Last week, the French Senate discussed the taxation of electronic services and internet activities. In this context, the French business daily Les Echos made a telling statement in an article on why France is missing out on tax revenues relative to these activities: "France, which is trying to convince other European countries to tackle the issue, is facing fierce opposition from Ireland and Luxembourg." They failed to specify, however, that this issue has been settled for quite some time by European regulations, applicable in France just as much as in Luxembourg.
As a small country with an important international banking and financial centre, Luxembourg has become somewhat used to such misconceptions and even deliberate disinformation. But the nonchalance with which certain members of the press habitually make such false statements does not cease to surprise me.
The simple truth of the matter, of course, is that Luxembourg, like many other European countries, applies a VAT rate of at least 15%, as foreseen in EU law. And, as of 1 January 2015, the Grand-Duchy, along with everyone else in Europe, will switch to a system where VAT is charged in the country of residence of the client rather than the country of the supplier of electronic services.
The fact that Luxembourg applies the standard European rate of 15% is merely down to the fact that we traditionally prefer a socially more just direct taxation to an over-reliance on indirect taxation. That the standard VAT rate of at least 15% is perfectly in line with European regulation might irritate some member states, but there is nothing more sinister to it than that.
There is of course an easy solution to this tax revenue conundrum.
Nothing in the European texts forces France to apply a rate that is higher than 15% (despite the fact that France, for its part, appears to want to impose its national VAT rate on other countries). Rather than complain about so-called "unfair" tax competition, why not simply lower the VAT rate to the standard 15% foreseen in European legislation? Unsurprisingly, this is no guarantee that internet companies and electronic service providers will flock to France. Luxembourg did more than apply the lowest standard European VAT rate. As in the world of banking and finance, Luxembourg worked hard to develop the necessary expertise and to establish the regulatory, technological and business environment that successful international companies rely on.
http://www.luxembourgforict.lu/en/international-scoreboard/ict/index.html
As a small country with an important international banking and financial centre, Luxembourg has become somewhat used to such misconceptions and even deliberate disinformation. But the nonchalance with which certain members of the press habitually make such false statements does not cease to surprise me.
The simple truth of the matter, of course, is that Luxembourg, like many other European countries, applies a VAT rate of at least 15%, as foreseen in EU law. And, as of 1 January 2015, the Grand-Duchy, along with everyone else in Europe, will switch to a system where VAT is charged in the country of residence of the client rather than the country of the supplier of electronic services.
The fact that Luxembourg applies the standard European rate of 15% is merely down to the fact that we traditionally prefer a socially more just direct taxation to an over-reliance on indirect taxation. That the standard VAT rate of at least 15% is perfectly in line with European regulation might irritate some member states, but there is nothing more sinister to it than that.
There is of course an easy solution to this tax revenue conundrum.
Nothing in the European texts forces France to apply a rate that is higher than 15% (despite the fact that France, for its part, appears to want to impose its national VAT rate on other countries). Rather than complain about so-called "unfair" tax competition, why not simply lower the VAT rate to the standard 15% foreseen in European legislation? Unsurprisingly, this is no guarantee that internet companies and electronic service providers will flock to France. Luxembourg did more than apply the lowest standard European VAT rate. As in the world of banking and finance, Luxembourg worked hard to develop the necessary expertise and to establish the regulatory, technological and business environment that successful international companies rely on.
http://www.luxembourgforict.lu/en/international-scoreboard/ict/index.html
