EU criticises French reduced VAT
- Jul 25, 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.
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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.