EC VAT harmonisation fails to secure support
European Commission proposals for a definitive VAT system will damage UK businesses, tax experts warn.
Failure of European tax harmonisation is predicted by KPMG, even though the Commission hopes to implement a revamped system by 2001. But EC VAT officials admit the regime will not be complete before 2005.
Other leading commentators argue that change will only come after monetary union or a significant increase in intra-community fraud.
The Commission’s plan for a new VAT regime was due to be adopted at Tuesday’s Council of Ministers’ meeting in Amsterdam. It aims to implement an ‘origin-based’ system for VAT payment.
Graeme Ross, a KPMG VAT partner, said: ‘Competitive threats and opportunities will arise unless there is true harmonisation. There is little evidence EU VAT rates will converge naturally.’
John Arnold, Moret Ernst & Young’s European VAT services director, predicted cashflow problems and increased compliance requirements.
He added: ‘The Commission is pushing member states to agree on VAT, but nobody will give up the power to set VAT rates.’
Customs & Excise said: ‘Zero-rating must be safeguarded and the burden on business must be reduced.’
Tino Eggermont, an EC VAT administrator, said: ‘Before moving to the origin system we must modernise the VAT directive and ensure a more uniform application.’
