OECD: first OECD Global Forum on VATNovember 26, 2012
The first meeting of the OECD Global Forum on VAT took place in Paris, France on 7–8 November 2012, with the participation of more than 90 delegations, composed of representatives of over 80 countries and international organizations from all around the world, representatives of the business community and leading academics.
On 12 November 2012, the OECD issued a press release with the conclusions of the Global Forum on VAT, which are summarized below.
A key conclusion was that countries around the world need to agree urgently on a global framework for the application of value added taxes (VAT; also called goods and services taxes or GST) to international trade, particularly in services and intangibles.
The OECD is currently developing International VAT/GST guidelines to address issues of double taxation and unintended double non-taxation, and this work provides a unique basis for the creation of the future international standard for applying VAT to cross-border trade.
VAT is a major source of revenue for governments around the world and its importance continues to increase.
Over 150 countries operate a VAT today, twice as many as in 1992, and this number continues to grow. VAT now raises some 20% of the world’s tax revenues.
As countries around the world are facing similar questions on the design and operation of VAT, the OECD has launched its Global Forum on VAT as a platform for policy dialogue and consensus building around best practice principles, particularly in the context of international trade.
The Global Forum looked at a range of design issues, notably considering how rising household income inequality may affect VAT policy and discussing options for improving VAT compliance.
Country experts also exchanged views on countermeasures to reduce VAT losses due to fraud and, in this context, expressed a strong need for enhanced administrative cooperation, including through the exchange of information, building on OECD work in this area.
The key focus of the debate at the Global Forum was on the issue of double taxation and double non-taxation that results from the uncoordinated interaction of national VAT at international level. In contrast with the taxation of income (where there is the OECD Model (2010)), there is no internationally agreed framework for the application of VAT to cross-border trade.
This is especially problematic in the context of the strong growth in services and intangibles. Services cannot be subject to border controls in the same way as goods, so administrative procedures for ensuring that the right amount of tax is paid in the right place are more complex.
From a government’s viewpoint, there is a risk of under-taxation and loss of revenue, or distorting trade through double taxation. From a business viewpoint, there are large revenue risks and high compliance costs.
The Global Forum concluded that there is a strong need for internationally agreed principles and guidelines that contribute towards ensuring that VAT interacts consistently so that it facilitates rather than distorts international trade. The Forum considered that the work on international VAT/GST guidelines provides the ideal basis for the development of such global standards.
Against this background, participants strongly agreed that the Global Forum’s key objective should be to build the widest possible international consensus on the guidelines, as the future international standard for applying VAT to cross-border trade, with a view to minimizing risks of double taxation and unintended non-taxation.
Work on the VAT/GST guidelines will now continue under an ambitious program to be completed by 2014, in cooperation with Global Forum participants.
A comprehensive set of guidelines will be presented for endorsement by the Global Forum on VAT at its next meeting early in 2014.
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