The European Commission adopted a Communication on the future of VAT which sets out the fundamental characteristics that must underlie the new VAT regime. According to the Commission, the VAT regime must be made more workable for businesses, VAT must be made more efficient in supporting Member States' fiscal consolidation efforts, and the huge revenue losses that occur today due to uncollected VAT and fraud need to be stopped.

The Communication adopted by the Commission on the future of VAT sets out the fundamental characteristics that must underlie the new VAT regime, and priority actions needed to create a simpler, more efficient and more robust VAT system in the EU. According to Algirdas Šemeta, Commissioner for Taxation, Customs, Anti-fraud and Audit, the time has come for an ambitious VAT reform.

The vision for the new VAT system include three overriding objectives. First, VAT must be made more workable for businesses. A simpler, more transparent VAT system would relieve businesses of considerable administrative burdens and encourage greater cross-border trade. Among the measures envisaged for a more business-friendly VAT are expanding the one-stop-shop approach for cross border transactions; standardizing VAT declarations; and providing clear and easy access to the details of all national VAT regimes through a central web-portal. MEPs also discussed the future EU value added tax system in October 2011.

As the second priority action, VAT must be made more efficient in supporting Member States' fiscal consolidation efforts and sustainable economic growth. Broadening tax bases and limiting the use of reduced rates could generate new revenue for Member States without the need for rate increases. And finally, the huge revenue losses that occur today due to uncollected VAT and fraud need to be stopped. It is estimated that around 12% of the total VAT which should be collected, is not (so-called VAT Gap). In 2012 the Commission will propose a quick reaction mechanism to ensure Member States can respond better to suspected fraud schemes. Furthermore, the Commission will see whether current anti-fraud mechanisms, such as Eurofisc, need to be strengthened and will explore the possibility of a cross-border audit team to facilitate multilateral controls.

Additionally, the Commission considers that VAT must continue to be collected in the country of destination (i.e. where the customer is located), and thus, the Commission will work on creating a modern EU VAT system based on this principle.