VAT VALUE ADDED TAX

VAT VALUE ADDED TAX. Ana Paula Rodrigues – 51707497 Danielle dos Santos Gon çalves – 51704846 Fabio Vieira e Silva - 51706059.

CONTENTS OF THIS ASSIGNMENT. Introduction – Basic principles of VAT The European VAT system 07 - How does VAT work? And how VAT is treated within European Union? 09 - What are the benefits? And what would be the benefit if it was only one VAT system in Europe? 14 - What is the role of Europe in relation to VAT? 17 - What are the obstacles to a more integrated system of VAT within Europe? What is the current situation after Brexit? Final considerations Bibliography.

INTRODUCTION. "VAT" is an acronym for Value Added Tax which is an indirect tax imposed on products and services from a registered business to another business (either registered or not) or to final consumers. There is a chain between the producer and the consumer. The way is taxed and its rates will depend on the nature of the activity.

INTRODUCTION. Many countries adopt the taxation system for the acquisition of products and services. However, within the European Union, the legislation is based on the Single European Act (EC Commission (1986)) which deals with Tax Harmonization and the Court of Justice of the European Union makes sure EU VAT law is implemented correctly. Tax harmonization serves so that all European Union countries can have an agreement with each other, respecting and adjusting the taxation system of different jurisdictions..

The VAT taxation system is one of the most complex in existence, as there are many rules and how and when they apply. However, keys concepts make the system more understandable, thus facilitating its application. The purpose of this assignment is to present the benefits of a more integrated VAT system within Europe and its obstacles. Also, to mention the present situation related to Brexit..

The European VAT system. How does VAT work? And how VAT is treated within European Union? What are the benefits? And what would be the benefit if it was only one VAT system in Europe? What is the role of Europe in relation to VAT? What are the obstacles to a more integrated system of VAT within Europe? What is the current situation after Brexit?.

How does VAT work? And how VAT is treated within European Union?.

How does VAT work? And how VAT is treated within European Union?.

What are the benefits? And what would be the benefit if it was only one VAT system in Europe?.

What are the benefits? And what would be the benefit if it was only one VAT system in Europe?.

What are the benefits? And what would be the benefit if it was only one VAT system in Europe?.

What are the benefits? And what would be the benefit if it was only one VAT system in Europe?.

What are the benefits? And what would be the benefit if it was only one VAT system in Europe?.

What are the benefits? And what would be the benefit if it was only one VAT system in Europe?.

15. 15. This tax was initially created by the six EU member countries, being later extended to the others, so that there would be a transparent, unified, and efficient market. In this way, fiscal neutrality, and the exact amount to be deducted from goods and services at the point of export would be guaranteed. It is calculated as a percentage of the sales price paid on the value added at each stage of production and distribution added up at the end. This avoids double taxation. EU countries implement the common rules set out in the VAT Directive in their national legislation, is only required by the force of the document that the standard VAT rate is at least 15% and the reduced rate of at least 5%..

16. 16. The actual rates applied to vary between EU countries and between certain types of products. In addition, some countries have maintained fees for specific products. The application and administrative practices of each country vary and as a result, the EU has a Commission that oversees and is to ensure that each country's national legislation and general practice comply with EU legislation. The European Union’s role is to make sure that taxes are fairly imposed on every EU country and that movements of goods are not charged..

EU countries are allowed to charge their local rate VAT to customers for products they imported within the EU. It could increase the price and be less affordable, causing harm to their economy. The economy is the reason why the 27 countries were relying on different rates of VAT for goods and services..

18. In a hypothetical scenario where trading goods or services were charged VAT between EU countries. And all countries are based on the same tax rates on products and services. This would be harmful to some countries. If an economically weak country imported from another economically strong country, consumers from the country of destination would struggle to pay for the service or product. It would become more expensive because the producer would impose the price on the product to claim it back. This is due to the economy of each country, considering that VAT is imposed on the final consumer..

In another hypothetical scenario where VAT was levied by the country of destination. it would affect the collection of VAT in the country of origin. For example, if Italy exports an item to Ireland, Ireland pays VAT according to Italian rules, and so can pass it on to its final consumer. Otherwise, if Italy had to pay the export tax, based on Irish taxation, Italy would lose out, as the Italian VAT rate is lower than the Irish one. The obstacle related to Brexit is the attractiveness threat between the UK and the EU. If a UK business imports from an EU country, they might pay extra duty costs, and it could affect the selling of the goods. Customers will be paying more than they used to pay for the same product before Brexit..

