Verbatim report of proceedings

Thursday, 13 October 2011 - Brussels

3. The future of VAT (debate)

  President. – The next item is the report by David Casa, on behalf of the Committee on Economic and Monetary Affairs, on the future of VAT (2001/2082(INI)) (A7-0318/2011).

  David Casa, rapporteur. – (MT) Madam President, this report makes an important contribution to the consultation process that began in December 2010 when the Commission launched a Green Paper on the future of VAT. The current VAT system is not suitable for the internal market and has various high administrative and compliance costs and is a big burden on businesses. Besides, it is open and very vulnerable to fraud. This applies, in particular, to transactions carried out between one country and another, where the most common type of fraud, carousel fraud, is a serious issue, being the most active and costing Member States billions of euro every year. Choosing the best way forward is a big challenge and this choice should be made after thorough consultations with all those involved in some way or another. I have met many organisations, including representatives of large companies and small businesses, and now I will explain the conclusions that were agreed upon.

One of the most important points I want to mention in this report is the fact that we have to accept this status quo and move on to the principle of destination when we impose taxes on internal and cross-border transactions. Those involved readily agree on such a position, as do the assertions made in the Commission’s Green Paper, that while a system based on the principle of origin is most appropriate for the internal market, every effort to move forward in this direction has failed. There is no political will and so I think it is time we found a credible alternative. A system based on the principle of destination can only be effective if we set up one-stop shops for VAT.

The report supports the existing plan to set up these one-stop shops by 1 January 2015. This should lead to a drastic decrease in administrative costs experienced by businesses and should increase the efficiency of cross-border operations. It is worrying that many of those I have spoken to have said that, in certain cases, they prefer to do business with countries outside the European Union when we are supposed to have an internal market. This is an unacceptable situation which needs to be addressed as soon as possible. When it comes to deciding how to go about collecting VAT, it clearly emerges that more studies are required and other studies need to be revised, because I have concluded that the best system is the Data Warehouse Model. There has to be substantial infrastructural investment to switch over to this system and so we have to be cautious. Therefore, as I have already mentioned, I recommend there should be further studies in this regard to see if this system is feasible. We also have to work towards a general reduction in administrative costs. This would greatly help the small businesses sector. Other recommendations I am putting forward are a reduction in the frequency of returns, simplification of the system where one has to prove exemptions, and an increase in the use of e-government solutions, particularly when submitting VAT returns.

I think I will stop here for now and continue after listening to my colleagues.

  Algirdas Šemeta, Member of the Commission. – Madam President, I would like to thank the European Parliament and, in particular, Mr Casa, for his positive and constructive report on the Green Paper on the future of VAT.

When this Commission began its mandate, we felt that the time had come to have a fresh look at the European VAT system, which has now been in place for over 40 years. It is indeed high time to develop a new and modern VAT system – fully compatible with the single market and with newly emerging business models – which should continue to ensure and even improve its role as a revenue raiser in the long term.

The Green Paper on the future of VAT presented in December 2010 constituted the first step in this process. The overwhelming reactions from stakeholders confirmed that there was a need for such a debate. More than 1 700 written contributions were submitted. They generally confirm that the current VAT system is too complex and burdensome, primarily because of the existing divergences across the EU. This is quoted as a major obstacle to maximising the benefits of our internal market, in particular, for smaller businesses. One conclusion that can already be drawn is that our initiative has created considerable expectations. Indeed, fundamental changes to all major aspects of the VAT system are advocated by business stakeholders as well as the general public.

The next step in this process of reforming VAT will be a communication to be presented before the end of 2011, identifying a comprehensive strategy for a stable and long-term VAT regime. Clearly, it will not be possible to tackle all aspects of VAT at once. The communication will set out the ultimate objectives to pursue and make a distinction between those areas in which progress can be made in the short term and those areas which will still require more substantial work and in which results can only be expected in the longer term.

In the forthcoming debate of the College on its work programme for 2012, I will propose new initiatives directly linked with one of our main priorities, namely, consolidation and sustainable growth. In this framework, concrete proposals will follow the new VAT strategy. They will cover issues such as a rapid reaction mechanism, VAT governance with the business community and a reduction in the administrative burden for businesses.

The opinion of Parliament expressed in this report often reflects the view of the stakeholders. It is also ambitious. For the Commission, this is positive and encouraging. I can already assure this House that its opinion will be given full consideration.

  Bart Staes, rapporteur for the opinion of the Committee on Budgetary Control. – (NL) Madam President, Commissioner, ladies and gentlemen, I am the rapporteur for the Committee on Budgetary Control and have thus, above all, had to examine what the Green Paper says about anti-fraud measures.

This is something that is not in its infancy but has been around for some time. A few years ago, we saw the report of the Court of Auditors, which pointed very explicitly to a number of shortcomings in the system. At the time, we approved an own-initiative report on the matter, which, ultimately, became the Bowles report, which the rapporteur also refers to, and in which a series of recommendations are made which I hope will continue to be implemented.

The system does indeed have a number of weaknesses, a fact which leads to fraud on a massive scale. This is estimated to be worth EUR 80-100 billion, which is an enormous amount. This also makes up a large proportion of total fiscal fraud in the European Union, which is estimated to cost EUR 200-250 billion. If we also consider that VAT carousel fraud, and VAT fraud in general, accounts for between EUR 80 and 100 billion, I think that we must then have sufficient incentive to take action.

In this connection, most of what we are seeing is cross-border fraud. There is therefore a need for cross-border cooperation. This means cooperation between the Member States’ authorities, cooperation with Europol, cooperation with Eurojust, and cooperation with OLAF. That is one of the recommendations that we, the Committee on Budgetary Control, are very happy to make.

I thank the rapporteur and the entire Committee on Economic and Monetary Affairs for the fact that they incorporated much of my opinion into paragraphs 33 to 40 verbatim. This is important, and I thank the rapporteur and the Committee. It is rare for an opinion to be incorporated so meticulously.

The issue is one of cross-border cooperation, and we must ensure that accountability and risk awareness relating to this kind of fraud are increased in the Member States.

In my opinion, there is also a need for a cross-border and more uniform definition of VAT carousels. During my research and when drawing up my report, I spoke to many people in the field, including many inspectors, and there was one clear piece of advice that came up, which was to establish a comprehensive and uniform definition of VAT carousel fraud. Harmonised administrative penalties are also needed.

The Commission should now urgently bring forward proposals on simplifying and consolidating anti-fraud legislation in this area. I see this as an important demand. You should also do something – as the rapporteur has already said – to simplify and consolidate VAT legislation. Many inspectors working every day in the field, dealing every day with this sort of crime, tell us that this is cross-border fraud and that we therefore need to cooperate across those borders.

There is also a language barrier at play. If we have to study the VAT legislation of a particular Member State and we do not know its language, then we are faced with an enormous problem. Another of the pointers I have been given was that we should at least ensure that the VAT legislation of all Member States is translated into a number of basic languages. The Committee on Budgetary Control has opted for French, English and German, but we can discuss this.

