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Special Eurobarometer 424 PUBLIC PERCEPTIONS OF VAT REPORT Fieldwork: October 2014 Publication: March 2015 This survey has been requested by the European Commission, Directorate-General for Taxations and Customs Union and co-ordinated by Directorate-General for Communication. http://ec.europa.eu/public_opinion/index_en.htm This document does not represent the point of view of the European Commission. The interpretations and opinions contained in it are solely those of the authors. Special Eurobarometer 424 / Wave TNS Opinion & Social

Project title Linguistic Version Catalogue Number Special Eurobarometer 424 EN KP-01-15-060-EN-N ISBN 978-92-79-45518-6 DOI 10.2778/976195 European Union, 2015

Special Eurobarometer 424 Public perceptions of VAT Conducted by TNS Opinion & Social at the request of the Directorate-General for Taxation and Customs Union (DG TAXUD) Survey co-ordinated by the Directorate-General for Communication (DG COMM Strategy, Corporate Communication Actions and Eurobarometer Unit)

TABLE OF CONTENTS INTRODUCTION... 2 EXECUTIVE SUMMARY... 4 1. The standard VAT rate... 6 1.1. Knowledge of the standard VAT rate... 6 1.2. Importance of VAT as a source of national revenue... 10 1.3. Perceptions of how the national standard VAT rate compares... 14 2. Reduced VAT rates... 17 2.1. Awareness of reduced rates... 17 2.2. Perceptions of the impact reduced VAT rates have on the national public budget... 21 2.3. Attitudes towards reduced VAT rates... 24 3. Cross border purchase behaviour... 29 3.1.1. Purchasing goods or services over the Internet... 29 3.1.2. Purchasing goods or services in other EU countries... 33 3.1.3. Cross-border purchase behaviour in the European Union... 39 3.2. Reasons for purchasing goods or services in other EU countries... 40 CONCLUSIONS... 44 ANNEXES Technical specifications Questionnaire Tables 1

INTRODUCTION Value Added Tax (VAT) is an important revenue source for each of the EU28 Member States. VAT rates are set by individual Member States and there is a range of different levels, with the lowest standard VAT rate in Luxembourg (15%) and the highest in Hungary (27%), Denmark (25%), Croatia (25%) and Sweden (25%). In the majority of EU Member States (17) the standard rate of VAT ranges from 18% to 22%. In addition to the standard rate of VAT, each Member State also sets an alternative reduced rate for certain products and services. These reduced rates are different in each Member State, ranging from 5% to 18%. In a number of Member States, VAT is segmented further with super-reduced rates, a parking rate and VAT exemptions. In view of the wide range of different VAT rates set in each Member State, public knowledge and experience of VAT is likely to differ. This survey and its analysis have been commissioned to investigate the knowledge that Europeans have of VAT levels in their country, and to assess the importance citizens attach to VAT as a source of public revenue. It explores their awareness of reduced rates and perceptions of how these may impact the national public budget. It also looks at cross border purchasing behaviour within the EU, with respect to both goods and services bought over the Internet and those purchased while visiting other EU Member States. This survey was carried out by TNS Opinion & Social in the 28 Member States of the European Union between the 11 th and 20 th October 2014. Some 27,868 respondents from different social and demographic groups were interviewed face-to-face at home in their mother tongue on behalf of the Directorate-General for Taxation and Customs Union. The methodology used is that of Eurobarometer surveys as carried out by the Directorate- General for Communication ( Strategy, Corporate Communication Actions and Eurobarometer Unit) 1.. A technical note on the manner in which interviews were conducted by the Institutes within the TNS Opinion & Social network is appended to this report. Also included are the interview methods and confidence intervals 2. 1 http://ec.europa.eu/public_opinion/index_en.htm 2 The results tables are included in the annex. It should be noted that the total of the percentages in the tables of this report may exceed 100% when the respondent was able to give several answers to the question. 2

