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Have you ever asked yourself: How did VAT arise, Could the EU countries meet the competition by different tax rates, Is the VAT reverse charge system fair to all member countries, How is your country profiting from EU VAT concept and other similar questions connected to value added tax? If you want to know the answers, read on. As everyone knows, VAT belongs to indirect taxes. Indirect because it is imposed on consumption, no matter what goods or services (with exceptions naturally) you purchase and who it purchases. So called VAT taxpayers (registered to VAT) are simply tax collectors for the government and hence indirect tax collecting. Brief history of VAT EU’s VAT framework proceeds from other former indirect taxes, that had nature of consumption taxes imposed on particular goods such as sugar, wine, etc. (in the past called octroi or excise tax). Often were these taxes even collected as tax in kind. Harmonization within EU Since establishment of European Community is clear, that within integration of Europe, it is essential to co-ordinate and integrate taxation and tax system in general. Crucial step in harmonization of indirect taxes was issuing First European Council directives (nr. 67/227/EEC) in 1967. In this directives EU member states pledged to implement so called “general consumption tax” to their tax systems on or before 1.1.1970. This deadline was later postponed and the whole new VAT framework actually started on 1.1.1973 (the last count...

Author: Ing. Mgr. Jaroslav Schulz

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