• Value Added Tax has been introduced in the European Community four decades ago, in an era considerably different from today. It is therefore obvious, that the system of VAT should be modernized, in order to, on the one hand, respond to the needs of a modern economy, in which services are a driving force and it is based on technology and, on the other hand, to minimize the complexity of the current VAT system, which results in unnecessary expenses and burdens for taxpayers and the provision of services and puts obstacles on the smooth functioning of the single market. The present economic situation has emphasized the crucial role of the VAT, in achieving economic stability and development. VAT is a major source of revenue for member states. It may become even more important if other sources of revenue are adversely affected by other factors, such as the aging of the population and rate of growth of the EU economy. Consumption taxes have been rated by several economic studies, to be of the most friendly taxes towards growth, whereas a strong VAT system, could contribute to the economic recovery of Europe. It is imperative to ensure that the VAT system of the European Union is absolutely functional and effective and utilizes fully its possibilities.

  • The current Energy Tax Directive (2003/96/EC) aims at ensuring the proper functioning of the internal market in relation to the taxation of energy products and electricity. In order to promote the objectives on climate change and simultaneously better harmonize the taxation of energy, the European Commission presented a Proposal for amending the current Directive, which is already under discussion and the Cyprus Presidency will continue these discussions, as this file is a priority. Specifically, the Commission Proposal amending the Energy Tax Directive seeks to:

    • establish a level-playing field among energy consumers, regardless of the energy sources used,
    • provide an updated framework for the taxation of renewable energy sources, and
    • solve the existing problem of dual regulation of CO2 emissions in the EU ETS allowance scheme  and the  taxation of CO2.

    By making the necessary adjustments to certain provisions of the Energy Tax Directive, the proposal aims to promote reduced and cleaner energy consumption in the EU through the taxation of energy products.

  • The revision of the Directive on Taxation of Savings Income aims achieve more effective taxation, address existing legislative gaps and eliminate distortion and unfair competition. The proposal seeks to ensure the taxation of interest payments which are channeled through intermediate tax-exempted structures. The extension of the scope of implementation of the Directive is also being discussed so as to include income equivalent to interest obtained through investments in some innovative financial products as well as in certain life insurance products. This file is important for the Cyprus Presidency, aiming to reach an agreement.

  • The proposal on the amendment of the Directive on a common system of taxation applicable to interest and royalty payments made between associated companies of different Member States aims to ensure the taxation of interest and royalties in one Member State. The proposal mainly includes measures for improving and extending the scope of implementation of the Directive. This file is important for the Cyprus Presidency.

  • The Commission’s proposal for a Common Consolidated Corporate Tax Base (CCTB) contains a common set of rules for computing the tax base of companies operating in more than one EU Member State. In fact, companies or groups of companies would have to comply with a single EU tax system for computing their tax base. Under the CCCTB rules, the tax results of a group would be consolidated and apportioned to each Member State in which the group operates and taxed by applying the tax rates prevailing in the Member State of operation. The Cyprus Presidency will continue the technical discussions in the Council on this file.

  • The conclusions of the European Council, on 9 December 2011 on the Euro Plus Pact include provisions on the coordination of tax policy and provide, in particular, for “structured” discussions. It is also provided that the Finance Ministers of the participating Member States to the Euro Plus Pact and the Commission submit a report to the European Council by December 2012, on progress made in relation “structured” discussions on the issues of tax policy, to ensure the exchange of best practices, avoid harmful practices and submit proposals on fighting tax evasion and tax fraud. During the Cyprus Presidency the report on the progress of the “structured” discussions” will be submitted to the European Council in December 2012.