The Commission proposed, on 28 November, to amend existing VAT rules by clarifying exemption schemes for financial services and insurance, but member states have yet to agree to the highly sensitive proposal.
"Leaving things as they are is not an option. I am convinced that the balanced package of measures being proposed is the best option for VAT reform in the financial and insurance sectors," Taxation Commissioner Laszlo Kovacs said on 28 November 2007.
The proposal's key measures include:
- Increased legal certainty for businesses and member states through clarifying and updating definitions of the exempt services;
- Giving banking and insurance companies the option to tax their services if they wish to do so, and in return allow them to deduct VAT paid for supply services or goods, and;
- The introduction of an industry-specific exemption from VAT on cost-sharing arrangements on purchases, for example IT systems - including cross border operations.