Note: In this report, countries are referred to by their official abbreviation. The abbreviations used in this report correspond to: ABBREVIATIONS BE Belgium LV Latvia BG Bulgaria LU Luxembourg CZ Czech Republic HU Hungary DK Denmark MT Malta DE Germany NL The Netherlands EE Estonia AT Austria EL Greece PL Poland ES Spain PT Portugal FR France RO Romania HR Croatia SI Slovenia IE Ireland SK Slovakia IT Italy FI Finland CY Republic of Cyprus*** SE Sweden LT Lithuania UK The United Kingdom EU28 EU15 NMS13 EURO AREA European Union 28 Member States BE, IT, FR, DE, LU, NL, DK, UK, IE, PT, ES, EL, AT, SE, FI* BG, CZ, EE, HR, CY, LT, LV, MT, HU, PL, RO, SI, SK** BE, FR, IT, LV, LU, DE, AT, ES, PT, IE, NL, FI, EL, EE, SI, CY, MT, SK * EU15 refers to the 15 countries forming the European Union before the enlargements of 2004, 2007 and 2013 ** The NMS13 are the 13 new Member States which joined the European Union during the 2004, 2007 and 2013 enlargements *** Cyprus as a whole is one of the 28 European Union Member States. However, the acquis communautaire has been suspended in the part of the country which is not controlled by the government of the Republic of Cyprus. For practical reasons, only the interviews carried out in the part of the country controlled by the government of the Republic of Cyprus are included in the CY category and in the EU28 average. * * * * * We wish to thank the people throughout Europe who have given their time to take part in this survey. Without their active participation, this study would not have been possible. 3

EXECUTIVE SUMMARY Nearly two-thirds (65%) of European citizens were able to correctly cite their national standard VAT rate, 21% gave a wrong answer and 14% did not know or refused to give an answer. With the exception of Finland (49%), the UK (47%), France (41%) and Ireland (31%), a majority of respondents in all Member States knew what their national standard VAT rate is. Over four-fifths (84%) of European citizens thought that VAT is either a very important or fairly important revenue source for public budgets in their country. More than seven in ten respondents (72%) in every Member State said that VAT is an important revenue source for their country. Once informed of the correct rate of VAT in their country, respondents were asked how they thought this compared with the standard rate in other Member States. Nearly half of respondents (48%) believed the VAT rate they pay is higher than in other Member States, 25% thought they pay about the same, and 10% thought it is lower. Around six in ten Europeans (61%) were aware that there are reduced VAT rates in their country for a number of goods and services, compared with 36% who were unaware. A majority of European citizens (56%) thought that the application of reduced VAT rates has a very important or fairly important impact on the public budget; by comparison 31% thought it is either not very important or not at all important. When provided with a series of four statements relating to reduced VAT rates, more than four out of ten respondents (43%) were in favour of abolishing reduced rates and replacing them by three different alternatives, while 39% of respondents were in favour of keeping the system of reduced rates unchanged. The most chosen alternative was lowering the standard VAT rate on all goods and services (24%), followed by a system where only the poorer households receive an annual fixed cash allowance (10%) and lastly a system where every household receives an annual fixed cash allowance (9%). Three in ten Europeans (30%) have purchased goods or services in another EU Member State in the last 12 months (either online or on a trip to another EU country); a similar figure of 29% was reported in a previous survey conducted in 2012 3. 3 http://ec.europa.eu/public_opinion/archives/ebs/ebs_395_en.pdf 4

