REPORT on the proposal for a Council directive amending Directive 2006/112/EC on the common system of value added tax, as regards the treatment of insurance and financial services

15.9.2008 - (COM(2007)0747 – C6‑0473/2007 – 2007/0267(CNS)) - *

Committee on Economic and Monetary Affairs
Rapporteur: Joseph Muscat

DRAFT EUROPEAN PARLIAMENT LEGISLATIVE RESOLUTION

on the proposal for a Council directive amending Directive 2006/112/EC on the common system value added tax, as regards the treatment of insurance and financial services

(COM(2007)0747 – C6‑0473/2007 – 2007/0267(CNS))

(Consultation procedure)

The European Parliament,

–   having regard to the Commission proposal to the Council (COM(2007)0747),

–   having regard to Article 93 of the EC Treaty, pursuant to which the Council consulted Parliament (C6‑0473/2007),

–   having regard to Rule 51 of its Rules of Procedure,

–   having regard to the report of the Committee on Economic and Monetary Affairs (A6‑0344/2008),

1.  Approves the Commission proposal as amended;

2.  Calls on the Commission to alter its proposal accordingly, pursuant to Article 250(2) of the EC Treaty;

3.  Calls on the Council to notify Parliament if it intends to depart from the text approved by Parliament;

4.  Asks the Council to consult Parliament again if it intends to amend the Commission proposal substantially;

5.  Instructs its President to forward its position to the Council and the Commission.

Amendment  1 Proposal for a directive – amending act Recital 1
Text proposed by the Commission	Amendment
(1) The financial service industry makes an important contribution to growth, competitiveness and job creation but can fulfil its role only under neutral conditions of competition in an internal market. It is necessary to provide a framework which provides legal certainty as to the value added tax (VAT) treatment of financial products and their marketing and management.	(1) The financial service industry makes an important contribution to growth, competitiveness and job creation but can fulfil its role only under neutral conditions of competition in an internal market. It is necessary to provide a framework which provides such neutral conditions in regard to the value added tax (VAT) treatment of financial products and their marketing and management.
Justification
Legal certainty is dealt with in Recital 2. Recital 1 is about the principle of neutrality and creating a level-playing field in the internal market.
Amendment2 Proposal for a directive – amending act Recital 2
Text proposed by the Commission	Amendment
(2) The existing rules governing the exemptions from VAT for financial and insurance services laid down in Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax are out of date and have led to uneven interpretation and application. The complexity of the rules and the variation in administrative practices generates legal uncertainty for economic operators and tax authorities. This uncertainty has led to considerable litigation and has increased the administrative burden. It is therefore necessary to clarify which insurance and financial services are exempt and thereby create greater legal certainty and reduce the administrative burden for operators and authorities.	(2) The existing rules governing the exemptions from VAT for financial and insurance services laid down in Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax are out of date and have led to uneven interpretation and application. The complexity of the rules and the variation in administrative practices generates legal uncertainty for economic operators and tax authorities and fails to secure a level playing field in the EU. This uncertainty has led to considerable litigation and has increased the administrative burden. It is therefore necessary to clarify which insurance and financial services are exempt and thereby create greater legal certainty and a level playing field in the EU and reduce the administrative burden for operators and authorities.
Justification
It is important to stress the aim of having a level playing field in the European Union between economic operators and Member States.
Amendment  3 Proposal for a directive – amending act Recital 5
Text proposed by the Commission	Amendment
(5) Insurance services and financial services require similar forms of intermediation. It is therefore appropriate for intermediation in insurance and intermediation in financial services to be treated in the same way.	(5) Insurance services and financial services require similar forms of intermediation. It is therefore appropriate for intermediation in insurance and intermediation in financial services to be treated in the same way, including intermediation by an agent who has neither a contractual relationship nor any other direct contact with any of the parties to an insurance or financial transaction to whose conclusion the agent has contributed. In such cases the tax exemption should uniformly cover all activities that are typical of an insurance or financial services agent, including all activities preparatory and subsequent to concluding a contract.