EUROFISC, a Belgian initiative for the establishment of a network, strikes me as being a very good initiative. I think that the Commission must realise that this creates added value. I also urge the Commission to ensure that it reports to Parliament and keeps us up to date on this matter so as to guarantee transparency.

These, I think, are the main points of my report, although there is also the matter of new technologies. These can help us to combat VAT fraud. I tend to think that if the recommendations of the rapporteur, the Committee on Economic and Monetary Affairs and the Committee on Budgetary Control are followed, the European Union will be a little stronger in tackling this important type of fraud.

  Alfredo Pallone, on behalf of the PPE Group (deputising for Iliana Ivanova, rapporteur for the opinion of the Committee on Women’s Rights and Gender Equality). – (IT) Madam President, ladies and gentlemen, I believe that the development and full implementation of the internal market cannot be carried out without an effective, efficient value-added tax (VAT).

I am perfectly in agreement with the report presented by Mr Casa, which highlights a whole series of shortcomings and also provides a set of procedures for compensating for them. I urge the Commission to act quickly, however, because I believe strongly that we are lagging behind.

The next VAT system must introduce effective, rigorous harmonisation, with common rules, in order to avoid the competitive advantages that damage companies and consumers, and hence the internal market, especially for companies with cross-border activities. Therefore, in this sense, cooperation can only be introduced if there is an actual, real desire for it on the part of Member States, and this means leaving behind national egotism.

Another important point that Mr Casa touched on is the reduction in red tape, not least for the purpose of cutting the administrative costs of compliance with VAT regulations. Here we have a real paradox: small and medium-sized enterprises (SMEs) pay much more than larger companies, or rather they have higher costs, particularly if they have cross-border activities. Therefore, the measures to be introduced must lead to greater simplification but, at the same time, to an increase in legal certainty for companies and administrations. What kind of models am I calling for, then? Harmonised models and special regimes for SMEs. Europe is very much counting on SMEs.

Finally – allow me to make this comment in passing, ladies and gentlemen – the next VAT strategy must lead to an extension of the tax base in order to foster fiscal consolidation. At a time of crisis, I believe that everyone should pay. It should not just be the lower-income bands or people with a fixed income who pay.

  Lara Comi, deputising for Markus Ferber, rapporteur for the opinion of the Committee on Transport and Tourism. – (IT) Madam President, ladies and gentlemen, the problem of public finances facing many European Member States is now clear for all to see. Therefore, it is not a time to be fighting over principles. Instead, we need to focus on common objectives, such as a return to sustainability in public budgets, and this means focusing on much broader goals.

I would therefore like to congratulate Mr Casa on his truly excellent work. While basing itself on the solid foundations of the Commission’s Green Paper, the report focuses on extremely important points. In this regard, I find the reference to reducing fraud particularly instructive. When citizens are being asked to make further sacrifices in order to improve the budget situation in leading European countries, there should be no flank left exposed to tax evaders and fraudsters. EU transactions need to be carried out within a simple fiscal framework, so that companies are absolutely not burdened by any additional administrative costs beyond those they already have to bear.

I believe that a further aspect should be underlined, one which I feel Mr Casa has thoroughly explored, regarding the markers this resolution puts in place for the healthier development of the internal market. More effective collection and simpler administration for businesses would inevitably foster business between Member States. This seems to me to be a thoroughly commendable objective, particularly at a time like the present, when the market needs a boost to get going and to get resources moving, and, at the same time, to create wealth.

I would like to congratulate Mr Casa once again, because I believe that this resolution is balanced and focuses on the true priorities. Now it is time to take action.

  Saïd El Khadraoui, on behalf of the S&D Group. – (NL) Madam President, I would like to begin by thanking the rapporteur for the excellent cooperation which has resulted in a good report in which we, the European Parliament, are sending a number of very clear messages in the debate about the reform of the VAT system in the Union.

That system must be made simpler, more efficient and more transparent. I believe that Mr Casa’s report helps take the debate forward. It is not the end but rather the beginning of a long road, and we are waiting for proposals from the Commission in order to continue along the way.

In the debate, we must, of course, be aware that there has been a shift in recent years from direct to more indirect taxation, but this has not yet been enough to guarantee the funding of the welfare state. It is therefore important that account is taken in this debate of fiscal proposals concerning a financial transaction tax, energy taxation, and so on.

Reforming VAT is clearly not neutral either. It is an important policy instrument that has a direct impact on consumption behaviour. It can either stimulate or discourage the purchase of goods. We therefore take the view that reduced VAT rates and exemptions must remain possible, for instance, for the non-profit sector and voluntary associations, and for social reasons.

For a number of sectors, account must also be taken of new trends and policy priorities. These include the transport sector, in which aviation and maritime transport are treated differently to the railways, a fact which hampers the development of a level playing field between the different means of transport and gives rise to market disruption.

We see more or less the same picture in the cultural sector, in which books should receive the same VAT treatment irrespective of the form they take, so that the same rate applies to downloadable and streamed books as to, for example, books printed on paper. We must also carefully examine such matters as well.

Finally, allow me to say a few words about efficiency and fraud. This has already been raised by other speakers. The system absolutely must become less sensitive to fraud, given that a figure of EUR 80-100 billion per year in lost VAT revenues has been reported. It goes without saying that this is unacceptable. Better monitoring and better consultation between services are a must. We also support simplifying the administration, although on the condition that doing so does not open up any back doors and that it helps us to combat fraud.

We also support the move towards a destination principle based on the place of consumption. This must go hand in hand with the introduction of well-functioning one-stop shops throughout the Union.

In conclusion, Madam President, I think that this report will definitely contribute to the debate and is a good start; we await the Commission’s initiatives on the matter with baited breath.

  Carl Haglund, on behalf of the ALDE Group. – (SV) Madam President, first of all, I would like to thank our rapporteur, who has done a sterling job. This is an excellent report. I am sure our shadow rapporteur, who, for practical reasons, is speaking after me today, will be able to come back to the group’s overall view, but this report really is very good.

I would like to take the opportunity to bring up the question of VAT exemption for non-profit making organisations, which is something that we have already debated here in the European Parliament. Commissioner, you will remember, I am sure, that some of us expressed concerns about this when you visited our committee in Strasbourg a few months ago. At that time, you were not particularly keen on the prospect of a VAT exemption for non-profit making organisations. We in Parliament did not think this was necessarily the best response and you may have noticed that I and a number of colleagues have succeeded in including an excellent passage on this matter in this report, which is something I welcome.

It seems a little ironic that, during the European Year of Volunteering, the Commission is attacking Member States whose taxation systems include VAT exemption. I am referring here to the infringement proceedings that the Commission has initiated against Sweden and other Member States. This is politically unacceptable, and I am pleased that a very clear majority in the European Parliament also rejected this in the report we are debating today, which is something that the Commission ought to take note of as it takes these matters further.

