In implementing vat european commission has played a cohesive role

While several countries have individually adopted vat or value added tax to boost tax revenues, most European countries have decided to adopt common codes, and in implementing vat european commission has played a cohesive role. The European Commission has made guidelines that need to be followed by all eu countries that follow vat so as to ensure better co-ordination between member countries.

Since 1977, the European Commission or Europa has issued several directives to member eu countries regarding implementation of vat within their own country as well as a common code of conduct to ensure seamless cross-country implementation of vat. The most important directive is the sixth directive that was recast in 2007 for easier interpretation. There were several other directives as well as amendments to remove hurdles in vat collections and refunds between various eu countries that have adopted vat.

Over the years, several countries in Europe including Germany, Romania, Poland, the UK, Spain, Greece, Sweden, and several others have decided to become part of the vat system. While adopting vat european commission directives have instructed all member countries to maintain the standard rates of vat between 15 and 25%. This ensures less friction between member states while importing or exporting goods and services in or out of their respective countries. Vat registered traders that have already paid vat on goods or services in another member eu country that follows vat also need to follow eu vat guidelines when they apply for vat reclaim.

The European Commission has tried to ensure total transparency in imports and exports between vat enabled eu countries. It has also tried to put into place an efficient tax system in Europe that is neutral and precise so as to remove any doubts within the minds of traders. Although each country is allowed to issue vat invoices in their own language and currency, the basic principle of displaying taxable rates, vat rates and gross amounts has to be followed by each country that has adopted vat. Vat traders also need to file regular vat returns that need to mention total vat collected and paid during that particular period. Vat traders also need to follow proper procedure for vat refunds and might need to wait for 4 to 8 months before their claim is successfully processed and the money deposited into their bank accounts.

Each eu country that follows vat has its own vat department that usually also looks after customs and excise duty collection. For example, in the UK it is HM Revenue and Customs or hmrc that decides on implementation of vat rules while also collecting vat from all traders including those with vat registration. The hmrc vat department also allows traders to file for vat refunds and it forwards those claims to member eu countries where the vat amounts had originally been paid. The hmrc has also decided to raise the standard uk vat rates from 17.5% to 20% from January 2011 onwards. Similarly other vat departments in other countries too act under the guidelines issued by the European Commission while also deciding on the best vat rates suitable for their own country.

The European Commission has truly managed to unite most eu countries under the common umbrella of vat. This has ensured transparent cross-border dealings between member countries and better implementation of all directives issued by the commission. In implementing vat european commission has truly played a pivotal and cohesive role in bringing together several countries under a common tax system.