VATupdate Newsletter Week 1 2022

Let’s start this year with an interesting fact: Did you know that there is a light bulb that has been burning continuously for more than 118 years? It was manufactured by the Shelby Electric Company in the USA in 1901.

Quite remarkable, since in many countries, the electric light bulbs have been replaced by modern variants such as led and CFL (compact fluorescent light) technology. They last a long time (which is great), but they still don’t last nearly as long as this bulb has.

It hangs from a cord in the ceiling of the Livermore-Pleasanton Fire Department’s Fire Station #6, in Livermore California. In 2015, the city held a party there to celebrate its one millionth hour of operation, where the town’s officials enjoyed food, drinks, and music while they toasted the bulb as it burned overheard.

The light bulb has its own live stream, of course, which can be found HERE.

The VAT rules in the European Union haven’t even been in place that long, but for some people the light on VAT has gone out for some time already. The VAT rules are trying to keep up with modern times, with new technologies, new ways of doing business and an expanding world where international cooperation and transparency is key to keep track of financial and product flows. This made the adjustments and interpretations of the VAT rules not simpler.

What can we learn from the light bulb? There are 3 theories on why the bulb hasn’t burned out after all of this time.

Consistency: Some people think the fact that the bulb has only rarely been switched off and on has saved the filament. Without having to cool down and heat up on the regular, it saves whatever quality allows it to keep burning.
Coincidence: It’s just one of those things, a happy accident.
Conspiracy: Although it cannot be proven, documentation shows that in late 1924, executives from GE, Philips, Tokyo Electric, Osram, Compagnie des Lampes, and other light bulb manufacturers met in Geneva and hatched a plan to limit the average lightbulb’s life to around 1,000 hours.

Can we see these theories back in VAT? Governments try to stick to a system, and adjust this to the modernization of the economy and society. The problem is, that the system may have (to be) switched on and off too many times, thus decreasing the lifetime of the VAT system.

Some rules may have side-effects. These can be coincidences, sometimes good, sometimes bad. It keeps advisors, tax authorities and courts busy with the interpretation and explanation of (new) rules, and applying them to new situations.

And some people may say that VAT is nothing but a conspiracy, to steer consumption and to tax the poor. Well, that first part is true, the second part you can have long debates on.

OK, so a light bulb is not the same as VAT. Still, we think that 118 years is a very long time. It was not until 17 May 1977 that the Sixth VAT Directive was adopted which established a uniform VAT coverage in the EU. Which means that we can celebrate the 1 millionth hour of harmonized EU VAT on 15 June 2091… We bring the drinks!

If you have any comments, questions or ideas that you want to share with us, please send us an email at [email protected] or leave a comment under the posts of this newsletter on LinkedIn.

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