As part of the on-going process of harmonisation throughout Europe, where fiscal matters are concerned the Commission has issued a proposal to amend the directive on the common system of value added tax with regard to the duration of the obligation to respect a minimum standard rate. With the minimum standard rate set by the VAT directive about to expire this year, this report comes at an opportune time and aims to extend the applicable period of the minimum standard rate by another five years, thus leaving it at 15 per cent.
Having been appointed rapporteur on this sensitive report by the Committee of Economic and Monetary affairs, I agree with this principle as it will give more breathing space to businesses in this difficult economic time.
We have repeatedly said that this is a time of turmoil for the business sector and we need to be aware of the fact that these businesses, of which more than 90 per cent are SMEs, need as much stability as possible in order to be able to keep on operating in a satisfactory manner. By amending this directive, which has already in its original form been of a considerable aid, we intend to further alleviate businesses from the many unnecessary administrative burdens that, unfortunately, are still in existence due to the bureaucratic nature of our system. In this regard, the Commission has promised to issue a Green Paper to establish a long-term strategy in respect of standard VAT rates across the whole of the European Union member states.
The Commission's proposal will aim first of all to narrow the 10 per cent difference between the lowest and the highest rates applied at present, this being translated in negative budgetary effects in some countries. With the financial and economic situations being what they are, it is evident that some practices need to be re-assessed. We have to ensure that we are adequately prepared to meet the challenges of the economic realities, the fast track changes in technology and the unfortunate reality of VAT fraud, which, incidentally, was also dealt with in another report with which I was entrusted. These factors have a direct impact on the everyday running of many businesses and are to be taken into consideration when implementing any other new measures.
By restricting rate divergences we would be making an important step forward towards harmonisation in VAT matters throughout Europe. This will minimise structural imbalances that are inevitably bound to develop due to the different needs and the different economic structures of each individual country. Establishing a minimum rate will also aid those countries that are at a disadvantage. As already stated, keeping the minimum rate at 15 per cent will give businesses the certainty they need at least until the economic crises are well over. This will give ample time for operations to gain lost ground during these last few years of uncertainty.
Having a narrower VAT divergence rate also encourages more hassle-free cross-border trade and gives us as a European Union a firmer stronghold when dealing with third countries. The process of total harmonisation is still at its inception but, nevertheless, it is a process that is aimed to go further and will most definitely be of great benefit for the millions of SMEs throughout our continent. As the rapporteur for the European Parliament on this report I will be pledging my full support as, undoubtedly, it is in the interest of businessmen and the economy.
Mr Casa is a Nationalist member of the European Parliament.