Companies in the EU Member States should possibly be allowed to deduct their input VAT for cars, laptops, mobile phones and other movable assets that form part of their business assets but first it has to be made clear what impact this would have on the internal market, according to members of the EP Economic and Monetary Affairs Committee, which met on Tuesday.

The European Parliament is being asked for the second time to give its opinion on a draft directive designed to clarify several areas of the existing VAT directive. The EP first gave its view in July 2008, when it focused on a few aspects of this directive, including the conditions under which companies can deduct input VAT on immovable property.

However, in June 2009 the Council significantly changed its position regarding the introduction of rules on VAT deductibility, so the European Commission has asked the EP to deliver a new opinion.

Under the new Council proposal, Member States would be allowed make VAT deductible not only for immovable but also for movable assets.

The EP committee, in a report by Udo Bullmann (S&D, DE) adopted by large majority, argued that this would considerably widen the scope of the directive and lead to less harmonisation. MEPs therefore believed an independent assessment of the effects of the proposed legislation should be made before it goes any further.

The full Parliament is expected to endorse this position at its plenary session at the end of November but since the EP has only advisory powers on taxation issues the final decision will be taken by Member States in the Council.