EU criticises French reduced VAT
- Jul 26, 2016 | Richard Asquith
The European Commission has issued a report that criticises heavily indebted France for over use of reduced VAT rates.
The report estimates that France’s extensive use of reduced VAT costs it around 1% in GDP compared to other EU member states. Given that France has missed the Euro currency 3% deficit limit for almost ten years in a row, the report suggests a rethink.
VAT is relatively easy to administer for governments, and is less damaging to economic growth compared to income or employment taxes. It has therefore become a much more popular source of revenues than income taxes for EU member states. The average share of VAT to total revenues in the EU is 17.5%. However, it is only 14.5% in France mainly due to the frequent application of reduced rates and full exemptions.
The current French standard VAT rate is 20%. This compares to the average EU VAT rate of 21.6%. France has three reduced VAT rates: 2.1%; 5.5%; and 10%. The EU VAT Directive only permits two reduced VAT rates, the lower of which must be 5% or above.
Need a fiscal representative in France?
Non-EU businesses selling in France will need to appoint a fiscal representative alongside completing VAT registration and returns.
Fiscal representatives are responsible for the accurate VAT submissions of their non-EU clients.
Avalara offers a Fiscal Representative Service as part of its international VAT and GST Registration and Returns Service.
Need help with your French VAT compliance?
Researching French VAT legislation is the first step to understanding your VAT compliance needs. Avalara has a range of solutions that can help your business depending on where and how you trade.
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