New Directive Mandates Online Platforms To Pay VAT
The European Parliament has approved an update to the VAT directive requiring online platforms to pay VAT on services offered through them by 2030, particularly when individual service providers do not charge VAT. This change seeks to put an end to a distortion of the market because similar services provided in the traditional economy are already subject to VAT.
This distortion has been most significant in the short-term accommodation rental sector and the road passenger transport sector. Member states have been granted the possibility of exempting SMEs from this rule.
The update also mandates the full digitalisation of VAT reporting for cross-border transactions by 2030. Businesses will be required to issue e-invoices for cross-border business-to-business transactions and automatically report data to tax authorities, enhancing the fight against VAT fraud.
To reduce administrative burdens, the rules expand the use of online VAT one-stop shops, enabling more businesses engaged in cross-border trade to fulfil VAT obligations through a single online portal and in one language.
According to Commission estimates, Member States will recoup €11 billion in lost VAT revenues every year for the next 10 years. Businesses around the Union will save €4.1 billion a year over the next 10 years in compliance costs, and €8.7 billion in registration and administrative costs over a ten-year period.
EP Wants European Central Bank To Take Stronger Action Against Inflation
The European Parliament has called on the European Central Bank (ECB) to take stronger action against inflation, following a debate with ECB President Christine Lagarde. 378 MEPs backed the recommendations, while 233 opposed and 26 abstained.
MEPs urged the ECB to do more to curb inflation, emphasising that the most vulnerable in society are the hardest hit by rising prices. They also stressed that the introduction of a digital euro must address citizen concerns. For the first time, Parliament asked the ECB to evaluate how war and conflict might impact price stability.
Expressing concern over the “historically and persistently” high inflation, MEPs criticised the ECB’s earlier assumption that inflation would be temporary. They argued that economic forecasting models need improvement for better policymaking.
Parliament also raised concerns about a “significant subsidy” to banks, indirectly caused by ECB policies that resulted in large interest payments on bank deposits at the ECB. MEPs called for measures to address this issue, urging the ECB to find ways to mitigate its impact.
On the other hand, MEPs failed to find common ground on the issue of how market neutral ECB policy should be and the extent to which price stability should determine the ECB’s actions.
EU Commission mobilises €200bn for AI Projects
The European Commission has launched InvestAI, an initiative to mobilise €200 billion for artificial intelligence, including €20 billion for new AI gigafactories. These facilities will support open, collaborative development of advanced AI models and aim to establish Europe as a leader in the field.
InvestAI will finance four gigafactories across the EU, designed to train complex AI models requiring extensive computing power. These next-generation models are expected to drive breakthroughs in areas like medicine and science. Each gigafactory will be equipped with approximately 100,000 cutting-edge AI chips, significantly surpassing the capacity of current AI facilities.
The initiative represents the world’s largest public-private partnership for developing trustworthy AI, fostering a European approach centred on cooperative, open innovation. It aims to make large-scale computing power accessible to all companies, not just the industry giants.
InvestAI will feature a layered fund with varying risk and return profiles, with the EU budget providing risk mitigation for other investors.
Initial funding will come from existing EU programmes such as Digital Europe Programme, Horizon Europe, and InvestEU, while Member States can also contribute. The investment model, combining grants and equity, will serve as a pilot for strategic technologies outlined in the EU’s Competitiveness Compass.
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