The EC has launched a consultation regarding reforms surrounding EU legislation governing VAT rates.
The Commission aims to present a proposal for a new VAT Directive in the third quarter of this year. The Directive intends to help the neutrality, easiness, and workability of the general VAT system.
The framework was put in place over twenty years ago and was established on a system in which the location of the vendor determines the tax rate. Using this method, all EU member states would theoretically pay similar tax rates on similar goods.
Nevertheless, in 2012, the Commission decided to use a destination-based system, where VAT is applied where the buyer is located which allows for a greater rate disparity between countries with a lower risk of misleading competition prices.
The consultation seeks a more balanced approach between synchronisation and member states’ independence in the setting of VAT rates.