European Commission: progress in VAT system digitisation

In January this year, the European Commission launched a comment procedure to collect views on the digitisation of the VAT system in the member states, as it believes that the digitisation and automation in applying VAT across the EU will help achieve the objectives of the 2020 Action Plan.

The comment procedure is open to taxpayers and academic professionals as well as interested members of the public. Comments can be submitted via a questionnaire on the European Commission's website until 15 April this year.
For most EU member states, value added tax is the largest revenue item in national budgets. According to the Commission, the system has become rigid?, unnecessarily complex, and prone to fraud. The digitisation and automation of the VAT system across the EU will help achieve the objectives of the 2020 Action Plan covering three major areas for development:

  • digital submissions by taxpayers
  • definition of rules for trading through digital platforms following DAC 7
  • single VAT registration in the European Union.

These steps are aimed to reduce the administrative burden on taxpayers, reduce the cost of tax administration, and make the system less susceptible to tax fraud.

Over the last decades, the European Commission and the national governments have been working on improving the VAT system at both national and cross-border levels. However, where reporting is concerned, there is no single directive imposing the same procedures or control mechanisms for collecting VAT on all member states. Therefore, we are currently seeing a variety of practices relating to both reporting and data control or possible tax evasion. These include, e.g., the introduction of VAT ledger statements in the Czech Republic in 2016, the electronic exchange of information using the SAF-T file in Poland, Luxembourg, and Romania, and the obligation to issue only electronic invoices in B2G and B2B trade in Portugal.

Through the comment procedure, the Commission wants to get a clear view of how the European VAT system is perceived by professionals and businesses. It plans to reflect the results of this procedure in its decisions aimed at harmonising reporting and control mechanisms.

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