EU VAT rates: One step forward, two steps back

Public finance in theory and practice

Virtually every reference VAT manual recommends a single rate. A single VAT rate saves both the administration and the taxpayers significant costs, prevents fraud and litigation, and is the only solution that can ensure tax neutrality. Along with the rationalisation of exemptions, this is one of the main tenets of modern VAT doctrine.

A single VAT rate can arguably be set in places where international agencies use their leverage to impose orthodoxy. For the EU, however, this was never an option. At the time the EU VAT system was built, national practice was much diverse, each state singling out different goods and services with reduced rates in the pursuit of their public policies.

Source International Tax Review

See also New rules on VAT rates offer Member States more flexibility while supporting the EU’s green, digital and public health priorities

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