Respondents who use the Internet were asked where they have bought their goods or services from: o o o More than half (56%) have made purchases from sellers based in their country (an increase of eight percentage points from 2012); Around a fifth or respondents (19%) have made purchases from sellers based in other EU countries (an increase of four percentage points from 2012); A tenth or respondents (10%) have made purchases from sellers based outside the EU (an increase of one percentage point from 2012). Around one-fifth (22%) of European citizens have purchased goods or services in another Member State during a business trip or holiday, or while on a trip primarily for this purpose (a decline of two percentage points since 2012). o o Just under a fifth of Europeans (19%) have made purchases in another EU country while on holiday or on a business trip (not including travel expenses) - the same result as at the time of the 2012 survey; A tenth or respondents (10%) have made a trip to another EU Member State in order to purchase goods or services (a decline of four percentage points since 2012). Finally, Europeans who have made a purchase in another EU country in the last 12 months were asked to select one or more reasons why they had done so. o o o A majority of respondents (57%) said that they have shopped in another EU country because the prices were lower; Three in ten respondents (30%) said that they have purchased goods or services from another Member State because the choice was bigger; Less than a fifth of respondents (18%) did so because the quality was better. 5

1. THE STANDARD VAT RATE This chapter discusses the state of public opinion regarding the standard VAT rate. In particular it details the knowledge Europeans have of their national VAT rate, how important they think VAT is as a source of national revenue and finally, how they think their national rate compares with that of other countries within the EU. 1.1. KNOWLEDGE OF THE STANDARD VAT RATE - Just under two thirds were able to correctly cite their national standard VAT rate - Respondents were asked to cite the standard or normal VAT rate in their country as a percentage 4. Across the EU, almost two-thirds (65%) of respondents were able to correctly cite their national standard VAT rate, while around a fifth (21%) gave the wrong answer. More than a tenth of respondents (14%) did not know or refused to give an answer. 4 QC1.1 In (OUR COUNTRY), when you buy most goods or services, a tax called Value Added Tax (VAT) is added as a percentage to the price of the good or service and is included in the total price you pay. Please tell me what is the standard or normal VAT rate as a percentage in (OUR COUNTRY)? 6

With the exception of Finland (49%), the UK (47%), France (41%) and Ireland (31%), a majority of respondents in all Member States were able to answer correctly. Member States where there were high levels of knowledge of the standard VAT rate included Germany (89%), Austria (88%), Croatia (87%) and Denmark (86%). It is worth noting that a fifth or more of respondents in eight Member States were unable to give an answer, with the highest levels of don t know responses recorded in Ireland (29%), the UK and Romania (both 24%) and Malta (23%). If only correct and wrong answers are considered (i.e. excluding don t know ), France (47%) and Ireland (44%) are the only two countries where a majority of respondents do not know the standard VAT rate in their country. The countries where the largest proportions of respondents gave correct answers are Bulgaria (94%), Germany (93%), Portugal (92%), Denmark (91%) and Austria (91%). 7

There are some differences in the knowledge of the correct standard VAT rate according to socio-demographic factors: Just over seven in ten men (71%) gave the correct answer compared to 60% of women; Respondents between the ages of 25-39 (70%) and 40-54 (73%) were significantly more likely to give the correct answer than those aged between 15-24 years (56%) and over 55 (61%); Education has a significant impact. Respondents who left full-time education at the age of 20 or over (73%) were much more likely to give a correct answer than those who left school at the age of 15 or under (54%); In terms of occupation, more than three-quarters of the self-employed (85%), other white collars (79%) and managers (77%) gave the correct answer. Students (56%) and house persons (53%) were least likely to give the correct answer; Respondents who never or almost never have difficulties paying their bills (69%) were much more likely to cite the correct standard VAT rate than those who struggled most of the time (52%). 8

1.2. IMPORTANCE OF VAT AS A SOURCE OF NATIONAL REVENUE - More than eight in ten thought VAT is an important source of national revenue - It was explained to respondents that VAT is applied in all countries of the EU and that it is one of the revenue sources for public budgets in Europe. Respondents were then asked how important they think VAT is as a revenue source in their country 5. An overwhelming majority of respondents (84%) thought VAT is an important national revenue source with around one in four (42%) stating that VAT is very important and the same proportion stating that VAT is fairly important. A tenth of respondents (10%) thought VAT is not important while 6% did not know. 5 QC2. Value Added Tax (VAT) is added in all countries of the EU and it is one of the revenue sources for public budgets in Europe. In your opinion, how important or not is VAT as a revenue source in (OUR COUNTRY)? 10

