86 Countries Endorse VAT Rules on Cross-Border Transactions

Article excerpt

The governments of 86 countries have taken a key step towards preventing value added tax (VAT) from weighing on trade while also safeguarding state revenues by endorsing the first internationally agreed framework for applying national VAT rules to cross-border transactions. More than 250 high-level representatives from around 100 countries, jurisdictions and international organizations attending the OECD global forum on VAT in Tokyo recently, endorsed a new set of OECD guidelines for the application of VAT or goods and services tax (GST) to international trade. These international guidelines seek to address the problems that arise from national VAT systems being applied in an uncoordinated way in the context of international trade. They set standards aimed at ensuring neutrality in cross-border trade and a more coherent taxation of business-to-business (B2B) trade in services. The endorsement of these guidelines is a big step towards reducing double taxation and under-taxation in trade, OECD Deputy Secretary-General Rintaro Tamaki told the forum. The guidelines are good for the private sector and good for governments as they should boost both trade and tax revenues. I encourage countries to start using them from today, said Tamaki. VAT is a major source of revenue for governments but becomes problematic when the tax is applied to international trade, particularly in services, as different tax jurisdictions often use different rules to determine which of them has the right to tax a transaction. …