The Commission Proposes Major Reform of the European VAT System

The European Commission has proposed a new tax framework for taxation aimed at combating tax avoidance, reports New Europe.

In the draft document, Brussels proposes that the VAT rate be determined by the country where the economic activity takes place. This does not mean that all tax revenue will remain in the country where the product is sold, but the amount of VAT to be paid in the country will be equal to that paid on domestic products.

>>>Z. Marić: The absence of a double taxation avoidance agreement harms exporters

By November, the VAT amount should be equal in all countries, thereby reducing the advantage of opening businesses in countries where operations are facilitated by tax avoidance such as Luxembourg, Ireland, Malta, and Cyprus.

However, the draft does not foresee the harmonization of corporate tax rates or the principle of taxing companies in the countries where they are economically active, rather than in those where they are headquartered. The issue of taxation is at the core of the European Union reforms proposed by French President Emmanuel Macron.

>>>The Commission sued Ireland in the EU Court, expecting a return of 13 billion euros in illegal subsidies to Apple

If adopted, the law will significantly impact American tech giants such as Apple, Google, and Amazon.