Pictured above: Terri Bruce

The latest attempt at the European "holy grail" of VAT harmonisation is likely to go the way of previous failures, an expert has predicted.

And that would mean the threat to drag the likes of newspapers and children's clothing, cherished exemptions in the UK, into the net - something already provoking an outcry in the media - would collapse, suggests Terri Bruce, senior manager for indirect tax at the Birmingham office of international accountancy firm Mazars.

"In my view it is unlikely that any of the proposals will ever come to fruition. Many attempts have been made to harmonise the VAT system since its introduction in Europe in the 1950s but to date, most have been filed on the 'too difficult' pile, presumably as even Europhiles welcome their tax independence."

Nevertheless, commenting on the European Commission's Green Paper on the future of VAT and how a simpler more robust and efficient system might be developed, she cautioned that the trend was upwards.

Published in December, Mazars has already submitted its comments - consultation runs until the end of this month.

Ms Bruce said: "The harmonisation of VAT across the EU is the holy grail for the Commission.

"The concept promises unity, cohesion and fairness; in short a real European single market. 

"The Green Paper is yet another attempt at achieving this nirvana, but are its aims realistic or achievable and has it addressed the necessary issues which would help to achieve agreement?  Indeed, given the current precarious state of the Euro zone, is a more cohesive Europe desirable in any event? Those are the questions being asked."

VAT receipts account for more than 21 per cent of the national tax revenues of EU Member States, a key source of income for most.  However, VAT is expensive to administer, and, as a self assessed tax, the bulk of the cost falls upon the taxpayer.

And a business trading across international borders incurs even higher costs due to the fact that each Member State has its own interpretation of the legislation.

The Green Paper is seeking to eradicate the differences and asking whether this might better be done by regulation, in the process removing the rights of Member States to have their own variations.

Ms Bruce warned: "If this part of the Green Paper is accepted, it could mean that the Commission is able to exert more influence over the UK and its taxing mechanisms.

"The Green Paper specifically asks for suggestions on which exemptions should be withdrawn, which indicates that the VAT bill will only rise."

Areas which may be affected could be public transport, food, newspapers and children's clothing, all of which are currently zero-rated in the UK. And it is this which has proved particularly controversial.

However, Ms Bruce doubts it will materialise.

"I cannot see Member States accepting this encroachment of their taxing powers and the withdrawal of discretion to allow lower rates of VAT to apply," she said.

With collection of VAT also under the spotlight, Ms Bruce was also highly sceptical about another suggestion the Green Paper is seeking to explore - making the banks do the job. 

"The idea is that the banks would pay the supplier the net amount they were due and pay the VAT directly to the tax authorities.

"However, given the number of transactions undertaken by businesses each day, this would appear to be unworkable and does not address issues such as discounts or credits.

"Furthermore, given the state of the banking system across the world, it is hard to see that Member States would be happy to entrust the administration of the tax to the banks."