Otherwise, I have to say that the report is very good, as I said, and I am pleased that we are getting to grips with the question of fiscal fraud, in particular, this being a major problem in many quarters and something that we really must be able to get to grips with, among other things, in order to increase tax revenue, which we may have need of during the current economic crisis.

Last but not least, I think that it might be worth mentioning that VAT is a good example of the fact that we can coordinate tax in Europe, something that we ought to do in other areas of taxation, too, and in that respect, it is good that cooperation on VAT is continuing at European level.

  Ashley Fox, on behalf of the ECR Group. – Madam President, may I start by thanking our rapporteur, Mr Casa, for his diligent work on this report.

Any report on taxation is likely to be controversial because the right to levy tax is one of the fundamental powers of a sovereign state. That is why so many in this Chamber, including the Commissioner, want the EU to have the power to levy taxes on our citizens and why we Conservatives do not.

This report deals with VAT and there are many aspects of it that I welcome. I am pleased that the references to the financial transaction tax and other EU own resources were removed. I like Mr Casa’s focus on reducing administrative burdens and costs for our businesses. The report also recognises that any new VAT proposals must be fraud-proof and help, in particular, to end carousel fraud. I am happy to see our governments in the Council adopting a more coordinated approach towards VAT. It is another important step towards the efficient functioning of the single market.

Where I disagree with this report is over the call made, in paragraph 46, for Member States to increase the level of tax harmonisation. Coordination between sovereign states is one thing, harmonisation by the EU is another. This is not a proposal with which my Group can agree, because of our belief that the right to levy taxes and to decide how they are levied should remain with the nation states.

  Nikolaos Chountis, on behalf of the GUE/NGL Group. – (EL) Madam President, the report includes measures to address and reduce red tape, but I have been unable to identify any strong political will to eliminate the problem of professional tax evaders, not so much in the report as in the Commission’s intentions. VAT fraud – as the report states – amounts to EUR 100 billion and VAT revenue in the order of 11% is being concealed.

However, my second comment, the most important comment by our group, is that these measures may consolidate the trend towards shifting taxation from direct to indirect taxes, meaning that the policy applied by the European Union will be to reduce direct taxes, to reduce corporation tax, and to reduce tax on multinationals and increase indirect taxes, in other words, VAT, on consumer goods. This increase will be paid for by our workers, together with other cuts, and will bring about an unfair system. Consequently, the future of a VAT system with such characteristics and the future of taxation policy in general are at odds with the future of a prosperous economic and social policy in the European Union.

  Rolandas Paksas, on behalf on the EFD Group. – (LT) Madam President, just a few thoughts I had while assessing this comprehensive report.

Firstly, the fact that VAT collection instruments and methods currently in force are hopelessly outdated, and that the sooner we replace them, the better it will be for us all, particularly in the midst of the crisis.

Secondly, the reform of the VAT system should be implemented expeditiously, but should properly take into account the needs of consumers, because they are among the main actors covering the costs of this tax and its inefficiency.

Thirdly, it is very important to ensure that the Member States themselves are able to adopt a decision on the application of a reduced VAT rate in areas that are important to them.

  Nicole Sinclaire (NI). – Madam President, VAT is sometimes called a luxury tax, yet it is a luxury for those who can afford it. Those who are the highest earners in society know how to avoid paying VAT, while the poorest in society seem to have to bear the brunt, whether on domestic fuel or general household goods. It has a cost to the UK taxpayer of almost GBP 15 billion a year which is transferred from the UK to the European Union in VAT payments, and governments of all persuasions in the UK forget to actually advertise that VAT is an EU tax, or an EU-inspired tax. We can no longer support this and this is not a tax that should be on an EU scale. It should be for a national government to decide what sales tax it should have and all revenue should stay within the Member State.

The example that I have already alluded to is the VAT on domestic fuel. Now this was a political hot potato in the UK in the early 1990s. The then Conservative Government lost a lot of political credibility when it tried to increase VAT to 15%. It never explained once that it had to do it because of EU membership. The then Labour opposition criticised this tax as being an affront to poor people; yet when Labour came to power in 1997 did they abolish it? No. The Chancellor of the Exchequer, Gordon Brown, had to come here cap in hand to ask permission to reduce it to 5%. So what happened to it being a tax on ordinary people? This VAT is a scam on the ordinary working class people of my country and should be abolished at an EU level.

  Spyros Danellis (S&D). – (EL) Madam President, Commissioner, from an economic point of view, VAT plays an important role in maintaining healthy government budgets and, of course, a healthy European budget and, with the well-publicised fiscal problems in the European Union, it is important for the VAT system to work both properly and efficiently.

Unfortunately, the administrative complexity of the current VAT system is having a significant effect on the administration of businesses throughout Europe. Let us not forget that obligations such as full recovery of VAT and the integration of various VAT payments into a business’s financial planning are more feasible for bigger businesses, making life comparatively more difficult for small and medium-sized enterprises, which account for 99% of businesses in the European Union. It also leaves a great deal of room for fraud and tax evasion.

Bearing these factors in mind, the proposals in this report represent an exceptional contribution on the part of Parliament in a sector which does not come within its legislative remit. Of course, measures to reduce red tape, such as convergence of administrative practices and a Standard European Invoice, will not change the VAT system, but may make a difference.

The VAT collection measures designed to reduce fraud will enable Member States to save billions. On the question of cross-border fraud, if higher financial commitments are needed in order to conduct effective investigations and use new technologies, then neither the Member States nor the European Union should avoid them. Also, we urgently need to simplify and unify legislation to combat fraud.

I was pleased to see that the report links future changes to VAT rates and zero rates with social and environmental priorities. In the Committee on Transport’s opinion, we call for a lower or zero rate for public transport and, even though this was not included in the report, we hope that it will be included in the Member States’ list of goods and services which qualify for a reduction in the VAT rate called for by the European Parliament.

Finally, bearing in mind the coordinated effort being made to improve road safety by 2020, it would be a positive move if road safety equipment were to benefit from a reduced VAT rate.

  Olle Schmidt (ALDE). – (SV) Madam President, Commissioner, I would like to say a big thank you to the rapporteur, Mr Casa, who has done a truly excellent job. The Group of the Alliance of Liberals and Democrats for Europe has an essentially positive view of the Commission’s Green Paper. Europe needs closer coordination of its VAT systems in order to be able to improve and strengthen the internal market. Our VAT systems differ far too much in the way they are organised and this creates obstacles for companies operating across national borders. Therefore, better coordination of VAT policy within the Union is necessary and we welcome the harmonisation of VAT rates.

We support the idea of tax neutrality. Reducing labour taxes and increasing VAT in terms of certain VAT rates is a good idea. Individuals and companies must not be forced to take on increased tax burdens. It is also good that the report highlights the importance of looking closely into the consequences for regional and municipal autonomy with regard to the right of taxation in the event of a shift from direct to indirect taxation. This could be very important for several countries.

