EU Commissioner John Dalli says Brussels has no intention of introducing its own taxes and the recent proposal by the bloc's executive is only intended to change the formula that determines how much each member state has to contribute from VAT revenue to the EU budget.

The Commission's proposals for the budgetary period 2014-2020 includes a suggestion, which was nicknamed EU VAT, to allocate a specific portion of VAT revenue from particular products and services in the member states to the EU budget.

Mr Dalli says that the proposal is intended to simplify the current mechanism and will not require member states to increase VAT.

Under the current system the basis on which the VAT transactions are calculated include products and services that are zero-rated in some countries such as food and medicines in Malta. This means that Malta is obliged to factor in the amount of sales in these sectors when it works out its VAT contribution to the EU.

The Commission is suggesting that a list of products and services is drawn up on which VAT is levied in all member states and a percentage of income derived from these is transferred to the EU.

Mr Dalli denies the EU has any intention of taking on board the power to tax people, which will remain a right vested in the member states.

Read the full interview with Mr Dalli in The Times tomorrow.

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