Aims & Objectives

What is the problem?

When Value-Added Tax (VAT) was first introduced, it was intended to be a simple, fair and uniform tax. However, when the original VAT system was developed, the special position of charities (or NGOs) was not considered. Because NGOs provide services that are either exempt from VAT or outside the scope of the VAT system they are unable to get back the VAT that they pay on the purchases to support their charitable aims. They are, in effect, treated as the final consumer, even when they are not.

Many people do not know that NGOs have to pay VAT. But the fact that they pay it means that less of the donations given to NGOs can actually be used to help the people for whom the money is given. For example, in the United Kingdom, charities lose over £400 million (€666 million) every year because they have to pay VAT.

What is ECCVAT?

The European Charities' Committee on VAT (ECCVAT) was formed in 1992 because NGOs were concerned about the impact of VAT on their activities. Most taxation legislation in the European Union now comes directly from the EU and is only implemented by the individual Member States. It was clear that a single organisation representing a broad cross-section of NGOs in the EU would be able to lobby the European Union more effectively than separate national organisations.

Why is it important?

The European Union currently has a Transitional VAT Regime, which is preparing for a Permanent Regime. The Transitional VAT Regime is already having the following effects on NGOs:

• they cannot get back the VAT that they pay on expenses which are necessary for their charitable objectives
• the amount of VAT which NGOs have to pay and cannot get back could treble in some Member States if action is not taken
• the Transitional VAT Regime is extremely bureaucratic and complicated, and so it is difficult for NGOs with few resources to deal with.

What is ECCVAT doing?

Since its formation in 1992, ECCVAT has been lobbying for NGOs to get a fair deal on VAT. We are afraid that the situation of NGOs could get even worse under the Permanent VAT Regime.

The European Commission has a Work Programme of Proposals for a Permanent VAT Regime. During 2000 the Work Programme was reviewed and a New VAT Strategy was published. In May 2001, the Commission published a new overall tax strategy which includes a section on VAT. ECCVAT has already lobbied on some Proposals in the original Work Programme and we will be monitoring the new tax strategy carefully to ensure that NGOs' interests are taken into account when the Commission makes policy decisions.

ECCVAT has also commissioned independent research into the effect of VAT on NGOs in the EU. The results will be used by ECCVAT to inform the EU's decision-making.

What can you do?

If you would like further information about ECCVAT and its activities, we should be delighted to provide it. In particular, we urge any NGO interested in creating a fairer deal for NGOs in the EU to contact the ECCVAT Secretariat or their country's representatives.