During a recent plenary session, the European Parliament held a public hearing on VAT proposals made by the European Commission last month. The majority of MEPs supported the need for reforms but expressed some concerns regarding the potential distortion of the single market due to greater flexibility granted to Member States.

In particular, there was concern that the high number of exceptions and exemptions might create inequalities between different types of business, as well as making it easier for businesses to find and exploit loopholes in the system. However, a number of other MEPs spoke favourably about the way that proposals attempted to alleviate the administrative burden, particularly on SMEs.

In his response to the debate, European Commission Vice-President Valdis Dombrovskis has stated that the Commission is proposing greater freedom for Members States, within a specific framework, which should not lead to either revenue erosion or the distortion of competition.

The European Parliament and the European Economic and Social Committee will now both prepare an opinion report on the Commission’s proposals and technical discussions between national experts will begin in the European Council.