VAT in the digital age

Project description:

Value Added Tax (VAT) is a tax levied on all goods and services supplied for use or consumption within the European Union (EU). VAT is a multi-stage tax calculated, and thus charged, on the value added at each stage of the value chain. It is collected, as a general principle, from businesses through a system of partial payments. At regular intervals, a VAT registered taxable person pays the net VAT due, which is the difference between the VAT charged on its outputs and the VAT on inputs. This system ensures that the tax is neutral for businesses, regardless of the number of transactions.

The digitalisation of the economy poses new challenges to Tax Authorities and to the VAT system due, for example, to the emergence of new business models, or the sometimes-limited capacity of tax administrations to exploit the huge amounts of information that they are more and more able to collect. Nevertheless, digitalisation also creates opportunities, in that it provides new digital instruments and solutions to help Tax Authorities in dealing with their tasks while reducing regulatory costs, and simplifying tax compliance and reporting for businesses. In this respect, any future evolution of the EU VAT system should avoid the creation of new costs for businesses and the fragmentation of the Single Market. 

Objectives of the project:

The assignment requires an assessment of the current situation and the likely impacts of a number of policy options (to be refined and further detailed) on three topics related to VAT and the evolving technologies, digitalisation, and innovative business models, namely:

• Digital Reporting and e-invoicing;
• The VAT treatment of the platform economy;
• Single EU identification number, and aspects related to the import One-Stop Shop and the low-value threshold, with a particular focus on SMEs.

The assessment is expected to contribute to the preparation of a future Impact Assessment (IA) and legislative proposal.

Project funding: DG TAXUD

Project leader: Economisti Associati

Project partners: CASE, Oxford Research AB, Wavestone S.A., Hedeos Société d'avocats, Mazars N.V.