Bank lobby groups have given a guarded welcome to European Commission proposals for a Directive aimed at simplifying the current VAT regime for financial and insurance services.
The provision of financial services is currently exempt from value added tax, which has led to higher costs for banks who are unable to recover VAT charges levied on them by suppliers. The issue has been seen as a stumbling block to further adoption of outsourcing and shared service centres across EU borders.
The reforms, outlined by László Kovács, commissioner for taxation and customs, aim to ensure a more consistent application of the rules across the internal market, and create an industry specific exemption from VAT on cost sharing arrangements.
Guido Ravoet, secretary general of the European Banking Federation welcomed the proposals as "a first step in the right direction".
"This is still very much work in progress," he says. "The EBF wishes the proposal to go further in modernising the legislation in order to correctly address today's banking activities and be flexible enough to include new activities as they develop. Greater certainty should in particular be established around the areas of the provision of payments services, derivatives, securities, custodial services and intermediaries."