How will the VAT package affect the globalization of businesses?
RW: I think in lots of ways it will simplify matters in that the VAT won’t have to be charged on so many business to business supplies. The customer business will have to take account of the reverse charge in its jurisdiction and that means that instead of local VAT needing to be charged, it will be accounted for in the jurisdiction of the recipient in its VAT return and if that business can recover all its VAT – say it is a manufacturer or a retailer or otherwise carrying on a fully taxable business for VAT, then it should be just an accounting entry and it will save the burden and the cash flow cost of having to pay VAT and seek to recover it under the EU directive which enables businesses to reclaim VAT incurred in different jurisdictions. The changes will have a huge impact on partially exempt businesses such as banks and insurance companies, which at the moment outsource their back-office services – say outside the EU and don’t incur any VAT cost at the moment at all. From the 1st
