The European Commission has adopted plans for a radical shake-up of the EU’s VAT regime

Date: 11/07/1996

“The complexities and inconsistencies of the existing VAT system are hindering intra-Community trade and preventing businesses, consumers and tax administrations from taking full advantage of the opportunities offered by a genuine single market,” said Taxation Commissioner Mario Monti. Under the new regime, VAT would be charged in the country in which goods or services originate, and not where they are sold. To prevent an unfair imbalance in revenues, Monti suggests setting up a clearing system to redistribute communal tax revenue among national authorities. The amount owed to each country would be calculated on the basis of consumption of VAT-taxable products and services, and not on the basis of tax declarations.