Brussels waded into the chaos that has surrounded the introduction of a new, EU-wide electronic value-added tax system on Thursday in an effort to get an estimated €8bn of annual VAT refund claims flowing more smoothly.
The European Commission announced plans to intervene in the design and technical operation of all 27 national web portals in an effort to get them running properly.
Because some taxpayers have not even been able to submit refund claims amid the technical mayhem, the commission said it would also extend the deadline for submitting 2009 expenses from September 2010 to March 2011.
A new VAT system, switching from a paper-based to an electronic system was meant to come into force in January and speed up VAT refunds across EU borders. But delays by some EU countries in launching their national web portals and technical glitches with others have caused severe financial problems for many European companies.
Business groups and tax advisers have been warning about the problems – and the knock-on cash flow implications for companies when economic conditions are already difficult – for the past six months. Firms such as transport companies – where VAT on diesel fuel is a significant proportion of operating costs – have been particularly badly hit.
Tax advisers said that the commission’s announcement was welcome, but also underscored the problems that many firms had been facing. “The move by the commission is an admission of the difficulties companies have been experiencing in getting their cash back. At a time of particular money worries, this has been acutely painful for businesses of all sizes,” said Richard Asquith, head of TMF VAT Services.
A survey by the International VAT Association found that, by the electronic system’s January launch, only seven EU countries had fully working electronic refund systems. Fourteen either did not have working portals or only partially working ones, and it could not obtain information from a further six countries.
The association criticised the failure to conduct end-to-end testing of the IT system before it went live, and also the failure of countries to collaborate in building compatible portals – and cited Finland and Sweden as the only countries known to have worked together.
Tax advisors also say that some countries did not launch portals until the second quarter of 2010; some have not been able to confirm receipt of VAT reclaims; and many portals have been unable calculate estimate tax refunds.
Brussels admits that the last member state web portal only opened in mid-May.