Value Added Tax Essay Example | Topics and Well Written Essays - 2500 words

Value Added Tax - Essay Example The concern for the measure is not limited to its monetary or financial impacts on trade and commerce but also in the overall all competitiveness of industries and markets. The objective of this paper is to be able to assess current opinion regarding the VAT measures and determine areas of concern. The opinion of various stakeholders on the issue, EU objectives and the state of global markets will also be taken into consideration. The paper will then conclude with a summation of the issues that dominate current discussion and weigh the legitimacy of projections on the issue. Lszl Kovcs' opening statement to the 2006 Joint Conference forum of the European Commission (EC) and the European Banking Federation (EBF) regarding the modernization of the VAT Rules for Financial Services and Insurances, acknowledged the interest of the issue to a number of sectors and industries. He reiterates to the assembly that the reviews of the VAT rules are motivated by the desire to simplify them to enhance and unify pan-European trade, particularly financial services (Tabellini 2003). ... n the assessment done by the 1973 Hutchinson Report: objections raised against the directive were concerned the lack of actual infrastructures to facilitate the application of the measures which impairs consumer credit levels. In response to the challenges of determining taxable amounts and VAT deductions in these industries, the industries were given exemptions due to the lack accounting and fiscal methods to implement measures. The lack of capacity was not based on the lack of fiscal or accounting skills but rather on the lack of justification of administrative charges and the complication of legal and accounting jurisprudence. It was only in the middles of the 1990's that efforts to implement full taxation were picked up. The Commission together with the Organisation for Economic Co-operation and Development (OECD) determined that it was possible to charge VAT using cash flow methods of financial services, known as the truncated cash flow method (TCA). Technical feasibility tests were conducted in financial institutions and yielded within acceptable parameters as well. Using the system, there would be no VAT or zero rating on business-to-business (B2B) transactions and will be considered as customer charges in business-to-consumer (B2C) transactions. However, there was still opinion that the systems was still to complex for actual implementation and migration to TCA was inhibitive because of the cost. In response to these continuing concerns, the Commission has identified three key issues for resolution (EC 2006, pp. 3-4): 1. Mitigation of administrative cost of implementation and fiscal supervision for economic operation and fiscal compliance 2. Establishment of related budget security and legal certainty for Member States and economic operators respectively 3.