The European Commission unveiled a plan on Thursday aimed at modernizing value-added tax rules, with the potential to raise as much as 18,000 million euros annually across the twenty-seven member states. The proposal targets VAT regulations for digital platforms, including passenger transport and short-term accommodations, such as Uber and Airbnb. The current setup often sees platforms responsible for collecting and remitting VAT when providers like small businesses or individual operators may not be doing so, creating an uneven playing field.
Commissioner for the Economy Paolo Gentiloni argued that VAT is not charged on many platform transactions, producing a sense of injustice and unfair competition relative to traditional taxis and hotels that deal directly with customers. He stated that the plan seeks to eliminate this disparity by making platforms responsible for VAT collection even when the service provider does not collect it themselves. Under the proposal, if the Uber driver or short-term rental owner does not add VAT to the price, the digital platform would automatically incorporate the VAT into the shown price in the app or listing page.
From the European Commission’s view, the initiative would simplify tax compliance for small and medium-sized enterprises as well as individual accommodation or vehicle providers who may be unaware of their VAT obligations for the service delivered to tax authorities. Officials estimate that the change could yield up to 6,600 million euros per year for ten years across the member states.
cross-border operations
Beyond extending VAT collection to transport and accommodation platforms, the commission’s Thursday proposal also aims to enhance VAT collection by up to 18,000 million euros annually through two additional pillars.
First, the plan introduces real-time digital notifications and electronic invoicing for independently operating cross-border businesses. This enhancement would help governments detect and combat the so-called carousel VAT fraud that occurs when transactions involve more than one member state. Brussels estimates suggest that this approach could cut VAT fraud by about 11,000 million euros and reduce administrative and compliance costs for EU operators by more than 4.1 billion euros each year over the next decade.
Second, the commission contends for a unified EU VAT record, using a one-stop shop model for online sellers. This would enable companies selling to consumers in other member states to register for VAT once for the entire EU and meet their VAT obligations through a single online portal in one language. Projections indicate that this mechanism could save roughly 8,700 million euros in administrative and registration costs over ten years.
The initiative is framed as a policy move with implications not only for EU budgeting but also for global platforms operating in North America, including Canada and the United States, where cross-border digital services are a growing area of tax policy discussion. The proposed changes would set a precedent for platform responsibility and transparent VAT processes, potentially influencing how international platforms structure pricing, compliance, and reporting for customers on both sides of the Atlantic. The plan reflects a broader push toward leveling the tax field between platform-based providers and traditional service operators, ensuring that consumers and authorities alike benefit from clearer pricing and fair competition. [Attribution: European Commission communications]