The European Parliament this week voted overwhelmingly in favour of a very important report that will finally tackle the common system of value added tax and the obligation to respect a minimum standard rate.

This proposed exercise has been long overdue because the temporary system in place does not satisfy the present needs where cross- border transactions are concerned. Moreover, the system we have now is vulnerable to tax fraud, especially carousel fraud and is costing national governments millions of euros in lost revenue every year. The new common system will not only reduce the risk of fraud but will also relieve businesses from unnecessary burdens the present arrangement carries. It is also aimed to improve the business environment particularly for SMEs.

In the case of VAT fraud, there was a dire need for concrete action to be taken because this kind of fraud in Europe is growing at an alarming rate and, even though individual countries do their utmost to try and combat it, the fight cannot be successful unless there is a united and common front having the necessary backing to stop this illegal activity, especially when most of these fraudulent transactions are intangible and, therefore, more difficult to control. Fraudsters use the latest technologies for their illegal activities and, thus, we should always be one step ahead if we want any degree of success.

With the setting up of an internal market in 1993, the idea was to establish a definitive system of tax harmonisation. At first, the Commission proposed a standard and a reduced rate. Yet, as one can imagine, it was not straightforward to reach the required political agreements. So much so that, apart from a directive that stipulated a minimum rate of 15 per cent, which has been extended four times, nothing much has happened.

Even the accessions of 2004 and 2007 had no effect on the discrepancies of VAT rates in the 27 member states. The report looked into the issue of a proper review of the VAT system, also keeping within a context of market realities.

The report urges the Commission to produce the results of the analysis made and to involve the European Parliament in the debate. At this stage, I think it is imperative to involve all the stakeholders in the discussions on the proposals so as to emerge with the best possible system that will not only be more practical but, maybe more importantly, will be a lasting one.

Since being appointed rapporteur on this report I have made it a point to discuss the Commission’s proposal with as many interested parties as possible in order to merge as many ideas as possible to make this system workable, safe and as simple as possible.

With the European economy slowly but surely recuperating, it is important to put in place the necessary tools to aid in this recovery and try and gain lost ground in the shortest time possible. Unfortunately, over the years we have burdened our businesses with unnecessary bureaucratic practices that have indirectly hampered growth and it is now the time to give these businesses, in particular SMEs, some breathing space and more opportunities to be able to transact across borders with the fewest limitations possible. With almost 90 per cent of businesses being SMEs, these are the backbone of every economy within the European Union and it is in everyone’s interest such businesses function properly and face the least restrictions possible.

I am sure my report on the Commission’s proposal will aid governments and businesses in this sense.

The author is a Nationalist member of the European Parliament.