October 24, 2020
What Options You can Have if You Want to Opt for VAT
The heterogeneity of the determining elements for the taxation of goods or different types of services (e.g. taxation to the beneficiary or to the provider of the service itself), the double allocation for taxable services and those excluded from the scope of tax, and finally the inclusion of “benefits” without any real counterpart (eg donations, subsidies, dividends).the heterogeneity of the determining elements for the taxation of goods or different types of services (e.g. taxation to the beneficiary or to the provider of the service itself), the double allocation for taxable services and those excluded from the scope of tax, and finally the inclusion of “benefits” without any real counterpart (eg donations, subsidies, dividends).
- Do not neglect the international dimension
For companies with international activities, national VAT regimes, which are sometimes very different from one another, can lead to distortions (multiple taxation or, on the contrary, absence of taxation). This is true even within the EU. Indeed, although the 6th European Directive on VAT – recently revised – harmonized its regulations in 1977, significant differences remain both between the rules as they are included in national legislation, and between practices of each of the Member States. In addition, the United States, the world’s leading economic power, does not know VAT, even though a large number of States in the Union levy a sales tax. All these differences result in distortions of competition, both internally and in cross-border trade – in services in particular. For the business calculator this is essential now.
- The VAT Solutions in EU
For years, multiple efforts have been made within the EU to simplify and strengthen the harmonization of VAT. A few years ago, the OECD also began to take a very serious interest in this consumption tax: first because of the boom in electronic commerce observed since the mid-nineties, then out of concern. to harmonize the rules relating to the collection of this tax, in particular for the provision of cross-border services, the volume of which is constantly increasing. It goes without saying that this is a long process, in which States must begin by understanding the reality in which businesses struggle, faced with increasing globalization and interdependence; they also need to understand the complexity of the multiple electronic cross-border services that are offered today.
- A third of the VAT burdens businesses
Calculations by the Federal Department of Finance show that around a third of total VAT revenues in Switzerland correspond to a non-chargeable and non-refundable tax on goods and services purchased by businesses and communities. This cannot therefore be passed on openly to the finished product and to consumers. This is mainly due to the restrictions which affect the deduction of input tax, in particular for transactions excluded from the scope of tax. The current VAT law has many such exceptions. One of the stated goals of the overhaul initiated today is to reduce the number to the politically feasible minimum. The hidden tax payable by businesses currently stands at around 6 billion francs per year, or roughly the equivalent of what all businesses pay in direct federal income tax.