The Commissioner recently held an orientation debate on the way forward for VAT in the EU and plans to put forward an Action Plan on this issue this month. According to the Commission, the VAT system needs reform: 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.

The Commission estimates that cross border fraud itself is responsible for a VAT revenue loss of about €50 billion annually in the European Union and the current VAT system remains fragmented and creates significant administrative burdens, especially for SMEs and online companies. The Commission also says that the current system needs to be modernised to reflect innovative business models and technological progress in today’s digital environment.