Increasing business efficiency

In the first months of the new legislature I was nominated rapporteur on two reports concerning the rules on invoicing as well as the application of the reverse charge mechanism. These legislative proposals have as their aim the goal of combating fraud as well as increasing the efficiency of business and SMEs in particular.

Let us start with the Invoicing Report. This proposal intends to simplify legislation and administrative procedures for EU and national public authorities as well as private parties while also removing legal barriers in the Internal Market for VAT invoices.

In addition, the amendments being suggested will act to simplify the information obligations for businesses, with the result of reducing administrative burdens as well as encouraging businesses to take on the cost effective and efficient e-invoicing system.

The proposal benefits SMEs especially in relation to the use of simplified invoices when dealing with small sums. Member States shall also be given the opportunity to allow SMEs to account for VAT on a cash basis under a cash accounting scheme.

While supporting the efforts made by the Commission I was reluctant to commit fully to all that was being proposed.

In the course of my examination, I was made aware of measures that could create problems for certain tax administrations as these could impact negatively on the way controls are carried out. This is especially true for small member states and Malta in particular. It was hence necessary to strike a balance between the simplification of procedures and the effective controls to be made by tax administrations also taking into consideration the issue of economies of scale. A case in point concerns the information that is to be listed on the simplified invoice. The possibility of using this invoice should be effective in reducing burdens - however excluding crucial information, as the Commission initially proposed, would be unacceptable to various member states.

In addition, while it is commendable that e-invoicing is being encouraged, funds should be made available which will allow member states to update their technology so as to make the implementation of these new procedures economically feasible. In this respect I have suggested that this be done either through the already existing FISCALIS programme or by exploring other funding possibilities.

Moving on to the Reverse Charge Report. VAT fraud has become a very serious problem in many Member States and threatens State revenues as well as the efficient functioning of the Internal Market.

The Commission has proposed the setting up of a reverse charge mechanism that will be applied to transactions involving goods and services that are susceptible to VAT fraud.

While it is likely that such measures will have a positive impact, little research has been carried out on the effectiveness of such a mechanism. The view being reflected in my report is that the application of such a reverse charge should remain completely optional to Member States prior to a thorough impact assessment being carried out. This should enable an understanding of the possible consequences in relation to the goods sector.

With regard to the application of the reverse charge to the Emissions Trading Scheme the situation is different as there is a greater chance of the possibility of fraud following the auctioning of these allowances after 2013.

This means that the situation is more urgent and requires immediate action.

Professional fraudsters need to be stopped - however one must balance this necessity with the potential harmful effects on industry that would be brought about by the increased burden resulting from the application of a temporary measure.

While not prima facie controversial, these reports could both prove to attract significant resistance from some member states that would be opposed to the implementation of the changes being proposed. The months ahead will provide clear insight into whether these initiatives will be as successful as all parties concerned are hoping.

Mr Casa is a Nationalist member of the European Parliament.