Justification
Clarifies the point that exemption in the case of mediation should not be restricted in comparison to the current legal position. In such cases action vis-à-vis the individual contract parties is not absolutely necessary. The clarification also brings the wording into line with Article 2(1) of Directive 2002/92/EC on insurance mediation, which is similarly based on a broad definition of mediation.
Amendment  4 Proposal for a directive – amending act Recital 5 a (new)
Text proposed by the Commission	Amendment
	(5a) It is appropriate for activities constituting management of investment funds to continue to fall within the exemption if carried out by third-party economic operators.
Justification
This aspect is addressed in Article 135 paragraph 1a, but the exemption of fund management services that are carried out by a third party is not explicitly addressed. The new recital eliminates doubts regarding the applicability of the third-party exemption for fund management services.
Amendment  5 Proposal for a directive – amending act Recital 7
Text proposed by the Commission	Amendment
(7) Suppliers of insurance and financial services are increasingly able to allocate input VAT on costs incurred by them precisely to the output to be taxed. Where the services they supply are fee-based, they can establish the taxable amount for these services easily. It is therefore appropriate to extend the possibility to opt for taxation for such operators.	(7) Suppliers of insurance and financial services are increasingly able to allocate input VAT on costs incurred by them precisely to the output to be taxed. Where the services they supply are fee-based, they can establish the taxable amount for these services easily. It is therefore appropriate to extend the possibility to opt for taxation for such operators, preventing any double taxation concerns that may arise by coordinating such taxation with national taxes on insurance and financial services.
Justification
Although ideally the VAT option to tax and national based taxes on insurance and financial services should be contained in a VAT Directive, it is ambitious to address at the European level a topic that relates to the tax sovereignty of the Member States and which is not directly under the scope of the VAT. Nevertheless, such reference in the VAT Directive Preamble is fundamental and very useful not only to address the definitive VAT system and to launch a certain degree of harmonization on the VAT option to tax, but also to introduce this topic in the ECONFIN agenda.
Amendment  6 Proposal for a directive – amending act Recital 8 a (new)
Text proposed by the Commission	Amendment
	(8a) In adopting measures under Directive 2006/112/EC governing the right of option for taxation, Council should ensure the uniform application of such rules in the internal market. Pending the adoption of such rules by the Council, Member States should be able to lay down the detailed rules governing the exercise of the option. Member States should notify the Commission of draft measures in this regard six months before their adoption. During that period, the Commission should assess the draft measures and issue a recommendation.
Justification
Given the too much open wording of Article 137a, it is appropriate to insert a recital that makes sure that the Council adopts a uniform rule that prevents market fragmentation.
Amendment  7 Proposal for a directive – amending act Article 1 – point 1 – point a Directive 2006/112/EC Article 135 – paragraph 1 – point a
Text proposed by the Commission Amendment (a) insurance and reinsurance; (a) insurance, including reinsurance;
Justification
The reference to the inclusion of 'reinsurance' in the latus sensus scope of the 'insurance' exemption provision, allows addressing systematically the reinsurance related provisions throughout the legislative proposals by referring simply to 'insurance', preserving the approach already adopted by the proposals.
Amendment  8 Proposal for a directive – amending act Article 1 – point 1 – point a Directive 2006/112/EC Article 135 – paragraph 1 – point d
Text proposed by the Commission Amendment (d) exchange of currency and provision of cash; (d) exchange of currency, provision of cash and cash claims transactions;
Justification
Abolishing this tax exemption provision would lead to a turnover tax requirement on all claim sales, with serious consequences particularly for the securities market in Germany. For such a sale by the creditor to the special-purpose company would then be liable to turnover tax, as a result of which the collection or administration of receivables by the creditor would also be taxable as an ancillary service to the sale.
Amendment  9 Proposal for a directive – amending act Article 1 – point 1 – point a Directive 2006/112/EC Article 135 – paragraph 1 – point e
Text proposed by the Commission Amendment (e) supply of securities; (e) transactions concerning trading in securities;
