Collective Commentary about the New Package Travel Directive

638 COLLECTIVE COMMENTARY ABOUT THE NEW PACKAGE TRAVEL DIRECTIVE this would have on public opinion and the negative effects it would have on the economy and on consumption. 4.3. The European Commission’s initiative The proposal presented by the Commission on 18 January 2018, which suggests a number of changes to the current rules on VAT rates, is of considerable importance in this respect 31 . The Commission considers that the reduced VAT rates should be maintained, but that the rules governing their introduction and the derogations should be reformed, as they are difficult to reconcile with the future definitive system. The Commission proposes to: allow Member States the option of applying an additional reduced rate even lower than 5% and an exemption with a right to deduct input tax (the so-called zero rate); limit the introduction of reduced and zero rates to B2C operations; to allow the introduction of reduced rates only on condition that they are in the general interest. Finally, it is advisable to repeal Annex III of the Directive and replace it with an Annex containing the list of goods and services which must be subject to the ordinary VAT rate by the Member States. This vision certainly departs from that of the Green Paper, which saw the abolition of reduced VAT rates as an overcoming of the distortive risks. Today, on the other hand, the tendency to maintain the current derogations from the standard rate and the possible introduction of further derogations is seen as an opportunity for Member States also to continue to facilitate deserving product categories and sectors of activity. The possibility of introducing new reduced rates would certainly be supported by the Member States and, with a view to the success of the reform, which must be approved unanimously, would certainly help to reach an agreement. However, it should also be borne in mind that the implementation of such a proposal would increase the already marked differences in VAT rates. However, whatever the outcome, the Commission’s efforts are to be welcomed. This is because the reform of the VAT rates system and the rules governing it is one of the most urgent issues, having now become an indispensable complement to the taxation of intra-European trade according to the destination principle, which is now the cornerstone of the European Union’s VAT policy. 31 The motion is contained in the document COM (2018) 20 final of 18 January 2018.