Commentary

V1.204 Adoption of Value Added Tax by the EU; common system; uniform basis of assessment

Part V1 General principles and rates of tax

V1.204 Adoption of Value Added Tax by the EU; common system; uniform basis of assessment

V1.204 Adoption of Value Added Tax by the EU; common system; uniform basis of assessment

EU Treaty art 991 (as originally enacted) required the Commission to consider how the legislation of the various member states concerning turnover taxes could be harmonised in the interests of the common market. The Commission was faced with the problem of devising a common system of turnover taxation which would avoid the disadvantages associated with the multi-stage turnover taxes operated by five of the member states. The choice was essentially between some form of single-stage turnover tax (such as the British purchase tax or North American sales taxes) or a value added tax based on the French model2. The Newmark Report3, which appeared in 1958, recommended harmonisation on the basis of value added tax.

The Commission was required to submit harmonisation proposals to the Council and it did so in 1962. The Council adopted the First4 and Second5 Directives on 11 April 1967. These directives are described below as they applied to the original member states, ie Belgium, France, Germany, Italy, Luxembourg and the Netherlands. For their application on enlargement of the Community in 1973, 1981, 1986 and 1995 see V1.208.

The Second Directive was subsumed in, and replaced by, the Sixth Directive6 in relation to all member states of the enlarged Community. Both the First and Sixth Directives were subsequently replaced, on 1 January 2007, by Directive 2006/112/EC.

Introduction of value added tax

member states were required to introduce a tax on

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