Standard VAT return proposed for EU

Companies across the EU should have to deal with a standard VAT return to ensure better compliance with tax law, a European Commissioner has said.

Algirdas Semeta, the commissioner responsible for taxations and customs union, statistics, audit and anti-fraud, told the general assembly of the Intra- European Organisation of Tax Administrations in Belgrade that such a measure would help reduce the high levels of tax evasion and avoidance taking place in the EU, which he said totals “several hundred billion euro a year in the EU alone”. He noted that this included an 18 per cent shortfall in VAT in 2011.

Arguing for a standard form, which would help fulfil the aim to “make it easier” for firms who willingly comply with tax obligations to do so, he said: “This Standard declaration would have benefits for both businesses and tax administrations. For cross-border businesses, it would bring major simplifications and maybe even incentivise smaller companies to expand cross-border.”

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Mr Semeta predicted the savings to businesses of the simpler system would total €15 billion, while tax authorities would enjoy the proceeds of better compliance.

He added: “Overly-complicated tax systems are clearly linked to lower levels of tax compliance, even amongst those who wish to play by the rules.”

The proposed new tax plans are being debated by EU finance ministers, with the Italian presidency aiming to secure an agreement by the end of the year.

Similarly, Mr Semeta said a pan-European tax code is also necessary, as this would ensure companies find it easier to work out what their obligations are in different countries.

The commissioner also noted that new directives are being established at a European level aimed at closing tax loopholes that are used for the purposes of evasion.

Companies will be affected by both EU rules and those introduced by national governments, such as the 2014 Budget measure on tackling marketed tax avoidance.

Extending previous plans announced in the 2013 autumn statement, this forces taxpayers to pay upfront any disputed tax involved in avoidance cases that have been referred to HMRC.