The Organisation for Economic Cooperation & Development (OECD) has published feedback on the three- month consultation on draft international VAT guidelines.

The OECD plan to adopt the neutrality principle on VAT when it is levied as a tax on final consumption have been welcomed by VAT professionals, although there are still concerns that crossborder supplies need to be more clearly defined.

Respondents, including CIOT, the ICAEW, BP and Business Europe, welcomed the OECD's initiative in seeking to develop guidelines to address the current uncertainty in the application of VAT and similar taxes to international trade.

However, the respondents generally felt that Chapter 3, which deals with the place of taxation for Cross-Border Supplies of Services and Intangibles, could be further developed with many calling for clearer definitions of terms such as 'establishment'.

The proposals are based on two core principles that were adopted by the OECD's Committee on Fiscal Affairs in 2006: the 'neutrality' principle, whereby VAT is a tax on final consumption that should be neutral for business; and the 'destination' principle, whereby internationally traded services and intangibles should be subject to VAT in their jurisdiction of consumption.

The OECD's Working Party No 9 of the Committee on Fiscal Affairs will use the main consultation findings to continue its work on the development of the OECD International VAT/GST Guidelines.

The responses to the consultation are available from OECD