On 12 June 2014, the EU VAT Expert Group published its opinion that a definitive VAT regime is urgently needed to replace the current transitional VAT system and achieve a true single market in the EU. The transitional VAT system was originally put in place in 1993, and was initially meant to last just four years.

The published opinion highlights several shortcoming of the current transition VAT system that impede the single market and growth in Europe overall.

1. The transitional VAT system is a barrier to trade because:
   • it is more difficult to trade within the EU than to export goods to or import goods from non-EU countries;
   • it specifically hinders small and medium-sized enterprises to expand across borders.
2. The transitional VAT system is creating high costs and significant administrative burdens to doing business:
   • by the cash flow impact on business where traders have to wait for VAT refunds to be made;
   • as the cost of compliance has become disproportionate;
   • because the use of technology to lower costs of compliance to the maximum extent is missing, as the efficient use of technology requires a clear, certain, simple and uniformly applied EU VAT system;
   • as the cost of collection is increasing for tax administrations (see Green Paper Consultation and White Paper action items of the Commission).
3. The transitional VAT system generates high and disproportionate risks for business, the unpaid tax collectors, due to:
   • non-legitimate traders committing fraud. Fraud-prevention measures taken increase the complexity of the current VAT system for legitimate traders, create legal uncertainty when doing business in the EU and shift risks to legitimate traders;
   • "inflating" the number of VAT disputes and litigation in the Member States and at the Court of Justice of the EU owing to non-harmonization, resulting in complexity and the legal uncertainty.

According to the Expert VAT Group, in order to achieve a successful definitive VAT system, it must be based on the following four principles:

1. legal certainty and simplicity. Clear and uniform rules should be easy to comply with for business, the unpaid tax collectors, and easy to apply for tax administrations;
2. neutrality and proportionality;
3. efficiency, thereby safeguarding VAT revenues, easing collection and reducing the administrative burden for businesses. Simplicity should allow efficiencies to be achieved through the effective use of technology;
4. effective enforcement and collection by the Member States in close cooperation with each other, including dispute resolution mechanisms.

The group calls for all stakeholders, including the European Commission, Council and Parliament, and all EU Member States to come to agreement with an implementation plan for a definitive VAT system by 2019.