The EBF has been contributing to this work for over five years and commends the Commission and Member States' ongoing commitment to adapt the VAT legislation to the needs of present and future globalized markets. The current VAT rules for financial services are one of the most important remaining obstacles to the efficient operation of a Single Market for financial services. The EBF, therefore, very much welcomes Mr. Kovacs's statement that "leaving things as they are is not an option!"

The package addresses the two main areas of concern currently facing the financial services industry: the need to modernise the outdated VAT legislation and the lack of neutrality in the current system that cascades the impact of irrecoverable VAT expense through the commercial supply chain.

"The EBF considers the proposal for a Directive to be a first step in the right direction and will continue to work with the Commission in addressing the technical issues that are apparent in the proposal" declared Guido Ravoet, Secretary General of the EBF.

The EBF wishes the proposal to go further in modernising the legislation in order to correctly address today's banking activities and be flexible enough to include new activities as they develop. Greater certainty should in particular be established around the areas of the provision of payments services, derivatives, securities, custodial services and intermediaries."

As regards VAT neutrality, the industry regrets that the proposals do not guarantee the right for financial services to organize under a harmonized "VAT group" regime, which would allow them to share best practices and to integrate their core functions without incurring additional VAT-costs. The EBF understands – but regrets – that this solution appeared not to be acceptable to all Member States. It however welcomes – albeit with some reservations - the alternatives proposed by the Commission through the option for taxation of certain financial services and the exemption for cost sharing arrangements.

European banks appreciate the difficulty of the Commission's task in balancing the financial services sector's calls for reform with a resistance to change amongst a number of Member States. They however strongly believe that it remains possible to achieve a clear, unambiguous and balanced legislative reform without prejudice to tax revenues for Member States. This is still very much work in progress. The EBF therefore confirms its commitment to continue to work constructively with the Commission, the EU Presidency and the Member States to achieve that crucial result for the competitiveness of the European financial services industry and of the European economy as a whole.