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VAT Action Plan: Commission presents measures to modernise VAT in the EU

EU News 116/2016

Brussels, 7 April 2016

The European Commission has presented an Action Plan setting out ways to reboot the current EU VAT system to make it simpler, more fraud-proof and business-friendly.

The current VAT rules urgently need to be updated so they can better support the Single Market, facilitate cross-border trade and keep pace with today's digital and mobile economy.

The 'VAT gap', which is the difference between the expected VAT revenue and VAT actually collected in Member States, was almost €170 billion in 2013. Cross-border fraud itself is estimated to be responsible for a VAT revenue loss of around €50 billion a year in the European Union. At the same time, the current VAT system remains fragmented and creates significant administrative burdens, especially for SMEs and online companies.

The Action Plan sets out a pathway to modernise the current EU VAT rules, including:

- key principles for a future single European VAT system;
- short term measures to tackle VAT fraud;
- update the framework for VAT rates and set out options to grant Member States greater flexibility in setting them;
- plans to simplify VAT rules for e-commerce in the context of the Digital Single Market (DSM) Strategy and for a comprehensive VAT package to   make life easier for SMEs.

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