In response to a European Commission's consultation exercise on possible options for changing the existing provisions in the Sixth VAT Directive, we have made a submission on this topic, under the auspices of CCAB-I. In very brief summary, we have advocated the adoption of a standard formula to permit a level of input credit for VAT exempt Financial Services businesses, along the lines of the method applied in Australia under their Goods and Services Tax regime.

The Submission supports zero rating for B2B services but recognises the practical difficulties given budgetary issues for Member States. It recommended greater clarity in definitions used in the sixth Directive for financial services and a uniform interpretation throughout the community. The Commission proposal for a standard calculation of input credits is seen as having value. That said, the Commission's reliance on an Australian model requires further analysis.

A suggestion that business should be able to choose between taxing and exempting B2B services does not appear to be a long-term solution. This also applies to the use of cross-border companies as proposed by the Commission.

The submission is reproduced at 2.03 below.