More than seven in ten (72%) respondents in every Member State said that VAT is an important revenue source for their country. VAT was considered important as a national revenue source by more than nine in ten respondents in Sweden (95%), Finland (92%), Denmark (92%), the Netherlands (92%), Germany (91%) and Belgium (91%). Moreover, more than half the respondents in eight Member States thought that VAT is a very important source of national revenue, with particularly large proportions observed in Sweden (62%), Denmark (60%), and the Netherlands (59%). At the other end of the scale, respondents in Greece were the most likely to say that VAT is not an important national source of revenue (23%). Significant proportions of respondents also stated that VAT is not an important revenue source in Romania (18%), Italy (15%), Slovakia (13%) and Spain (12%). In Bulgaria (16%), Romania and Poland (both 10%), significant proportions of respondents were unable to give an answer. 11

According to the socio-demographic results, the respondents most likely to think that VAT was important as a national revenue source were: Men (87%) compared with 81% of women; Those aged 25-39 (85%) and 40-54 (87%) compared to those aged 55 and over (83%) who were slightly less likely to think VAT is an important national revenue source. Fewer than eight in ten respondents aged 15-24 thought that it is important (79%); Respondents with more years of education. Nine in ten respondents who completed their full-time education at the age of 20 or over (90%) thought VAT is an important national revenue source compared to three-quarters of those who finished at the age of 15 or under (76%); Managers (93%), other white collar workers (89%) and the self-employed (88%) compared with all other socio-professional groups (ranging from 77% to 84%); Those who never or almost never struggle to pay their bills (87%) compared with respondents who have difficulties most of the time (76%); Respondents who were able to correctly cite the standard VAT rate in their country were also much more likely to say that VAT was an important source of national revenue (90% compared with 63% of those who gave a wrong answer). 12

1.3. PERCEPTIONS OF HOW THE NATIONAL STANDARD VAT RATE COMPARES - Almost half thought they pay a higher standard VAT rate compared to other EU countries - Respondents were informed of the correct standard VAT rate in their country and were then asked how they thought this compared with the standard rate in other Member States 6. Across the European Union, a relative majority of respondents (48%) believed their country s standard VAT rate is higher than in other Member States, while a quarter (25%) thought their rate is about the same and a tenth (10%) thought their rate is lower. Almost a fifth of respondents were unable to give an answer (17%). 6 QC3. In your opinion, is the standard VAT rate in (OUR COUNTRY) about the same, higher or lower than the standard VAT rate in the other EU Member States overall? 14

At the national level, the view that the standard VAT rate is higher in the respondent s country than in other EU Member States was the most widely held opinion in 22 Member States. High proportions of respondents in Denmark (88%), Greece (77%), Croatia (74%) and Hungary (72%) thought that they pay higher rates of VAT than in other EU Member States. It is worth mentioning that all of these countries do actually have comparatively high VAT rates (DK: 25%, EL: 23%, HR: 25%, HU: 27%) 7. In Germany (25%), Malta (20%) and Cyprus (18%), sizable proportions of the respondents thought that their standard VAT rate is lower than in other countries. Luxembourg stands out as almost nine in ten (88%) believed that their VAT rate is lower than in other countries. These four countries actually have the lowest VAT rates in the EU (DE: 19%, CY: 19%, MT: 18%, LU: 15%,). Respondents in Slovenia (42%) and Austria (40%) were particularly likely to think that their VAT rate is about the same. However, in Austria, an even larger proportion thought that their VAT rate is higher than in other countries (48%). Sizeable proportions of respondents were unable to give an answer in some Member States, such as Bulgaria (34%), Malta (32%), Estonia (29%), UK (25%) and Cyprus (24%). 7 http://ec.europa.eu/taxation_customs/resources/documents/taxation/vat/how_vat_works/rates/vat_rates_en.pdf 15