Justification
Better wording, as securities trading should be defined as other services and not supplies.
Amendment  10 Proposal for a directive – amending act Article 1 – point 1 – point a Directive 2006/112/EC Article 135 – paragraph 1 – point g a (new)
Text proposed by the Commission Amendment (ga) derivatives of all kinds;
Justification
Derivatives should be exempted from turnover tax, irrespective of the underlying assets. Turnover tax liability can only arise if the performance of a transaction leads to a taxable sale.
Amendment  11 Proposal for a directive – amending act Article 1 – point 1 – point b Directive 2006/112/EC Article 135 – paragraph 1a
Text proposed by the Commission Amendment 1a. The exemption provided for in points (a) to (e) of paragraph 1 shall apply to the supply of any constituent element of an insurance or financial service, which constitutes a distinct whole and has the specific and essential character of the exempt service. 1a. The exemption provided for in points (a) to (f) of paragraph 1 shall apply to the supply of any constituent element of an insurance or financial service, which constitutes a distinct whole and has the specific and essential character of the exempt service.
Amendment  12 Proposal for a directive – amending act Article 1 – point 2 Directive 2006/112/EC Article 135a – point 1
Text proposed by the Commission Amendment (1) 'insurance and reinsurance' means a commitment whereby a person is obliged, in return for a payment, to provide another person, in the event of materialisation of a risk, with an indemnity or a benefit as determined by the commitment; (1) 'insurance' means a commitment whereby one or more persons is or are obliged, in return for a payment, to provide one or more other persons, in the event of materialisation of a risk, with an indemnity or a benefit as determined by the commitment;
Justification
The definition of exempt transactions should allow expressly for both coinsurance or risk pooling and group insurance, as these policy types are all widely used by the insurance sector in order to cover given categories of risks.
Amendment  13 Proposal for a directive – amending act Article 1 – point 2 Directive 2006/112/EC Article 135a – point 8 – introductory part
Text proposed by the Commission Amendment (8) 'supply of securities' means the supply of tradable instruments other than an instrument establishing title to goods or to the rights referred to in Article 15(2), representing financial value and reflecting any one or more of the following: (8) 'transactions concerning trading in securities' means the sale of tradable instruments other than an instrument establishing title to goods or to the rights referred to in Article 15(2), representing financial value and reflecting any one or more of the following:
Justification
Better wording, as securities trading should be defined as other services and not supplies.
Amendment  14 Proposal for a directive – amending act Article 1 – point 2 Directive 2006/112/EC Article 135a – point 8 – point c
Text proposed by the Commission Amendment (c) unit ownership in undertakings for collective investment in the securities referred to in points (a) or (b), in other exempted financial instruments referred to in points (a) to (d) of Article 135(1) or in other undertakings for collective investment; (c) unit ownership in investment funds, as defined in point 10, or in undertakings or other agencies for collective investment;
Justification
The amendment broadens the definition of ‘investment funds’. The change to point (c) means that investment in fund units (whether the funds in question are securities, real estate, or pension funds) will continue to benefit from the exemption arrangements in force.
Amendment  15 Proposal for a directive – amending act Article 1 – point 2 Directive 2006/112/EC Article 135a – point 8 – point c a (new)
Text proposed by the Commission Amendment   (ca) title to cash-settled financial, credit, and commodity derivatives and related options;
Justification
The above point (ca) has been inserted in order to include transactions in derivative instruments and the related options among the exempt financial services. The definition encompasses all cash-settled derivatives, whatever the nature of the assets underlying them (commodities and/or financial instruments).
Amendment  16 Proposal for a directive – amending act Article 1 – point 2 Directive 2006/112/EC Article 135a – point 9
Text proposed by the Commission Amendment (9) 'intermediation in insurance and financial transactions' means the supply of services rendered to, and remunerated by, a contractual party as a distinct act of mediation in relation to the insurance or financial transactions referred to in points (a) to (e) of Article 135(1), by a third party intermediary; (9) 'intermediation in insurance and financial transactions' means the supply of services rendered as a distinct, direct or indirect act of mediation in relation to the insurance or financial transactions referred to in points (a) to (e) of Article 135(1), by third-party intermediaries, provided that none of the intermediaries is a counterparty to those insurance or financial transactions;