As has already been said, we also need to limit the number of VAT exemptions, which create higher administrative costs and additional bureaucracy. However, I have to admit that there is one exemption that I am strongly in favour of, and which Mr Haglund also mentioned, and that is VAT exemption for non-profit making organisations. As you know, the European Commission initiated infringement proceedings against Sweden in the spring on account of tax exemption for non-profit making organisations. Together with MEPs from six Member States, I have tabled a joint proposal for VAT exemption for the non-profit making sector, and I am pleased that the proposal for national VAT exemptions for non-profit making organisations received such a high level of support in committee and from the rapporteur. This sends an important signal to the Commission that voluntary, not-for-profit work must be encouraged, not stifled.

I would also like to emphasise the importance of all books and newspapers, regardless of their format, being treated in exactly the same way when it comes to setting VAT rates. I would like to thank the President and the Commissioner, and I wish the Commissioner luck with a difficult and challenging task.

  Ivo Strejček (ECR). – Madam President, I would like to raise three points. The first is to offer my congratulations and thanks to Mr Casa. This is not political correctness but a reflection of my personal feeling. Mr Casa, I know that, as an MEP, you have devoted yourself for almost seven years to the problems of VAT and, as far as I know, you know what you are talking about. However – and this brings me to my second point and one of my concerns – I fear that the strategy of so-called green VAT, which would reduce rates for energy-efficient and environmentally friendly products and services, is likely to result in tax fraud. We all agree that fraud is unacceptable, so we should not ignore that possibility.

My time is up. I will speak to Mr Casa personally about my third point.

  Claudio Morganti (EFD). – (IT) Madam President, ladies and gentlemen, to begin with, I should like to thank the rapporteur, Mr Casa, for his work. I am pleased because the report contains numerous references to simplifying administration, particularly red tape. By using the technological and digital tools at our disposal as well, these measures could be a great help, especially to small and medium-sized enterprises (SMEs).

I would like to underline in particular an amendment that I tabled and which was carried, which moves towards the introduction of a Europe-wide value-added tax (VAT) exemption for SMEs. This would reduce costs and charges and, above all, facilitate wider access to the internal market, particularly for young entrepreneurs.

Furthermore, I appreciate the efforts aiming for more efficient VAT collection. This measure is necessary in order to prevent potential fraud, a phenomenon that has unfortunately been very common in recent years.

  Angelika Werthmann (NI). – (DE) Madam President, ladies and gentlemen, given the significance of VAT as a source of income for the currently stretched national exchequers, any improvement in the current system is desirable. The VAT system is based on legal provisions adopted at EU level but applied by the individual Member States.

The primary guiding principle should be practical justiciability. The Commission’s Green Paper finds fault, above all, with the complexity of the existing system, which it criticises for failing to satisfy the requirements of a true internal market.

The regulatory framework clearly called for by our rapporteur, involving a broad based VAT system with as few exceptions as possible, seems to me to constitute a logical approach. Objectives include greater efficiency in collection and a sensible reduction in the follow-on costs for businesses. Adjustments in line with the requirements of the internal market must ensure the proper functioning of the taxation system.

In order to guarantee and increase tax revenue, the most effective approach, first and foremost, is an effective limiting of the opportunities to abuse the system. The hope remains that a disentanglement of the rules will lead to a somewhat more trouble-free implementation of future directives in the Member States. Finally, I would also like to add my thanks for a sound report.

  Diogo Feio (PPE). – (PT) Madam President, the report that we are debating here today takes the right approach, presenting a modern vision of value-added tax (VAT) and taxation, and includes a series of proposals that should act as an incentive for the initiative that the Commission could and should present to Parliament.

For this very reason, I would like to congratulate the rapporteur, Mr Casa, whom I know well, and I am aware of his concerns about these matters. These concerns are amply demonstrated when the report mentions that VAT is a source of state income, but that it also has an impact on the functioning of the market and its actors, as well as a major impact on the functioning of the internal market. That is exactly why it is important that there be fewer costs for users, fewer costs and administrative burdens, less bureaucracy and better combating of fraud and tax evasion, as stated in the report.

It is also important, as mentioned here, that the collection system be improved. However, at this time, when the Member States are increasing their tax burdens, I would also highlight the need to look at the refund system, which often creates so many problems for small and medium-sized enterprises (SMEs) that pay VAT and then take a long time to recover any that they have overpaid.

It is also crucial to create a system that pays particular attention to how SMEs work, as mentioned in this report. SMEs are the engine of our growth and of taxes too, so intervention to assist them should be encouraged, even in times of difficulty.

I shall conclude by saying that Parliament is committed to a better VAT system, and that this report is a demonstration of this commitment.

  António Fernando Correia De Campos (S&D). – (PT) Madam President, Commissioner, this report by Mr Casa is good. The principal question is why value-added tax (VAT) in the EU is being reviewed. Firstly, there is a need to make it compatible with the single market. The more systems and varieties of VAT there are, the less fluid the market. Reforming VAT encourages e-commerce, focuses competition on value and on the basic price of goods and services rather than on tax differences, combats fraud and ensures the confidence that is so vital, especially in cross-border transactions, thereby improving the economy for small and medium-sized enterprises (SMEs) and reducing administrative burdens.

What other supporting measures are already under way in the single market that could be linked to VAT? One measure is a simple, clear and transparent digital support mechanism; namely, measure 7 of the single market. Measure 5 relates to services and the need to review legislation on the standardisation and implementation of the Services Directive. Measure 9 is aimed at removing tax obstacles and explicitly reviewing the VAT system and making VAT the same for online and face-to-face commerce, which we have all experienced when ordering books.

There are two fundamental reasons for the pressures to reform VAT. The first of these is the economic crisis. More revenue is needed and, in some countries, this is likely to involve cutting income tax in order to promote economic development, and passing on this burden to VAT. The second major source of pressure is the ageing population, demographic ageing, and the trend from indirect taxation towards direct taxation, which is due to the reduction in the active population base.

It is necessary to rethink the balance between this direct and indirect taxation. Finally, we must reconcile subsidiarity with harmonisation in these reforms.

It is essential to restrict the range of variation in the standard VAT rate so that all of us can understand it better. Greater transparency is needed in setting the reduced VAT rate and its scope, and there needs to be a clear and widely publicised list of reduced rates. There is a need to study exemption thresholds for SMEs, in the knowledge that each exemption brings with it a procession of small- or large-scale fraud.

Finally, I welcome the Commission’s recent proposal to create European-level VAT.

  Edvard Kožušník (ECR). – (CS) Madam President, I appreciate the fact that the report devotes considerable attention to the issue of eliminating bureaucracy in the European legislation governing VAT, and specifically to a reduction in the frequency of the periodic VAT returns.