When socio-economic factors are taken into consideration, we find only minor differences in opinion as to whether the standard rate of VAT is the same, higher or lower than in other Member States. Men (27%) were slightly more likely than women (23%) to think that their national VAT rate is about the same as in other countries; In terms of age, over half of those aged 25-39 (52%) and 40-54 (52%) believed that their standard VAT rate is higher than in other Member States; this figure is somewhat lower among people aged 15-24 (45%) and 55+ (44%); Respondents who left full-time education at the age of 20 or over (52%) were much more likely to think that their standard VAT rate is higher than in other countries than those who left education at the age of 15 or under (43%). Those with lower levels of education were much more likely to spontaneously say that they did not know how their national VAT rate compares (27%); Respondents who have difficulties paying bills most of the time (57%) were the most likely to think that their country s standard VAT rate is higher than in other countries. Less than half of those who never or almost never struggle held the same opinion (46%). 16

2. REDUCED VAT RATES 2.1. AWARENESS OF REDUCED RATES - More than six in ten were aware of the existence of reduced VAT rates - After briefly exploring respondents knowledge and perceptions of the standard VAT rate, the survey then turned to reduced VAT rates. The topic was introduced with a brief summary of the purpose of reduced VAT rates and respondents were then asked if they were aware of the existence of these reduced rates 8. Across the EU, more than six in ten respondents (61%) were aware of reduced VAT rates compared with just over a third who were not aware (36%). 8 QC4. For different reasons (including social reasons and to promote demand for certain goods and services) in (OUR COUNTRY) the purchase of a number of goods and services benefits from a reduced VAT rate. Were you aware of the existence of these reduced VAT rates? 17

At the national level, at least half of respondents in 22 Member States said that they were aware of reduced VAT rates, the highest levels being recorded in Sweden (85%), the Netherlands (84%) and Germany (78%). At the other end of the spectrum, more than two-thirds of respondents in Bulgaria said that they were not aware of these reduced rates (68%). More than half also said this in Denmark and Slovakia (both 53%). It is worth noting that in these three countries, reduced rates are not widely applied. 18

Socio-demographic analysis shows that the following groups were most likely to be aware of reduced VAT rates: Men (66%), compared with 56% of women; Those aged 40-54 (69%), compared to less than half of respondents aged 15-24 (48%) said that they were aware of reduced VAT rates; Respondents who left education at 20 or over (73%) compared to respondents who left education at the age of 15 or under (46%). Generally, the longer respondents stayed in education, the more likely they were to say that they were aware of reduced rates; Managers (79%), the self-employed (76%) and other white collar workers (72%), compared to a range of 44% to 58% across other socio-professional groups. Respondents who also correctly stated their country s standard VAT rate were much more likely to say that were aware of reduced VAT rates (71%) compared with 54% of those who gave a wrong answer. Those who thought that VAT is an important source of national revenue were also more likely to say they were aware of reduced VAT rates (66%) compared with 44% of those who thought it is not an important source. 19

2.2. PERCEPTIONS OF THE IMPACT REDUCED VAT RATES HAVE ON THE NATIONAL PUBLIC BUDGET - A majority thought that reduced VAT rates have an important impact on the public budget - Respondents were told that reduced VAT rates reduce the country s public budget, and they were then asked how important they thought the impact of this reduction was 9. At EU level, more than half of respondents (56%) thought that the impact of reduced VAT rates on the public budget is important, and of these 15% said it is very important. By comparison, around a third (31%) thought it is either not very important (26%) or not at all important (5%). Just over one in ten (13%) were unable to give an answer. 9 QC5. The application of reduced VAT rates leads to a reduction in the revenue collected for the public budget in (OUR COUNTRY). In your opinion, how important or not is the impact of reduced VAT rates on the public budget in (OUR COUNTRY)? 21

