- The European VAT system operates within the framework of the European Economic Community, which aims to promote economic integration and a common marketplace with free movement of goods, services, capital, and people.
- The Treaty of Rome outlines the obligations of the Community, including harmonization of Member State laws to establish and operate the common market. Legislation is passed by Community institutions, with the Commission as the initiator and the Council as the decisive power.
- Taxation is a sensitive area of harmonization, as it has traditionally been exercised by states to raise revenue and regulate the economy.
- However, differences in tax regimes can hinder the creation of the internal market, so fiscal barriers such as VAT rate differences have been denounced as obstacles to achieving the common market objective.
Source Jean Monnet Program
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