The EU VAT system, like many VAT systems around the world, exempts insurance and financial services. As opposed to merit goods or services, such as health or education, the rationale for exempting these services is not to diminish the regressivity of VAT, or to encourage their consumption, but...

The taxation of financial services is one of the most vexing aspects of a VAT. Conceptually, VAT should apply to any fee for service but where financial services are concerned there is a difficulty in identifying the taxable amount, ie the value added by financial institutions. As a result, most...

This paper provides a legal and economic analysis of the European Commission’s recent proposals for reforming the application of VAT to financial services, with particular focus on their ‘third pillar’, under which firms would be allowed to opt in to taxation on exempt insurance and...