A majority of respondents in 21 Member States thought that reduced VAT rates have an important impact on the public budget in their country. The countries where respondents were most likely to think that the impact of reduced VAT rates on the public budget is important were Hungary (80%), Ireland (79%), Malta (77%) and Lithuania (74%). At the other end of the scale fewer than three in ten respondents (29%) in Estonia thought that the impact of reduced VAT rates on the public budget is important. Particularly low proportions of respondents who thought it is important were also found in Denmark and Sweden (both 43%) and Germany (39%). It is also worth noting that significant proportions of respondents in Greece (20%) and Cyprus (13%) thought that the impact of reduced VAT rates on the public budget is not at all important. 22

According to the socio-demographic analysis, those who spent a longer time in full-time education were more likely to think that the impact of reduced rates on the public budget is important (57%), compared with 53% of those who finished their education at the age of 15 or under. Cross-tabulation with other questions in the survey reveals that: Respondents who thought that VAT is an important source of national revenue were also particularly likely to think that reduced VAT rates have an important impact on the public budget (61%), compared with 37% of those who thought that VAT is not an important source of national revenue; Those who thought that their national VAT rate is the same (61%) or higher (60%) than in other EU countries were more likely to think that the impact of reduced rates on the public budget in their country is important (compared with 53% of those who thought that their national standard VAT rate is lower); Respondents who said they were aware of reduced VAT rates were more likely to say that these rates do not have an important impact on the public budget (35%, compared with 22% of those who were not aware). 23

2.3. ATTITUDES TOWARDS REDUCED VAT RATES - More than a four out of ten Europeans were in favour of abolishing reduced rates and replacing them by different alternatives, while slightly less than four in ten thought that reduced VAT rates should continue unchanged - Respondents were provided with a series of four statements relating to reduced VAT rates and were then asked which statement was closest to their own opinion [1]. 43% of respondents were in favour of abolishing reduced rates and replacing them by different alternatives, while 39% of respondents were in favour of keeping the system of reduced rates unchanged. The most chosen alternative was lowering the standard VAT rate on all goods and services (24%), followed by a system where only the poorer households receive an annual fixed cash allowance (10%) and lastly a system where every household receives an annual fixed cash allowance (9%). Around one in five were unable to give an answer (18%). [1] QC6. Thinking about reduced VAT rates, which one of the following statements is closest to your opinion? Reduced VAT rates should continue unchanged; Reduced VAT rates should be abolished and replaced by a system where every household receives an annual fixed cash allowance; Reduced VAT rates should be abolished and replaced with a system where only the poorer households receive an annual fixed cash allowance; Reduced VAT rates should be abolished, enabling the standard VAT rate on all goods and services to be lowered; I don t know about/understand/take an interest in these matters (SPONTANEOUS); DK/NA (SPONTANEOUS) 24

At the national level, a majority of respondents in Sweden (65%), Luxembourg (63%), Germany (54%), Netherlands (54%) and Finland (53%) thought that reduced VAT rates should continue unchanged. This statement received least support in Italy (25%), Romania (23%) and Bulgaria (19%). The notion that reduced VAT rates should be abolished, enabling the standard VAT rate on all goods and services to be lowered received most support in Greece (40%) and Croatia (40%), while only 16% of respondents in Poland and less than a tenth (9%) Luxembourg held the same view. Less than a tenth of respondents in 10 Member States thought that reduced VAT rates should be abolished and replaced with a system where only the poorer households receive an annual fixed cash allowance. The largest proportions were found in Cyprus (18%), Italy and Lithuania (both 16%), while this statement received least support in Denmark (5%) and Germany (3%). Similarly, less than a fifth of respondents in all countries thought that reduced VAT rates should be abolished and replaced with a system where every household receives an annual fixed cash allowance, and in 15 countries, less than a tenth held this opinion. This statement received the most support in Italy (18%) and Malta (17%) while fewer than 5% of respondents in Germany (4%), Finland and Denmark (both 3%) and Sweden (1%) agreed. 25

