The EC has refused to take on board proposals from the telecomms industry that would have simplified its planned changes to VAT regulations on telecomms services.
The EC told a delegation of major suppliers that its hands are tied legally in making any changes to its proposals on taxing telecomms services, which would force non-EU based providers to impose VAT on their European offerings.
The delegation from the Ernst & Young Telecommunications Forum, made up of suppliers such as BT, Mercury and Deutsche Telekom, travelled to Geneva last Friday to urge the EC to simplify its proposals, which it claims will cause customer confusion.
The main focus of the group's opposition is a plan for a derogation to the directive for charging VAT on telecomms services. Currently, customers are not required to pay VAT for telecomms services supplied by operators not based in the EU. The directive is being changed but in the meantime a derogation is being approved to allow countries to effectively break the law and impose their own rules. The French and German governments have done just that.
According to Peter Jenkins, Ernst & Young?s national VAT partner and one of the delegates, the proposed derogation is too narrow and only takes into account inbound calls to the EU. It doesn?t address calls between member states and those to non-EU countries.
This will confuse methods of charging and reclaiming tax. The derogation calls for residential customers to be charged VAT by the supplier while organisations are obliged to declare tax and reclaim it themselves. However the policies are clouded when dealing with outbound calls and calls between member states.
EC officials told the Telecommunications Forum representatives that the current proposals are being sent to the EC Council of Ministers and it is up to them to reject them. ?They told us they didn?t think they could go further with the changes. They are legally constrained from doing so - but anyone could fudge the law,? said Jenkins.
The Council is expected to respond to the proposed derogation by mid-February.
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