A View on the VAT Split Procedure: the Estimated Effects of the Proposal for Regulation

• Author: Mihaela Tofan
• Profession: University of Iasi, Romania
• Pages: 205-215

A View on the VAT Split Procedure: the Estimated Effects of the

Proposal for Regulation

Professor Mihaela TOFAN

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Abstract

In the context of the recent global financial crisis, the methods to efficiently col-

lect the revenues to the public budget became a constant concern for every government.

This is a major concern within the EU too, the member states looking for appropriate

regulation to insure the fiscal sustainability. VAT split pro cedure is one of the proposed

means of action and it was anticipated in EU Commission Green Paper on VAT in 2010.

The main objective of imp lementing this new procedure to collect VAT is to reduce and,

if possible, to eliminate the VAT gap. In theory, the procedure is estimated to reach its

best results in more than 15 years of activity but there are already delays in implementing

it. Italy was the first state in the EU to opt for this new procedure of collecting VAT.

Romania, Poland and UK are about to follow this trend, but major discussions are ongo-

ing both among academics, practitioners of taxation and politicians. Romanian proposal

of regulation for VAT split procedure is strongly criticized, but the goals of the prevision

and the EU regulation development trend will impose, eventually, this collectio n mecha-

nism for all the member states.

Keywords: VAT gap, split procedure, regulation.

JEL Classification: K34, K40

1. Introduction

Value Added Tax is an indirect tax applicable to transactions relating to

the supply of goods, the importation of goods, the provision of services and the

operations assimilated to them and it is due to the state budget. Designed as a

progressive way of taxing goods, to avoid casual taxation (characteristic of turn-

over tax), value added tax (or, more simply and more commonly referred to as

VAT) was adopted by the Common Market countries starting with January 1,

1970, being an evolved form of general merchandise taxation.

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VAT is a relatively new tax at the scale of the evolution of the rules of

financial and fiscal law, regulated in the middle of the last century. In France,

VAT was introduced by the law of 10 April 1954 and applies, in principle, to all

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Mihaela Tofan - “Alexandru Ioan Cuza” University of Iași, Romania, mtofan@uaic.ro

2

Sever Gabriel Bomboș, Mihaela Galanton, Taxa pe valoare adăugată. Legislație. Doctrină.

Jurisprudență, C.H.Beck Publishing House, Bucharest, 2006, p. 1.