A report drawn up by Maltese MEP David Casa, which calls for VAT reforms to target fraud, assist small companies and NGOs and promote green products, was overwhelmingly approved by the European Parliament, with 521 votes in favour, 50 against and 58 abstentions.
Prioritising a crackdown on fraud, granting NGOs and small businesses exemptions and reducing rates for “green” products are the key proposals in the resolution that was passed by the EP’s plenary session on Thursday, on the future EU VAT system. MEPs are also calling for a stronger role for the European Commission in pushing through more harmonisation to increase efficiency and reduce red tape for businesses.
The resolution also calls for a “Green VAT strategy” that would provide for reduced rates on eco-friendly products, thereby making them more competitive with non-ecological alternatives produced more cheaply.
The report, a response to the Commission’s December 2010 Green Paper on the future of VAT, will feed into the forthcoming strategy on the future of VAT, which is expected by the end of this year.
Rapporteur David Casa said in the debate before the vote: “Some businesses I spoke to told me that they prefer to trade with non-EU countries because VAT procedures are simpler. This should not continue to be the case. We need to simplify and improve our infrastructures, while at the same time giving a priority to fighting fraud that costs countries billions every year.”
The main goal of the resolution is to strike a balance between maintaining VAT revenues at the levels needed to provide a major source of income, while at the same time ensuring that they do not choke off useful activity.
This could be achieved chiefly by tackling fraud (which currently costs the EU €100 billion in lost revenue), reducing the plethora of different exemptions and rates and devising smart EU-wide systems that will make it easier for honest businesspeople and legitimate non-profit organisations to deliver their goods and services.
The resolution calls on the Commission to propose a mechanism that allows member states wishing to strengthen civil society to grant a general VAT exemption for all or most of the activities and transactions carried out by these organisations, particularly smaller NGOs.
It also asks the Commission and member states to consider introducing a Europe-wide VAT exemption threshold for SMEs, with a view to reducing red tape and costs and facilitating access to the internal market.