Europe has an ageing population, and this has an impact on labour markets, savings, consumption patterns, and the stability of public budgets. There is a clear and obvious need to focus on the restructuring of tax systems. In restructuring, we must reduce the role of direct taxation, in favour of indirect taxation. I must sound a warning, however, over the attempts to transfer responsibility for tax system reform from Member States to the EU. Tax systems and the parameters thereof must stay within the remit of Member States. Attempts to harmonise VAT must be roundly rejected from the outset. VAT harmonisation would be just the first step towards creating a single tax authority. That would be a ‘road to Hell’ for Europe, to coin a phrase.

  Theodor Dumitru Stolojan (PPE). – (RO) Madam President, as a result of the crisis, numerous Member States have increased their VAT rates, thereby making it an even more important source of revenue for their budgets. Every year, whenever I discuss with my students the movements of information and resources caused by Europe’s VAT system, this is always followed by heated debates about the complexity, burden and evasion which this European VAT system encourages. This is why I give my overwhelming support to the proposals featuring in the report from my colleague, Mr Casa, whose aim is for every Member State to reduce and get rid of, as far as possible, the exceptions, exemptions and reduced VAT rates, which only add to the complexity and administrative burden imposed by this tax.

I obviously support the measures for cutting the red tape required to implement this system. However, I have serious reservations about the proposals on granting a blanket exemption to activities carried out by non-profit making, non-governmental organisations since, in many cases, and I do not wish to give any examples at the moment, these organisations are merely involved in covering up tax evasion arising from some of their activities.

  Olle Ludvigsson (S&D). – (SV) Madam President, all I can say is that this is an excellent report. The focus is in the right place, which is to say, on increased efficiency, reduced bureaucracy and a stronger fight against fraud. There is a great deal to be gained by improving the VAT Directive in these areas.

More specifically, I would like to emphasise the question of VAT rules for non-profit making organisations. There are weaknesses in the directive in this regard. Austria, Denmark, Finland and Sweden have been criticised by the Commission for not having applied the current legislation correctly. These countries may perhaps need to make certain adjustments to their national rules for associations, but the main problem lies at European level. The best solution would be for provisions to be introduced into the VAT Directive that allow the Member States to apply general VAT exemptions to the non-profit making sector. We need to restrict the exceptions that we allow, but in this case, it is fully justified to increase national flexibility.

The general VAT exemption for non-profit making organisations is an excellent way to promote civil society. A rich voluntary sector is the mainstay of a well-functioning democracy, and it is perfectly possible to formulate this sort of exemption in such a way that it does not distort competition. We are talking about voluntary activities on a limited scale, which are clearly separated from commercial activity. The main aim of the exemption is not to strengthen the finances of the non-profit making organisations, but to reduce the administrative burden on those enthusiastic souls who manage the budgets in their spare time. Therefore, the exemption cannot be replaced by subsidies; it is the reduction in bureaucracy that is the important issue. It is good that the report fully supports this way of looking at VAT in the voluntary sector, and it is a very important signal to the Commission ahead of the next stage of the process. I would also like to say a big thank you to the rapporteur, and thank you for the opportunity to speak.

  Jacek Olgierd Kurski (ECR). – (PL) Madam President, it is assumed by the European Union that an increase in VAT rates in Member States will translate into an improved budgetary intake. The reality, however, may prove to be quite different. Our part-session lasts for 22 hours. According to the Federation of Small Businesses, during this short part-session in Brussels, small and medium-sized enterprises will have spent over 23 million hours fulfilling their administrative and tax obligations. Four thousand three hundred small, mainly family-run businesses will have closed and around 19 000 people will have lost their jobs. These are only some of the facts associated with excessive administrative and tax burdens within the EU.

For this reason, adopting harmonised VAT rates for similar types of goods regardless of whether they are purchased online or offline seems an appropriate solution. We cannot agree, however, to the harmonisation of VAT in all the Member States. It is a basic principle that each country should determine its own fiscal policies. We can only support the adoption of rules by which consumption and not production of goods is taxed, as well as support adoption of the lowest possible rates of VAT.

  Ildikó Gáll-Pelcz (PPE). – (HU) Madam President, Commissioner, first of all, I would like to thank the rapporteur for the outstanding job he has done in addressing an aspect of economic policy where harmonisation and at least a minimum degree of coordination is indispensable in order to ensure a well-functioning and competitive EU economy. When VAT was introduced 40 years ago, it met the needs of the economy of the time. Since then, however, it has undergone numerous modifications, so-called modernisation, which, let us be frank, made the system increasingly complicated. It put unnecessary burdens on both taxpayers and tax authorities and, at the same time, acted as an impediment to the creation of an integrated EU market. Its many weak points made it vulnerable.

As a result it lent itself to tax fraud and tax evasion, causing a considerable loss of tax income amounting to hundreds of billions. At the same time, VAT must be recognised as a very important source of budgetary income that enables us to finance our welfare systems. Nevertheless, I am of the opinion that we do need both exceptions and exemptions, but we must assess very carefully where we can allow exemptions and exceptions without distorting competition in future. I welcome the report’s objective to strengthen action against fraud, as well as the simplification of administrative procedures. Another aspect I support and consider important is ensuring transparency and traceability of the system, in particular, when it comes to cross-border activities.

However, I also find it important to note that it would be a good idea to forget about the categories of ‘within national borders’ and ‘within the European Union’. These categories are, in fact, obstacles to the integrated internal market of the EU. I also find Data Warehouse Models to be useful. I believe that we need to introduce what has already proven its worth in Member States and truly results in a budgetary surplus. Once again, I would like to congratulate the rapporteur and thank him for considering my motion for amendment.

  Andreas Schwab (PPE). – (DE) Madam President, Commissioner, ladies and gentlemen, the European Union’s interim VAT system, which has been in place for 16 years, currently represents a significant obstacle for European businesses in their activities within the internal market. Meanwhile, the complexity of the rules and their differing implementations at national level give rise to administrative costs, especially for small and medium-sized enterprises, that cannot carry on like this. This is particularly the case when it comes to cross-border electronic trading, which, with its enormous potential for growth, is of fundamental importance for the internal market. Ultimately, European consumers also benefit from such trade.

Against the backdrop of the economic and financial crises, the legislative initiative to be brought forward by the Commission is therefore indispensable, Commissioner. I very much welcome the debate occasioned by the advent of the Green Paper. We advocate the simplification of the processes and the removal of bureaucratic obstacles. My friend and colleague, Mr Casa, has submitted an outstanding proposal containing sensible measures such as the introduction of a Standard European Invoice and reducing the frequency of VAT returns.

It is regrettable – and I want to point this out specifically – that the Member States are manifestly holding back on their cooperation on the implementation of the country of origin principle for cross-border transactions. Not only the Member States, but also the Commission and Parliament had all come out in favour of this previously. The fact that we are now moving towards a destination principle and a system based on the place of consumption is not ideal, although certainly a conceivable option, which the rapporteur is proposing here.

Overall, we advocate a regulation rather than a directive, in order to allow for better and more standardised application of the rules on VAT in the European Union while, at the same time, creating an effective system for the internal market and the businesses operating within it.

