VAT in the Gulf Cooperation Council
Edited by Ehtisham Ahmad and Abdulrazak Al Faris
Chapter 5: The European VAT and the Common Market Framework: Lessons for the GCC
Christophe Waerzeggers The EU has probably the longest and most extensive experience in operating a harmonized VAT system in a common market. This paper focuses on the way in which the EU VAT deals with the common market. As a result, a basic knowledge of the EU VAT is likely to be of assistance to policymakers in designing a common VAT framework for the GCC. Section A explains the role the VAT played in the EU internal market integration process. It also highlights which elements of the continued integration process in turn contributed to the development of EU VAT. Section B goes on to discuss the basic characteristics of EU VAT, comparing it with a “model” or “best practice” VAT. Section C deals with one aspect of EU VAT in particular, the intra-EU trade arrangements. This issue, and especially the fraudulent use that has been made of it in recent years, continues to be at the forefront of VAT debate in Europe; it is also of particular importance to the GCC if it intends to operate a common VAT in a borderless common market without a centralized VAT administration. Section D concludes by providing some useful lessons from the European VAT experience, which the GCC might wish to consider when designing a common VAT framework for its common market. A DRIVERS OF EU VAT COORDINATION History The EU founding members1 were among the first countries in the world to adopt VATs. Of those, France in the early 1950s was the...
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