Amendment  17 Proposal for a directive – amending act Article 1 – point 2 Directive 2006/112/EC Article 135a – point 10
Text proposed by the Commission Amendment (10) 'investment funds' means undertakings for collective investment in the exempted financial instruments referred to in points (a) to (e) of Article 135(1) and in real estate; (10) 'investment funds' means specially constituted investment vehicles created for the sole purpose of gathering assets from investors and investing those assets in a diversified pool of assets including pension funds and vehicles used to implement and execute collective pension schemes;
Justification
The proposal forces investment funds managers to check the VAT status of the assets in which they invest their investors’ assets. This definition is too restrictive with regard to the definition commonly recognised in the industry. The amendment proposes to use the definition of investment funds from the Commission’s White Paper on enhancing the single market framework for investment funds (COM(2006)0686). By including in the definition pension funds and vehicles used to implement and execute collective pension schemes, a level playing field is created and a distortion eliminated.
Amendment  18 Proposal for a directive – amending act Article 1 – point 2 Directive 2006/112/EC Article 135a – point 11
Text proposed by the Commission Amendment (11) 'management of investment funds' means activities aimed at realising the investment objectives of the investment fund concerned. (11) 'management of investment funds' means activities aimed at realising the investment objectives of the investment fund concerned and shall include at least strategic and tactical asset management and asset allocation, including advisory services, as well as currency and risk management.
Justification
'Advisory' or 'advisory services' should be inserted in order to include the services provided by a third party advisor taking investment decisions on the basis of complete consideration of regulatory rules as well as fund rules and advising the fund manager accordingly. Another reason for exempting this kind of investment advice vis-à-vis the fund manager is that the pertinent VAT cost would otherwise eventually be charged to the investor.
Amendment  19 Proposal for a directive – amending act Article 1 – point 3 Directive 2006/112/EC Article 137 – paragraph 1 – point a
Text proposed by the Commission Amendment (3) In Article 137(1), point (a) is deleted. deleted
Justification
Same justification for Amendments 3 and 4. Since the right to opt for taxation only exists with regard to B2B transactions, B2C transaction should continue to be subject to the current rule.
Amendment  20 Proposal for a directive – amending act Article 1 – point 4 Directive 2006/112/EC Article 137a – paragraph 1
Text proposed by the Commission Amendment 1. From 1 January 2012, Member States shall allow taxable persons a right of option for taxation in respect of the services referred to in points (a) to (g) of Article 135(1). 1. From 1 January 2012, Member States shall allow taxable persons in each individual case a right of option for taxation in respect of one of the services referred to in points (a) to (ga) of Article 135(1), where that service is provided to another taxable person established in the same country or elsewhere in the Community.
Amendment  21 Proposal for a directive – amending act Article 1 – point 4 Directive 2006/112/EC Article 137a – paragraph 1 a (new)
Text proposed by the Commission Amendment   1a. The Commission shall report to the European Parliament and the Council on the operation of the right of option under paragraph 1 by ...*. If appropriate, the Commission shall present a legislative proposal concerning detailed rules governing the exercise of that right of option and any other amendments of Directive .../.../EC in this respect.   * Three years after the entry into force of Directive .../.../ EC.
Justification
A better enforcement of legislation and a consultative role to the European Parliament.
Amendment  22 Proposal for a directive – amending act Article 1 – point 4 Directive 2006/112/EC Article 137a – paragraph 2
Text proposed by the Commission Amendment 2. The Council shall adopt the measures necessary for the implementation of paragraph 1 pursuant to the procedure provided for in Article 397. So long as the Council has not adopted such measures, Member States may lay down the detailed rules governing exercise of the option under paragraph 1. 2. The Council shall adopt the measures necessary for the implementation of paragraph 1 pursuant to the procedure provided for in Article 397. So long as the Council has not adopted such measures, Member States may maintain the existing detailed rules governing exercise of the option under paragraph 1.
