The value added tax treatment of financial services : conceptual issues and practices

Abstract

This dissertation examines the overall VAT treatment of financial services. Particular allusion is accorded to the applicable Maltese VAT legislation stipulations emanating from the Sixth EU VAT Directive and ECJ and UK case-law, along with their embracing in the local practice. At the core of the discussion lies the pertinent exemption without credit regime; a fundamental structural imperfection of the common VAT system supported by both theoretical and practical motives. It is argued that the distortions caused by the exemption and the metamorphosis in the financial environment are significant enough to warrant a revamp in the indirect tax treatment of financial services (FSs). Proposals and alternative country approaches are given an overview while recommendations are ripened. In view of the EU target of becoming the most competitive economy in the world, at least exertion towards some legal certainty in this field is expected. The dissertation further raises a number of VAT issues surrounding five financial transactions which are critically scrutinised as portrays of the indistinct treatment of FSs in the context of the general VAT framework. In the midst of perplexing case-law, factoring, foreign exchange and credit card transactions are bestowed by an interpretation. The haste of growth and complexity of derivative instruments plays a motivational role towards their address whilst VAT arrangements applicable to securitisation dealings are pored over within ken of placing Malta on a firmer financial grip backed by the Securitisation Act making its way through Parliament Overall, the study is an attempt to contribute to the current vehement debate on the international scene and to transpose it ashore. Semi-structured interviews back up the plethora of fiscal documentation from a domestic viewpoint.