  Sari Essayah (PPE). – (FI) Madam President, Commissioner, my thanks go to the rapporteur, Mr Casa, for this balanced report representing Parliament’s strong position on the reform of the value-added tax system, which has been in preparation for a long time now. The great extent to which standard tax rates in the Member States vary, and the many types of VAT exemptions and threshold values that apply, have led to the distortion of competition in certain sectors and have harmed the development of a viable internal market. A system that has been in effect for 17 years now requires a more thorough overhaul.

It is especially important to reform the system now, in the midst of the economic crisis. Tax evasion and tax fraud eat into the tax base and leave honest citizens and companies to pay the taxes that have been avoided by the perpetrators of fraud.

The report stresses the importance of cooperation between the tax administrations of the Member States and urges the Commission to develop a coordinated strategy to fight fiscal fraud. The so-called Green VAT strategy contained in this report, however, gives rise to a few questions. I hope that the specifics can be worked out without more problems arising.

In future, it should be possible to ease the administrative burden associated with VAT and make reporting as easy as possible for small and medium-sized enterprises. It is to be hoped that a new system would take better account of the position of labour-intensive sectors, such as the craft industries. Value-added tax can easily become an additional tax on work when the end product hardly allows for the possibility of reducing material costs.

The Member States also have different tax practices relating to charitable and not-for-profit organisations. The report expresses a desire to see Member States strengthening civil society by exempting these from value-added tax wherever appropriate. I hope that this practice will also be adopted in the Member States.

  José Manuel Fernandes (PPE). – (PT) Madam President, allow me to begin by congratulating my fellow Members and, in particular, the rapporteur, Mr Casa, on his excellent report and the superb work that he has brought before us here.

The report advocates simplifying and harmonising the value-added tax (VAT) system in the EU, which will lead to greater transparency and efficiency, as well as less bureaucracy and less fraud. In this way, we can improve the workings of the internal market and contribute to increasing competitiveness, which is much needed, in the euro area and the EU.

Combating VAT fraud is a priority. It is even estimated that this fraud could total up to EUR 100 billion. VAT receipts represent more than 21% of the Member States’ tax revenue, and is thus an important source of revenue for national budgets. In many of them, it is even the main source of funding.

If we have clear and unequivocal rules, we can advocate the neutrality principle and reduce the administrative burdens resulting from EU VAT legislation. Companies, especially small and medium-sized enterprises (SMEs), cannot bear the administrative costs that they incur by charging VAT. It is worth noting that SMEs represent more than 99% of companies and around 67.4% of jobs in the EU. In Portugal, SMEs represent 81.4% of the total number of jobs.

Countries receiving external assistance need to be alert and ensure that they act with particular and targeted solidarity, especially as regards taxes. These Member States have been obliged to increase their taxes and are now being called on to consider VAT exemption thresholds, and to set out lists of common goods and services eligible to benefit from tax exemptions or reduced taxes. This is the reason why I am urging particular solidarity and a focus of attention.

  Erminia Mazzoni (PPE). – (IT) Madam President, ladies and gentlemen, I believe that the work carried out by Mr Casa in this report is highly relevant.

It was important to state the position of the European Parliament in the process of reforming the value-added tax (VAT) system, and I believe that the strongly underlined objectives of simplification, transparency and harmonisation are truly worthy of support. In particular, with regard to the tools for promoting harmonisation, the report takes into account extremely well the need to safeguard at all times national autonomy and, hence, the full application of the principle of subsidiarity.

There are two points I think the Commission needs to consider for its forthcoming engagements. With regard to exemption, it is definitely a good idea to look into exemptions for associations, non-profit making organisations and non-governmental organisations, but in doing so, the Commission will have to take due account of the need to cleanse the system of exemptions that have been misused. Secondly, it is important to work on legal certainty and the reduction of administrative burdens, and on adaptation to innovative technological processes, because this is very useful to businesses and to the market.

IN THE CHAIR: RODI KRATSA-TSAGAROPOULOU
Vice-President

  Petru Constantin Luhan (PPE). – (RO) Madam President, value-added tax is a vital source of revenue for national budgets. In many Member States, it is even the main source of revenue. While, at the start of the economic crisis, VAT receipts accounted for roughly 8% of Member States’ GDP, their proportion has subsequently grown significantly due to Member States needing to increase their VAT rates.

Given that the VAT system accounts for around 60% of companies’ administrative burden, I think that it is vital to the smooth running of the economy for this system to be simplified and updated, especially during a crisis. I call for the quickest possible regulation of the aspects relating to obligations, deductibility and rates, as these are the main grounds for concern that economic operators have. Their complexity hampers economic operators’ activities, increases costs and very often makes European systems less attractive to foreign investors, thereby holding back regional development.

  George Sabin Cutaş (S&D). – (RO) Madam President, at a time of economic crisis and excessive public deficit, VAT has proved to be an important source of revenue for national budgets. However, increasing its rate is no guarantee of economic growth either, especially when the consumption of basic foods is affected. In Romania, the VAT rate for staple food products has been held at 24%, which has not encouraged consumption, but exacerbated the poverty level. This is why I think that much fairer alternative sources of revenue need to be found.

On the other hand, it is not only consumers who have had to suffer from high VAT rates. Small and medium-sized enterprises, the European Union’s economic driving force, have also been affected. This is why I welcome the rapporteur’s proposal to think about adopting a VAT exemption threshold for SMEs at EU level, with the aim of facilitating their access to the internal market and reducing their costs and administrative obligations.

  Alfreds Rubiks (GUE/NGL). – (LV) Madam President, I also value the work that has been done in analysing what the situation is with regard to the collection of value-added tax. Everything I hear and have read demonstrates that in the 17 years since this tax has been in operation, it has become ever harder to collect, it has become more and more fragmented, and it has opened the door to ever more fraud. It seems that we are now thinking of giving this old, lame and sick horse new shoes, in the belief that it will race well. In my view, we should give serious consideration to abandoning this tax altogether – not immediately, but perhaps in the future – and replacing it by turnover tax, which would at once eliminate all types of fraudulent schemes and also make administration easier.

  Jaroslav Paška (EFD). – (SK) Madam President, value-added tax (VAT) is one of the most important sources of revenue for the EU Member States. In cross-border trade, however, there is great deal of tax evasion, and therefore it is proper to seek ways to improve the existing mechanisms for the recording, reporting and collection of VAT. Tax policy is the responsibility of the Member States, and therefore EU initiatives in this area are very limited. Nevertheless, in Mr Casa’s report, we can find several ideas as to how to improve the current rules. The system of VAT is built on broad foundations. According to the OECD definition, it may be a good basis for further coordinated improvement of mechanisms for cross-border transactions, accounts and collection. The efforts expended in reducing red tape could be a further benefit. Simplification of financial statements, a reduction in the frequency of submission of tax returns, as well as better utilisation of e-government or the introduction of European invoices using a language-neutral template, will certainly assist both the tax authorities and businesses. I believe that each simplification and streamlining of the system will contribute to the better collection of this tax.

