Dáil Éireann Debate, Tuesday - 18 April 2023
420. Deputy Louise O'Reilly asked the Minister for Finance the estimated extra revenue that would accrue to the State if EU proposals on "VAT in the Digital Age" were enacted; and if he will make a statement on the matter. [18111/23]
View answerOn 8th December 2022, the European Commission published its proposed “VAT in the Digital Age” reforms to amend the European Union VAT system to respond to the challenges of digitalisation. The proposed reforms aim to make the EU’s VAT system more resilient to fraud and more efficient for businesses. There are three pillars involved in the proposal.
The first is the introduction of common standardised Digital Reporting Requirements (DRR) and e-invoicing on business-to-business (B2B) cross-border transactions within the EU. The proposed changes would replace the current recapitulative statements with a new Digital Reporting System for intra-community transactions and would cover the same transactions that are currently covered by the recapitulative statements with additional reporting requirements. Member States will also have the option to impose DRR for domestic supplies of goods and services, similar to the mandatory DRR designed for intra-community transactions. The expectation is that the existing digital reporting requirements in various Member States should converge with the proposed cross-border requirements by 2028.
The second pillar of the proposal addresses the challenges of the platform economy in short-term accommodation rental and passenger transport services by clarifying existing rules and enhancing the role of e-commerce platforms in VAT collection. The proposed changes would mean that these facilitation services when provided by platforms to private persons will always be taxable where the underlying transaction is supplied. It will also place an obligation on platforms to charge VAT where the underlying provider is not VAT registered. Additionally, the currently optional Import One Stop Shop (IOSS) would become mandatory for platforms when certain imports of goods to consumers in the European Union are facilitated by them.
The third pillar of the proposal would reduce VAT registration requirements in the EU by expanding the scope of the One Stop Shop (OSS) and the application of the reverse charge for B2B transactions.
The proposals are significant. They will modernise the VAT landscape and will result in increased revenues for Tax Administrations and reduced costs for business if they enter into force, as intended, between 2024 and 2028.
A number of Council meetings have taken place since January 2023 to discuss the proposals and, in common with all legislative proposals of this nature, some of the proposed amendments may not be agreed or may change significantly from what is proposed. Unanimous approval of all EU Member States is required for the proposals to enter in force and, even if there is full agreement, it is possible that implementation may be delayed.
It is not possible to estimate the extra revenue that will accrue directly to the State if the proposals are enacted. The European Commission has estimated that they should result in EU Member States collecting up to €18 billion in additional VAT revenues annually, €11 billion of this as a result of anti-fraud measures, while also reducing administrative costs for business.