Amendment  23 Proposal for a directive – amending act Article 1 – point 4 Directive 2006/112/EC Article 137b – point 1
Text proposed by the Commission Amendment (1) the group itself and all its members are established or resident in the Community; (1) the group itself is established in the Community;
Justification
To ensure that the cost-sharing rules really do deliver progress in the single market as hoped, two regulatory aspects need changing. 1: It should be possible for undertakings that are not resident in the EU to become members of such a group, and 2: these groups should be able to provide services to third parties in accordance with general turnover tax principles without this affecting the principle of their tax exemption.
Amendment  24 Proposal for a directive – amending act Article 1 – point 4 Directive 2006/112/EC Article 137b – point 3
Text proposed by the Commission Amendment (3) members of the group are supplying services which are exempt under Article 135(1)(a) to (g) or other services in respect of which they are not taxable persons; (3) members of the group are supplying services which are exempt under Article 135(1)(a) to (ga) or other services in respect of which they are not taxable persons;
Amendment  25 Proposal for a directive – amending act Article 1 – point 4 Directive 2006/112/EC Article 137b – point 4
Text proposed by the Commission Amendment (4) the services are supplied by the group only to its members and are necessary to allow members to supply services which are exempt pursuant to Article 135(1)(a) to (g); (4) the services supplied by the group are necessary to allow members to supply services which are exempt pursuant to Article 135(1)(a) to (ga);
Justification
To ensure that the cost-sharing rules really do deliver progress in the single market as hoped, two regulatory aspects need changing. 1: It should be possible for undertakings that are not resident in the EU to become members of such a group, and 2: these groups should be able to provide services to third parties in accordance with general turnover tax principles without this affecting the principle of their tax exemption.
Amendment  26 Proposal for a directive – amending act Article 1 – point 4 Directive 2006/112/EC Article 137b – point 5
Text proposed by the Commission Amendment (5) the group claims from its members only the exact reimbursement of their share of the joint expenses, excluding any transfer-pricing adjustments made for the purposes of direct taxation. (5) the group claims from its members only the exact reimbursement of their share of the joint expenses; transfer-pricing adjustments made for the purposes of direct taxation shall not affect the group’s exemption from turnover tax.
Justification
To ensure that the cost-sharing rules really do deliver progress in the single market as hoped, two regulatory aspects need changing. 1: It should be possible for undertakings that are not resident in the EU to become members of such a group, and 2: these groups should be able to provide services to third parties in accordance with general turnover tax principles without this affecting the principle of their tax exemption.
Amendment  27 Proposal for a directive – amending act Article 1 – point 4 a (new) Directive 2006/112/EC Article 169 – point c
Text proposed by the Commission Amendment   (4a) In Article 169, point (c) is replaced by the following: '(c) transactions which are exempt pursuant to points (a) to (ga) of Article 135(1), where the customer is established outside the Community or where those transactions relate directly to goods to be exported out of the Community.'
Justification
In order to ensure a level-playing field between the banking, insurance and fund industry sector, investment fund management services provided to third countries should also be VAT deductible.
Amendment  28 Proposal for a directive – amending act Article 2 – paragraph 1 – subparagraph 1
Text proposed by the Commission	Amendment
1. Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive by 31 December 2009 at the latest. They shall forthwith communicate to the Commission the text of those provisions and correlation table between those provisions and Directive.	1. Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive while ensuring that end-consumers benefit from the restructuring of the present VAT arrangement. They shall forthwith communicate to the Commission the text of those provisions and correlation table between those provisions and Directive.
Justification
Any economic decision must be based on transparent and numerical analysis on the underlying issue. The Commission should draw up that kind of survey which is to constitute evidence that average customers will be able to take advantage of the modification of the current VAT regime for financial services. This survey should include the current magnitude of the ancillary services which tend to be outsourced in lower-waging countries and it should measure the possible rise of outsourced ancillary, supporting services attributed to lifting of VAT exemption in financial services industry.

