EU Considering VAT Changes
November 29th, 2007 | by The Vat Man |Banks, Insurance companies and financial institutions are VAT exempt, generally for most products they supply. Great you would think for the consumer, however it is not as they cannot reclaim any of the VAT they pay on services or goods. Therefore it is all part of the cost base on which the consumer is charged.
This long standing practice puts European banks at a price disadvantage to non European bank, like the US who do not have this same problem. Therefore non European banks can offer services to business at a cheaper rate than European banks.
Now though the European Union are considering changing these rules. Proposals put forward by the European Commission on Wednesday focus these measures. First, there would be a redefinition of the scope of the exempt services in an effort to bring more clarity.
Second, banks and insurance companies would be given the option of taxing their services if they wished. This will make life more interesting for credit control within these orginisation when it comes to writing off bad debts.
The European Banking Federation also said it was a “first step in the right direction” although it added that there should be greater certainty established around the areas of provision of payment services, derivatives, securities, custodial services and intermediaries.