Call for EC to put VAT modernisation back on agenda

Insurance Europe has called for the modernisation of Value Added Tax (VAT) rules for financial services to be put back on the European Commission’s agenda. It pointed out that the VAT liability of financial services transactions continues to be governed by a VAT Directive that was implemented in 1977 and written even earlier. Insurance Europe said it believes that this Directive is outdated and not correctly applicable to modern financial services.

In particular, recent rulings of the European Court of Justice (ECJ) have shown that there is a need to adapt the VAT Directive to current market realities. “Due to this lack of adaptation to modern financial services and current market realities, Member States may implement their own interpretations of the law. This results in an uneven playing field within the EU, causing VAT to become a key factor affecting the competitiveness of the EU and a driver in business decisions for financial services companies,” said Insurance Europe.

It said the lack of harmonisation of VAT law across the EU is in fact a significant barrier to a Capital Markets Union (CMU).