EXPLANATORY STATEMENT

Background

This proposal is the first attempt by the Commission to update and bring into line with economic realities a piece of legislation that has remained virtually unchanged for the last three decades. Since 1977, most financial services, including insurances and investment fund management, have been exempt from VAT. Although the precise reasons for the exemption were never clearly spelled out,[1] the main one seems to be the technical complexity inherent in taxing financial services. As a counterpart of this exemption, input VAT generated in order to provide the exempted services cannot be recovered and becomes therefore non-recoverable, embedded or “hidden VAT”.

At the time of adoption of the original legislation (1977), financial and insurance institutions managed most of their own back office and support activities locally. Institutional structures were nationally based, focusing mainly on supplying domestic markets. This landscape has changed dramatically since then. The main features of this evolution are a trend towards cross-border consolidation within the Community and the growth in outsourcing. This developments are the consequence not only of market globalisation but above all the result of the successful implementation of the Financial Services Action Plan (FSAP) that brought about the dismantling of obstacles to integration whilst strongly encouraging consolidation. The evolution of the industries since 1977, together with changes in the legal and regulatory environment, has increased exposure to non-recoverable tax. For the financial sector, increased tax charges absorb the first benefits resulting from efficiency gains from cross-border consolidation and outsourcing. This raises concerns about the consistency with FSAP objectives of allowing "hidden VAT" to exist within the internal market.

The legislation that the Commission proposes to modernise is not only obsolete but it has also become more and more unclear. This creates legal uncertainty. The European Court of Justice (ECJ) has been frequently requested to intervene in order to clarify the interpretation and the application of a legislation that is no longer adapted to an economic context that had not been contemplated when it was originally drafted. The question arises --to put it in the Commission’s words-- whether, because of legislative neglect, “the ECJ has been forced to make judgements to determine tax policy”.

Furthermore, deduction rates decided by the Member States within the discretion permitted by the current legislation are not in line with the principle of neutrality. To illustrate the disparity between Member States, the International Bureau for Fiscal Documentation carried out a survey on the methods of deduction of input VAT applied by the Member States, showing that recovery rates varied from 0% to 74%, notwithstanding the fact that the VAT Directive seems to foresee a certain degree of harmonisation. In order to prepare the impact assessment, Member States were requested to provide figures on the value of actual VAT receipts, which can be attributable to non-recoverable VAT borne by financial and insurance companies as well as on the value of VAT foregone though exempting those services. Apparently, less than half of the Member States responded to this request.

Objectives

In order to address the concerns raised above, the Commission proposes to reform the VAT legislation with a view to achieve the following objectives:

1.  increase legal certainty for all concerned, from the business sector to national tax administrations and thereby reduce their administrative burden in achieving fiscal compliance, whilst creating budgetary security for Member States;

2.  ensure a more consistent application of the tax and deliver a level playing field in the internal market, by eliminating the competitive distortions that are attributable to the current VAT regime for the financial services;

3.  allow operators to manage better the impact of non-deductible VAT on their activities;

4.  more generally, to promote the principle of tax neutrality that is one of the foundations of the EU VAT system.

Measures

The three main measures proposed to achieve these objectives are the following:

1. Modernisation of the definition of exempt financial and insurance services.

2. Possibility for taxable persons to opt for taxation in respect of their financial and insurance services, as newly defined in the Commission’s proposal. Such an option to tax already exists in the VAT Directive with regard to financial services only, [2] but is currently at the discretion of Member States and not widely used.[3] Its limited availability today is, according to the Commission, potentially distortive.

3. Introduction of an industry specific exemption from VAT on cost sharing arrangements.

Preliminary Comments

The proposed measures can be assessed from the point of view of businesses, tax administrations and consumers.

From the point of view of businesses: As shown by the Commission’s analysis, the generation of non-recoverable input VAT has become an important factor in the decision-making process on where and how an operator supplies financial or insurance services, in line with the Lisbon strategy.

From the point of view of tax administrations: The legislator has to bear in mind that any change that increases the level of deductibility will, in the absence of compensating measures, result in a reduction in VAT receipts for Member States.

From the point of view of consumers: It is not clear to which extent the benefits in terms of efficiency and cost reduction will be passed on to customers. As the impact assessment correctly warns about, there is always a risk that commercial constraints will spread the cost saving unevenly across the entire client base with business customers still carrying a part of the cost of non-deductible VAT.

Following a preliminary assessment of this proposal, the rapporteur is of the opinion that:

1.  The scope of the proposal can be welcomed as positive, especially since it creates more legal certainty. The new definitions proposed by the Commission are useful and long-awaited in order to catch up with economic realities.

