese MEP, explaining why he abstained on the report VAT: Definitive system for the taxation of trade between Member States, warned that this reform should be carefully framed to avoid such consequences.
This report forms part of the broader ongoing VAT reform, launched by the European Commission in 2016, aimed at rebooting tax rules so that businesses can reap all the benefits of the Single Market and become more fraud resilient.
Sant said that this definitive VAT system of taxation of trade aims to boost efforts to reduce the VAT gap. It introduces simplifications that reduce companies’ administrative costs.
By replacing the current system with a single procedure, it could facilitate business to business transactions, he said. Moreover, move establishes the status of a reliable taxable person, ultimately facilitating trade and making life easier for companies operating across-borders.
“These are highly desirable outcomes. However, such reforms should be carefully framed. Member states need to be sure that where applicable, they retain existing guarantees to apply zero rates on food and pharmaceuticals even after the introduction of the definitive VAT system.
“Any subsequent price increases that might then follow in the wake of the definitive system would be totally unacceptable.”
Sant emphasised that this tax reform should by no means weaken the measures by which taxes are collected or the incentives and safeguards that make for a robust VAT system.
Also, by shifting the responsibility for tax reporting on the supplier in another member state, the definitive system risks removing a tool from the hands of member states, in their quest to collect taxes due to them, he said.
“For these reasons I have abstained on the final vote,” remarked the Maltese MEP.
The report was approved by 493 votes in favour, 48 votes against and 137 abstentions.