  Andrew Henry William Brons (NI). – Madam President, the rapporteur describes lack of harmonisation as a particular problem, or shortcoming, of VAT. I cannot agree that this is a problem at all. Taxes are levied primarily to gain revenue and secondarily to have economic or social effects. Taxes are not levied to look pretty or harmonious. Each country has its own spending agenda and perceived economic and social needs, and it is they who should determine tax rates. We should not levy taxes for the sake of doing so or so that they are the same as in neighbouring countries.

I would not reform VAT, I would replace it with a simple but variable sales tax. Flat-rate VAT is a regressive tax because it is paid disproportionately by the less affluent with their high marginal propensity to consume. The zero-rated and exempt items make VAT less regressive than it would otherwise be. However, I suspect that those items would become victims of harmonisation. Furthermore, harmonisation would be impossible to escape were it to be effected by a regulation rather than by a directive.

  Csanád Szegedi (NI). – (HU) Madam President, ladies and gentlemen, Members of the Jobbik Party have spoken out on several occasions here against the centralisation of the European Union. However, with VAT, we have come to an issue where harmonisation is typically the only solution. It is a very inappropriate message to send to European citizens that while we should all share burdens in this Union, welfare measures are applied disparately. We need only look at how wages in Eastern Europe compare to Western Europe. And if the existence of such a social gap were not enough, VAT in Eastern Europe is essentially several times higher than general turnover tax or value-added tax in Western Europe, or exceeds it by several per cent.

Hungary, for example, envisions a record VAT hike. The government will break a record in austerity measures by raising VAT in Hungary to 27%, which will put an unprecedented burden on citizens, even more so if we consider that wages are but a fraction of those in Western Europe. It would be high time for the European Union to intervene in such austerity measures and prevent them from happening. The European Union should not only step up in various abstract issues, but should also guard the sense of wellbeing of citizens.

  Monika Flašíková Benová (S&D). – (SK) Madam President, after more than forty years since the introduction of value-added tax (VAT), it is indeed high time for a review of this system. The aim should be to strengthen its coherence with the single market and its contribution to other policies. Reforming the VAT system can play a crucial role in supporting the delivery of the Europe 2020 strategy and a return to growth through its potential to reinvigorate the single market and underpin smart budget consolidation in the Member States. Any such improvements require a comprehensive VAT system that will be able to adapt to changes in the economic and technological environment. A simpler VAT system would also reduce the operational cost to taxpayers and tax administrations, thereby increasing the net benefit to the treasury. VAT compliance costs are a major administrative burden for EU companies, and reducing this burden would contribute significantly to increasing their competitiveness. Finally, it is essential to finally find a solution whereby money, including by means of VAT, does not escape from the budgets of the Member States and disappear into so-called tax havens.

  Elena Băsescu (PPE). – (RO) Madam President, I, too, would like to congratulate my colleague, Mr Casa, for drafting this excellent report.

VAT receipts are a major source of revenue for national budgets. However, during a recession, it is preferable to avoid raising the VAT rate and other taxes when an alternative is available. For example, raising the VAT rate by five percentage points in Romania, from 19% to 24%, has had an adverse impact on business, exerting pressure on this sector. Initially regarded as the way to economic recovery, according to the analyses, this measure has delayed Romania’s exit from recession, and it would have been appropriate to implement it in two stages.

Romania is currently one of the Member States with the highest VAT rate and needs to adopt measures to stimulate investments and the absorption of European funds.

  Seán Kelly (PPE). – Madam President, just following on from my colleague Mrs Băsescu’s comment that we need measures to stimulate the economy, I am pleased to say that in my country, the new government brought in proposals this year to reduce VAT, particularly in relation to restaurants and other areas of that nature. It has had a huge positive effect. In fairness to most of the businesses, they passed the VAT reduction on to the customer and, as a result, they have increased their customers and the number of people visiting. So certainly there are areas where we can stimulate the economy by varying the VAT rate. The idea of having the same rate right across Europe, while it is desirable in the long term, is not practical in the short term.

  Algirdas Šemeta, Member of the Commission. – Madam President, honourable Members, I would like to thank you for your comments and the views you expressed during this very interesting debate. I am glad to see that the European Parliament and the stakeholders often share views on priorities and on the action to be undertaken to achieve a simpler, more fraud-proof and efficient VAT system tailored to the single market.

I also see general strong support for our initiative and, indeed, this is more than necessary. Our role in the EU VAT system will constitute a huge task. After all, we should never forget that most of the European VAT legislation is based on Article 113 of the Treaty, requiring adoption by unanimity in the Council. If the Council were to deliver on the high expectations that have been raised, it would have to leave the comfort zone of business as usual, and some Member States might find themselves chasing their own shadows.

The Commission will, of course, take into account Parliament’s conclusions, suggestions and requests during the next steps of the review of the EU VAT system. As I said, we are finalising our work on the communication on the future of VAT, which will be issued very soon – before the end of the year – but, in parallel, we are already working on concrete proposals for improving the system and on issues that were raised today during the discussion. Issues such as fraud, better coordination of activities between Member States, and exemptions are currently the subject of detailed analyses, and when implementing the strategy, we will come forward with concrete proposals on these matters.

In conclusion, I would like to thank this Parliament – as well as Mr Casa personally – for its strong support and constructive approach.

  David Casa, rapporteur. – (MT) Madam President, first of all, I would like to thank all my colleagues for their contribution and for the support they have given me now and which they apparently will extend to me in the future, at least when we come to vote later on. I appreciate all the comments made about details in the report, including, for example, an agreement on a general reduction of administrative costs especially for SMEs, which are basically at the forefront of the European economy and which are currently suffering the most due to the complicated system we have in place at the moment. There are a number of proposals for changes which can be implemented immediately without major modifications to the present system. I hope at least that the Commission will take note of what we are suggesting, where, for example, the report calls on the Commission to prepare a template for invoices that is linguistically neutral. This could solve the current issue and could be implemented in the form of a system of grids based on corresponding numbers that add up, or rather harmonise, the input of data. This could therefore eliminate the problem of translation. This report also calls on the Commission to prepare a maximum set of VAT obligations. This would mean that countries already using an efficient system would not need to impose further obligations on businesses. On the other hand, businesses would have a guarantee that a list of obligations which can be imposed by Member States already exists. Business thrives under calm and stable conditions and, with this in mind, we have suggested that, when possible, especially on non-controversial issues, regulations should be used instead of directives. This increases the uniformity of interpretation and implementation of VAT legislation.

I conclude, Madam President, by thanking all those involved, the rapporteurs of the other committees, as well as the staff at the Committee on Economic and Monetary Affairs. I have every confidence that this report will receive the strong support that is required when we vote on it later today, and that we, as a Parliament, will send a strong message to the Commission concerning the future of VAT that we hope is taken into consideration.

