taxud/2414/08 - European Commission - Europa

able to determine the taxable amount for their services and apply VAT as any
other ordinary economic operator supplying taxable services. The question
whether a supplier of financial and insurance services is able to apply VAT
depends on the individual capabilities of this operator, namely on the kind and the
range of services he supplies, his management and, in particular, his ITcapabilities.
As the individual capabilities of the economic operator concerned
determine whether he is capable to apply VAT to his services, it is not possible to
introduce VAT for certain categories of financial and insurance services and stay
with the VAT exemption for other categories of financial and insurance services.
On the contrary, it is only the economic operator himself who can decide whether
he is capable to and wants to apply VAT to financial and insurance services
supplied by him. Therefore the option for taxation being with the economic
operator concerned is the only viable way forward.
- An economic operator whose IT-systems are capable to operate under normal
VAT taxation rules, has a better control of his cost-centres and profits; such an
operator knows exactly where his investments go and where he is making profits
or losses; this is not only vital for his competitiveness but it is the key criterion
for his excellent performance in a single-market environment with more
competition; this excellent performance is of interest for all stakeholders. The
option will thus contribute to economic operators becoming more competitive and
performing better in the single market.
- An operator who is able to calculate input VAT on the basis of cost-centres and
his output VAT as any other ordinary economic operator, creates a profile of
transparency for the fiscal authorities reducing the potential for indirect and direct
tax avoidance. This reduces the costs of the fiscal authorities for the fiscal
monitoring of this operator, increases the trust between the operator and the tax
authorities and potentially reduces the administrative burden for both, the
economic operator and the tax authorities where the tax authorities could reduce
the number of tax audits carried out on this operator.
- Suppliers of insurance and financial services are increasingly using advanced
book-keeping tools for matching input costs precisely to the services they supply
allowing them to calculate fees for these services which they could not before;
this allows them to establish the taxable amount for these services easily; they are
therefore capable to behave – as regards VAT – as any other taxable person
supplying taxable services. There is no reason why they should not be able to opt
for taxation and request being treated like any other economic operator supplying
taxable services. In fact, none of the reasons having lead to the VAT exemption
for insurance and financial services, such as the difficulty to establish the taxable
amount of VAT, seems to apply.
- There are also numerous operators supplying highly standardized insurance and
financial services with low profit margins; for those operators the cash flow
disadvantage of not being able to recover input VAT on their investments
generates a higher disadvantage than the benefit of not having to impose VAT on
their taxable output; these operators are to a large extent the innovative driving
10