The European Union, as a customs union, allows the supply of goods between EU countries without levying customs duties. Brexit brought uncertainty on how they would be treated related to, not only, Indirect Taxes. For customs purposes a withdrawal Agreement was mandatory. The United Kingdom is now treated as a country that does not belong to the European Union which means that all customs procedures and formalities will normally be applied with respect to trade relations. In other words, United Kingdom countries are currently not allowed to trade with the free charge of VAT..

21. On December 24th 2020, the EU and the United Kingdom signed an agreement regarding the relationship between them after Brexit. The Trade and Cooperation Agreement (TCA) provisionally entered into force on 1 January 2021, exempting tariffs and quotas to each other's markets for goods — but not services — and also covers future competition, fishing rights, and cooperation on matters such as security on all trade in the EU as long as products from the United Kingdom comply with the appropriate rules of origin..

Despite all this, Brexit has brought significant disruptions to trade, with the UK out of the single market, January of 2021 saw exports to the EU fall by £5.6 billion and imports fall by £6.6 billion, according to figures from the Office for National Statistics (ONS). A record falls in the trade as the economy struggled with post-Brexit rules and the pandemic. Currently, Customs declarations need to be constantly filled in by companies, which means new code and IT systems. There are also new regulations for foods like meat, dairy and fish products that need health certificates. All this generates considerable delay and drives higher costs. There is also a risk of supplies getting stuck. Everything needs to be verified, and problems or errors can delay the entire shipment. There are also complications over "rules of origin".

FINAL CONSIDERATIONS. Final the perfect formula for taxes charged to intercommunity is been a big challenge in the last centuries. The VAT tax system within Europe came as a tentative of male the imports and exports easier for both sides to calculate how much tax was due, makings it more transparent and – mostly times – fair. The exit of the United Kingdom – Brexit – from the European community is just another challenge the governments are still facing when comes to fair treatment of the taxes charged within Europe. A lot of agreements had to be done in order to guarantee the European countries compete in equal conditions with British companies in the EU market..

REFERENCES. 24. Euronews. 2022. UK sees record fall in trade with EU after end of transition period. [online] Available at: <https://www.euronews.com/2021/03/12/uk-sees-record-fall-in-trade-with-eu-after-end-of-brexit-transition-period> [Accessed 5 April 2022]. Kopits , G., 1992. Tax harmonization in the European community. Washington, D.C.: International Monetary Fund. Taxation and Customs Union. 2022. EU Tax Policy Strategy. [online] Available at: <https://ec.europa.eu/taxation_customs/taxation-1/eu-tax-policy-strategy_en> [Accessed 30 March 2022]. Official website of the European Union, 2021, Available at: <https://ec.europa.eu/taxation_customs/uk_withdrawal_en> [Accessed 02 April 2022]. Quaderno, 2022. What You Must Know About EU VAT If You Have Customers In Europe. [Online] Available at: <htps://www.quaderno.io/blog/what-you-must-know-about-vat-if-you-have-customers-in-Europe> [Accessed 30 March 2022]. Tax Policy Center, n.d. What is the history of the VAT?. [Online] Available at: <https://www.taxpolicycenter.org/briefing-book/what-history-vat#:~:text=The%20value%2Dadded%20tax%20(VAT,turnover%20taxes%20and%20sales%20taxes> [Accessed 01 April 2022]. Taxation and Customs Union. 2022. EU Tax Policy Strategy. [online] Available at: <https://ec.europa.eu/taxation_customs/taxation-1/eu-tax-policy-strategy_en> [Accessed 31 March 2022]. Taxation and Customs Union. 2022. EU Tax Policy Strategy. [online] Available at: <https://ec.europa.eu/taxation_customs/taxation-1/eu-tax-policy-strategy_en> [Accessed 1 April 2022]. Victor, A., 2010. VAT: a brief history of tax. [Online] Available at: <https://www.theguardian.com/money/2010/dec/31/vat-brief-history-tax> [Accessed 01 April 2022]..