A number of differences emerge at the socio-demographic level when each of the statements is analysed. The respondents who were most likely to agree that reduced VAT rates should continue unchanged were: Men (42%), compared with 36% of women; Those who left full-time education at the age of 20 or over (45%), compared with those who left at the age of 15 or under; Managers (49%), other white collar workers (44%) and the self-employed (41%) compared with a range of 32% to 38% across other occupation groups; Respondents who never or almost never have trouble paying their bills (44%), compared with over a quarter of those who have difficulties most of the time (27%); Those who were able to correctly cite their national standard VAT rate (44%), compared with 34% of those who gave an incorrect figure; Respondents who thought that the standard VAT rate is an important source of national revenue (43%) compared with 21% of those who did not; Those who said they were aware of reduced VAT rates (50%) compared with those who said they were not (23%). The respondents who were most likely to think that reduced VAT rates should be abolished, enabling the standard VAT rate on all goods and services to be lowered were: Respondents who struggle with their bills most of the time (29%), compared with those who never or almost never struggle (24%); Those who thought that the standard VAT rate is not an important source of revenue in their country (32%), compared with those who did (24%); Respondents who thought that their national standard VAT rate was higher than in other countries in the EU (29%). No differences emerge for the remaining statements. 27

3. CROSS BORDER PURCHASE BEHAVIOUR 3.1.1. Purchasing goods or services over the Internet - The proportion of respondents who shopped online has increased since 2012 - Respondents who use the Internet were asked if they had ordered any goods or services for private purposes over the Internet in the last year 10. More than half of the respondents who use the Internet (56%) had made purchases from sellers based in their country, an increase of eight percentage points since 2012 11. Just under a fifth (19%) had also made purchases in other EU countries, an increase of four percentage points since 2012. The proportion of respondents who had made purchases from sellers based outside the EU remains stable compared to 2012 (10%, +1 percentage point). More than a third of respondents who use the Internet (36%) had not made any online purchases in the last year, a decrease of seven percentage points since the survey conducted in 2012 (43%). Base: respondents who use the Internet (N=21,015) (*) The EU average in 2012 did not include Croatia and Denmark 10 QC7. In the last 12 months, have you bought or ordered any goods or services over the Internet for private purposes from any of the following? (MULTIPLE ANSWERS POSSIBLE) 11 http://ec.europa.eu/public_opinion/archives/ebs/ebs_395_en.pdf 29

At the national level, respondents with Internet access were most likely to have bought goods or services over the Internet in the Netherlands (84%), Denmark (82%), the UK (81%) and Sweden (80%). Since 2012, there have been increased use of the Internet for shopping online in all Member States, with the largest increases recorded in Hungary (46%, +18 pp), Romania (38%, +16 pp) and Ireland (69%, +15 pp). Respondents were most likely to have made Internet purchases from sellers in their own country in the Netherlands (82%), Sweden (78%), the UK (78%), Denmark (76%) and Germany (71%). Respondents in Portugal (15%), Malta (13%) and Cyprus (7%) were least likely to have done so. Since 2012 the proportions of respondents who have made purchases in their own country have increased by more than ten percentage points in Hungary (33%, +16 pp), the Netherlands (82%, +12 pp) and Romania (29%, +12 pp). The countries where respondents were most likely to have purchased from sellers based in other EU countries are Malta (61%), Luxembourg (59%) and Ireland (47%). They were least likely to have done so in Italy (10%), Romania (10%), Hungary (9%) and the Czech Republic (8%). Since the 2012 survey, purchasing from sellers based in other EU countries has risen most in Estonia (27%, +13 pp), Latvia (28%, +12pp) and Ireland (47%, +11 pp). Malta (34%), Ireland (22%) and Estonia (21%) are the countries where the largest proportions of respondents purchased goods or services from sellers based outside the EU. Conversely, less than five percent of respondents did so in Italy (4%), Poland (4%), Romania (4%) and Bulgaria (2%). Since the previous survey, purchasing from sellers based outside the EU has risen most in Estonia (21%, +12 pp), Ireland (22%, +7 pp) and Latvia (20%, +7 pp). 30

