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EU member states must broaden VAT base

  • Oct 12, 2013 | Richard Asquith

EU member states must broaden VAT base

The EU has criticised a number of its 28 member states for failing broaden the net of goods and services subject to Value Added Tax.

Many countries have withdrawn some reduced VAT rates

A number of countries, such as Spain and Luxembourg, have increased the numbers of goods subject to the higher, standard EU VAT rate of their country.  But many continue to subsidise certain sectors. In particular, the hotel and tourism sectors.  Ireland is debating continuing 9% VAT on tourism.  Greece dropped restaurant VAT to 13% in August 2013.  Portugal wants to do the same.

Following the recent German parliamentary elections, it is possible that much needed tax rises will include raising the hotel VAT rate to the standard German VAT rate of 19%.

Another recent report identified an EU VAT Gap of many billions of Euro’s.  The report blamed extensive VAT fraud.  But subsequent criticism of the report’s calculation methodologies have focused on the repeated use of the reduced VAT rate to shrink the theoretical VAT take due – hence a gap.

The report, "Tax Reforms in EU Member States", monitors tax efficiency measures of the member states, improving tax clarify and ease of administration.  It covered indirect taxes, like VAT, and direct business corporation taxes.

VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is the former VP Global Indirect Tax at Avalara