  President. – The debate is closed.

The vote will take place today, Thursday, 13 October, at 11.30.

Written statements (Rule 149)

  George Becali (NI), in writing. – (RO) I share the sentiments of my colleagues who advocate the need to reform the VAT system, which puts Member States in a difficult situation due to the way in which it is regulated and defined at the moment. In my country, Romania, the VAT rate is one of the highest in the European Union, and there has still been no differentiation agreed for certain categories of goods or products. This is why I support the request submitted to the Commission to provide Parliament and the Council with a mandatory list of goods and services which may be subject to a reduced rate or exemption, in line with the VAT Directive.

I believe that it is just as important to harmonise administrative practices and cut red tape. By this I mean doing away with some of the annual returns, reducing the frequency of regular returns, simplifying the proof required for a VAT export exemption, and creating the future Standard European Invoice. I hope that we will have serious consultations with companies and entrepreneurs throughout this entire process and achieve results. Please God!

  Jiří Havel (S&D), in writing. – (CS) One of the key instruments for EU competitiveness is a functioning single market, an important component of which is an effective tax system. The discussion over a common VAT system for the EU is therefore a step in the right direction, as we see in the Commission’s Green Paper of 1 December 2010 on the future of VAT. I therefore welcome the Commission’s plan to develop a comprehensive VAT system which would eliminate the susceptibility of the current system to fraud, would be sufficiently stable and resistant to fraud – estimated to be as high as EUR 100 billion annually in the EU – and which would contribute to greater transparency and the competitiveness of European businesses. The VAT system in operation in New Zealand should be an inspiration to the EU. For social reasons, I consider it important in the reform to retain Member State discretion in decision making on reduced rates of VAT on selected goods. The report also contains promising conclusions and proposals (VAT with a broad base, a VAT system based on location, VAT collection methods such as, for example, the limited Data Warehouse Model combined with the Certified Taxable Person model). Overall, it can be said that the report submitted by David Casa presents a detailed analysis of this issue, makes reference to the relevant legislation, and also contains relevant recommendations on the future of VAT in the EU.

  Iliana Ivanova (PPE), in writing. – (BG) The VAT system has not been changed for the last 17 years. Nowadays, we need a modern VAT framework which we can use to address the challenges facing the European Union. European business often views the current legislation as an obstacle to the smooth running of the European single market. This is why we need to simplify the current rules and reduce the administrative burden to provide a better fiscal environment for companies in the EU. Every year, VAT abuses amount to EUR 60-100 billion. One measure of paramount importance is to create new instruments for controlling and tackling VAT fraud at EU level. Another important element is to standardise information and promote international transactions within the EU. This will enable better cooperation between Member States’ tax services. Last but not least, I would like to stress that it is important for us to comply with the principle of subsidiarity so that Member States have the chance to make decisions on different levels of VAT in certain sectors, allowing national economic and social features to be taken into consideration. This will help improve the competitiveness of the entire European economy.

  Sandra Kalniete (PPE), in writing. – (LV) As the author of the report on the single market, I fully support what the resolution states to be the effect of value-added tax (VAT) on the European single market. It is one of the preconditions for attracting investment, although one must admit that it is certainly not the most important precondition. In the last few years, several Member States have been forced to increase VAT in order to balance budget expenditures and cope with the challenges arising from the crisis. In Latvia, for example, VAT has been increased from 18% to 22%. I support the issues already examined in the Green Paper, including the important questions of tax neutrality and the degree of harmonisation essential in the single market. VAT is a tax on end-consumption. I therefore agree that the administrative burden associated with VAT should not be borne by businesses. The report also touches on the important aspect of the efficiency of VAT collection. Although VAT is one of the taxes that is most easily collectible, schemes for VAT fraud continue to be rife in EU Member States. The black economy is like a cancer eating away at public finances. Nevertheless, we must do all we can to encourage people to pay tax.

  Marie-Thérèse Sanchez-Schmid (PPE), in writing. – (FR) An overhaul of the VAT system is urgent. The economic crisis, demographic changes, the survival of our social system, a return to growth and the completion of the internal market, these are the challenges necessitating a change in the current system. In fact, VAT revenue accounted for 21.4% of tax revenue in European Union Member States in 2008, in other words, more than EUR 860 billion. Our welfare state model relies heavily on this lever. What is more, VAT adjustments are tremendous tools for boosting economic sectors with a potential for growth. Lastly, it is essential to harmonise VAT rates in other sectors to a certain level so as to avoid distortions of competition and obstacles to the common market. I therefore welcome the proposals set out in this report inviting the Commission to simplify, adapt and improve harmonisation of VAT systems in Europe, thereby allowing a return to growth. Finally, I want to point out that the adoption of a reduced VAT rate for cultural goods and services distributed on physical media or on-line must become a reality to unleash their growth potential and ensure the distribution of a diversified and quality cultural creation.

  Vilja Savisaar-Toomast (ALDE), in writing. – (ET) In view of the significant role of value-added tax in the harmonisation of differences in taxation, for the development of a common internal market and the reduction of bureaucracy, and in order to safeguard Member States’ value-added tax revenues, I am glad that we were able to consider this topic. I believe that this report, which examines the amendment of the system for value-added tax, is important because it offers a solution to the problem that has arisen in the transport sector, offering equal opportunities to all modes of transport. Member States should ensure that similar goods and services receive like treatment in the application of value-added tax, and should also ensure that value-added tax is applied uniformly to different cross-border transport services, regardless of the mode of transport. Also, taking into consideration the public interest and social and environmental arguments, I support the proposal made in the report to introduce lower rates of value-added tax or zero rates for public transport (urban public transport, inner city transport and regional transport). Considering that 99% of entrepreneurs in the European Union are small and medium-sized enterprises, this is also of great importance in the reduction of the administrative burdens facing SMEs. The report states that administrative burdens should be reduced by 25% by 2012. The measures offered in this report include a clause that refers to the broader implementation of e-governance solutions, primarily in the electronic submission of value-added tax declarations and records. Since Estonia has had an effective system of e-governance in recent decades, I concur with the proposed resolution.

  Monika Smolková (S&D), in writing. – (SK) Value-added tax constitutes the most important item in each national budget, and therefore tax evasion cannot be accepted. The difference in VAT rates between each Member State is being abused for various types of fraud, particularly in cross-border transactions. In our Member States, we encounter on a daily basis illegal traders who sell goods on the street which are directly imported from other countries. When you purchase these goods, a receipt is not issued and they are sold without a cash register; mayors of villages are even announcing such sales on the municipal information service, and the inspection authorities turn a blind eye to such events. In addition to these ‘minor’ frauds, every year, larger, more sophisticated frauds involving hundreds of thousands of euro are uncovered. It is therefore high time for the introduction of a single European tax and uniform control mechanisms. The economic crisis is revealing flaws in the selection and control of individual taxes and VAT is one of the most important of these.