The EU’s common VAT system has existed for more than 40 years. The Commission carried out a European consultation on a modernisation of the system between December 2010 and May 2011. A Green Paper entitled ”Towards a simpler, more robust and effective VAT system” was prepared for use in the consultation.
The objective of the Green Paper was to launch a broad, public debate as a first step towards a new VAT system in the EU. In the Green Paper, a range of questions are directed at the business sector, public authorities and the Member States. With these questions, the Commission draws attention to four different areas within the VAT system which should be improved.
VAT treatment of cross-border transactions in the EU
Close harmonisation of the current (and differentiated) VAT rate structure, with different rates for different products, which is criticised for obstructing the functioning of the EU’s internal market
Whether or not the existing tax exemptions should be maintained in the light of the economic and technical changes over the last 40 years
More effective strategies to fight VAT fraud.
Based on the review of the responses to the consultation, the Commission will decide which areas to prioritise in the efforts towards developing a new VAT strategy for the EU. The Commission is expected to publish the chosen areas in a Communication (a so-called White Paper) at the end of 2011.