2.  Consistency of the definitions with the FSAP must be ensured. However, and because of the need for a strict interpretation of the VAT exemptions, the new definitions should, where appropriate, be narrower than those provided for by the internal market rules.

3.  There is a need to examine thoroughly and with prudence the effect that the widespread option to tax financial services and insurance will have on the final prices to consumers, particularly bearing in mind the limited experience with the use of the option and the absence of reliable figures allowing to assess the impact in an accurate manner. The facilitation of procedures for businesses should not come at the cost of increased prices for consumers. This concern is all the more important with regard to the inclusion of the insurance sector within the scope of the special VAT exemption regime, particularly in those countries where insurance premium taxes exist.

· Too many crucial details are left for the Member States as regards the scope of the option (e.g. whether it applies to certain fee-based services only, etc.). Hence, the overall outcome will depend on the precise details of the implementing measures. As indicated above, although the proposal indicates that the Council shall adopt the implementing measures, it nevertheless confirms that, in the absence of the Council’s measures, the Member States shall specify these rules. The proposal should include safeguards to avoid market fragmentation as a result of Member States disagreement on how to implement the right to opt for the exemption.

4.  As the Commission’s impact assessment shows, a side effect of cross-border consolidation is that the tax revenue generated by VAT on inputs will mainly accrue in the Member State where the service is created by the service-provider as opposed to the Member State where the consumer (business or private) of the service is established. Are there any safeguards that could avoid too an imbalanced re-distribution of tax revenue generation? Given the lack of reliable information on the impact of the proposed measures, an obligation to analyse how the measures have worked together with an obligation to report to the Council and the Parliament could be inserted in the legislative text.

• [1]  These consisted mainly in the impossibility of establishing taxable amounts and the amounts of deductible VAT without generating unacceptable administrative charges and without creating legal and accounting complexity both for economic operators and Member States' fiscal authorities.
• [2]  The current VAT directive provides that Member States may allow taxable persons a right of option for taxation in respect of financial services; the Commission’s proposal provides that Member States shall allow taxable persons that right.
• [3]  Currently, Belgium, Estonia, France, Germany and Lithuania have allowed taxable persons this right of option.

PROCEDURE

Title	Value added tax on the treatment of insurance and financial services
References	COM(2007)0747 – C6-0473/2007 – 2007/0267(CNS)
Date of consulting Parliament	18.12.2007
Committee responsible        Date announced in plenary	ECON 15.1.2008
Committee(s) asked for opinion(s)        Date announced in plenary	JURI 15.1.2008
Not delivering opinions        Date of decision	JURI 6.2.2008
Rapporteur(s)        Date appointed	Joseph Muscat 15.1.2008
Discussed in committee	1.4.2008		2.6.2008		16.7.2008
Date adopted	10.9.2008
Result of final vote	+: –: 0:	40 1 0
Members present for the final vote	Mariela Velichkova Baeva, Pervenche Berès, Sebastian Valentin Bodu, Sharon Bowles, Udo Bullmann, David Casa, Christian Ehler, Elisa Ferreira, José Manuel García-Margallo y Marfil, Jean-Paul Gauzès, Benoît Hamon, Gunnar Hökmark, Karsten Friedrich Hoppenstedt, Sophia in ‘t Veld, Othmar Karas, Christoph Konrad, Guntars Krasts, Kurt Joachim Lauk, Andrea Losco, Astrid Lulling, Gay Mitchell, Joseph Muscat, John Purvis, Dariusz Rosati, Eoin Ryan, Antolín Sánchez Presedo, Margarita Starkevičiūtė, Ivo Strejček, Ieke van den Burg, Cornelis Visser, Sahra Wagenknecht
Substitute(s) present for the final vote	Daniel Dăianu, Ján Hudacký, Piia-Noora Kauppi, Baroness Sarah Ludford, Thomas Mann, Poul Nyrup Rasmussen
Substitute(s) under Rule 178(2) present for the final vote	Evelyne Gebhardt, Eleonora Lo Curto, Florencio Luque Aguilar, Pierre Pribetich