VAT

VAT in Europe

Description of VAT (Value added tax)

The Concise Encyclopedia of the European Union describes vat (value added tax) in the following terms: [1] VAT has been mandatory in the Community since 1967. The Cockfield Report of 1985, which preceded the introduction of the Single European Act, advocated greater standardisation of indirect taxes in order to further the completion of the single market. This process of harmonisation is popular in the Commission for its relative ease of administration (a share in national VATrevenues also forms part of the financing of the EU budget). Harmonisation is, however, made problematic by political, cultural and economic factors. For example, there are wide national differences in the degree of reliance on indirect, as opposed to direct, taxation, ranging from Greece, where reliance on indirect tax is low, to Denmark, where it is high; certain countries attach particular importance to low VAT on basic necessities or on items such as books; the Protestant countries tend to levy special duties on spirits; and taxes on petrol and cigarettes are affected by health and environmental policies. Exceptions apart, the Council sets a standard minimum VAT rate of 15% and a maximum of 25%.

VAT harmonisation may also have unintended effects on competitiveness. The London art market lost business heavily to New York when the Commissionimposed VAT on imports in 1995, a measure designed to make the UK conform with the inactive markets of the rest of the EU, seemingly oblivious of the fact that art is mobile and its market global. (See also Tax.)

VAT and the European Union

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  • Value added tax

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Notas y References

  1. Based on the book “A Concise Encyclopedia of the European Union from Aachen to Zollverein”, by Rodney Leach (Profile Books; London)

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