Niall Collins (Limerick County, Fianna Fail)
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105. To ask the Minister for Finance his views on the latest European Commission reforms of the sales tax VAT system and potential unintended consequence for Ireland’s export industry. [45329/17]

Paschal Donohoe (Dublin Central, Fine Gael)
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The European Commission published a series of proposals on 4 October 2017 dealing with the definitive VAT system. The definitive system will bring to an end the current transitional VAT system that has applied since the early 1990s. It deals with changing the method of taxing intra-EU business-to-business supplies of goods from taxation based in the Member State of the supplier to the Member State of the consumer – i.e. the destination principle. This complements the Modernisation of VAT on e-Commerce proposals, which focus on changing the method of charging VAT on business-to-consumer cross border supplies. This is the subject of ongoing discussion at EU level.

In the early 1990s, the goal was to charge VAT on goods in the place of origin but the political and technical conditions were not suited to such a system. Since 2011 the EU has been focusing on changing the method of taxation of cross-border EU trade so that VAT is charged on the basis of destination and not origin. The Commission published a VAT Action Plan in 2016 that set a path towards the modernisation of VAT in this context, and the proposals published on 4 October are part of this Plan.

The definitive VAT System proposals make core changes to the EU VAT Directive to introduce a definitive system based on the destination principle. Further proposals will be published in 2018 dealing with technical details around this change. I would point out that the ethos behind the change to the destination based VAT system is to modernise VAT for the digital economy and to simplify VAT for both businesses and tax authorities, as well as minimising VAT administration costs for businesses selling across a number of EU Member States.

None of these proposals deal with the export of goods and services outside the EU and will have no impact on Irish businesses exporting outside the EU. On the contrary the Modernisation of VAT on e-Commerce proposals, currently subject to discussions at EU level, aim to address the imbalance where goods are imported into the EU free of VAT. The recently published definitive VAT regime proposals will be subject to discussion and negotiation at EU level in the near future. Changes to the EU VAT Directive can only be made on the basis of unanimity and Ireland will scrutinise all proposals to ensure that there are no unintended consequences for Irish exporters.