Collective Commentary about the New Package Travel Directive

THE PROVISIONS OF EXPLICIT TAX RELEVANCE 637 future of VAT 29 . In particular, there was talk of the determination that a broad- -based VAT system, possibly with a single rate, would come close to the ideal of a consumption tax that minimizes compliance costs. This document also shows the conviction that a strong harmonization of VAT rates is needed in order to prevent rate differences from affecting the decision of the place of purchase. Certainly, as can be seen from the reading of certain points in the Green Paper, the introduction of a single VAT rate is subject to the fulfilment of certain essential conditions. Firstly, the abolition of reduced rates, which can have distorting effects; secondly, the abolition, in any case, of reduced rates applied to goods and services whose consumption is discouraged by other European policies. Another condition is that transactions involving similar goods and services are subject to the same rate, taking into account, among other things, technological progress. More recently, in 2016, with the VAT Action Plan, the Commission expressed the need to define a modernised rate policy to adapt it to the system of application of VAT which, over the years, has gradually evolved into a system based on the principle of taxation at the place of destination. However, it has been noted that the current VAT system has proved rather refractory to reforms, especially asVATmeasures have to be adopted unanimously, which is becoming increasingly difficult to achieve due to the increase in the number of EU Member States, as well as divergent policy positions 30 . Furthermore, it is specified that the same proposals for implementing directives or regulations, presented by the EU Commission and which, in order to become operational, must be approved by the EU Council, do not become the subject of immediate examination in the appropriate Tax Questions Group. In fact, it is the Member State holding the rotating Presidency, during each six-month period, that decides which of the EU Commission’s legislative proposals should be discussed, without any obligation to continue the work carried out by the outgoing Presidency. This would suggest that the adoption of new VAT rules would require strong political leadership. Moreover, it was felt that there would be a great deal of hostility on the part of the Member States towards the prospect of having to abandon reduced rates for certain product categories or sectors of activity, both in terms of the impact 29 COM (2010) 695 final of 1 Decembre 2010. 30 On this point see, recently, Pistone (edited by), European Tax Integration: Law, Policy and Politics , IBFD, Amsterdam, 2018.