Base: respondents who use the Internet (N=21,015) (*) The EU average in 2012 did not include Croatia and Denmark 31

A socio-demographic analysis shows that the respondents most likely to shop online were: Those aged 25-39 (68%) compared with those aged 55 and over (52%) who were the least likely to shop online; Respondents with more years of education. Just above seven in ten respondents (72%) who completed full-time education at the age of 20 or over have shopped online in the last year compared with four in ten (40%) of those who finished their education at the age of 15 or under (76%); Managers (82%) compared to other socio-professional categories (where online shopping ranged from 51% to 64%); Those who never or almost never struggle to pay their bills (68%) compared with respondents who have difficulties most of the time (48%). Base: respondents who use the Internet (N=21,015) 32

3.1.2. Purchasing goods or services in other EU countries - The majority of Europeans have not purchased goods or services on trips to other EU countries - Respondents were asked if they had purchased goods or services in other EU countries while on holiday or if they had made a trip to another EU country primarily to purchase goods and services in the last 12 months 12. Across the EU28, just under a fifth (19%) of respondents had purchased goods or services in another EU country while on holiday or on a business trip. The proportion of Europeans shopping while on these types of visits has remained stable since the previous survey conducted in 2012. Respondents were slightly less likely than in 2012 to have made trips primarily in order to purchase goods or services: in this survey 10% of respondents have done so (-4 pp). (*) The EU average of 2012 did not include Croatia and Denmark 12 QC8. In the last 12 months, have you? 1. Made a trip to another EU Member State primarily in order to purchase goods or services (trip made for this purpose, for purchasing clothes, electronics, etc.); 2. Purchased goods or services, while on holiday or on a business trip in another EU Member State (excluding expenditures linked to the trip such as travel, accommodation, leisure activities, meals). 33

At a national level, respondents in Luxembourg (53%), Sweden (50%) and Denmark (49%) were most likely to have purchased goods or services during a holiday or a business trip in another EU Member State. Respondents in Bulgaria (10%), Hungary (10%), Spain (9%) and Greece (6%) were least likely to have done so. The highest increases were recorded in Slovenia (36%, +10 pp), Latvia (31%, +8 pp), Cyprus (32%, +7 pp) and Croatia (20%, +7 pp). Decreases were recorded in nine Member States, most markedly in Austria (30%, -15 pp), Belgium (26%, -6 pp) and the Netherlands (33%, - 4 pp). (*) The EU average of 2012 did not include Croatia and Denmark 34

Respondents in Luxembourg (42%), Slovenia (33%) and Slovakia (32%) were most likely to have made a trip to another EU Member State in the last 12 months primarily in order to make a purchase of goods or services. Respondents in Greece (4%), Spain (4%) and Hungary (3%) were least likely to have done this. The highest increases were recorded in Slovenia (33%, +5 pp), Luxembourg (42%, +4 pp) and Romania (14%, +3 pp). Decreases were recorded in 18 Member States, most markedly in Austria (22%, -22 pp), Belgium (16%, -11 pp) Germany (9%, -8 pp) and Italy (6%, -8 pp). (*) The EU average of 2012 did not include Croatia and Denmark 35

To summarise, the chart below shows the combined proportions of people who have made a trip to another EU Member State primarily in order to purchase goods or services and those who have purchased goods or services while on holiday or on a business trip in another EU Member State. The proportion of respondents who have purchased goods or services from another EU Member State remains stable since 2012: 22% of respondents shopped in another EU country in the current survey and 24% of respondents had done so in 2012. More than three-quarters (77%) said that they have not shopped in another EU country in the last 12 months, a slight increase since the 2012 survey when 75% had not done so. (*) The EU average of 2012 did not include Croatia and Denmark 36

At a national level, respondents in Luxembourg (67%), Denmark (56%) and Sweden (53%) were most likely to have shopped in another EU country, either when making a trip expressly for this purpose or while on holiday or a business trip. Respondents in Hungary (11%), Spain (10%) and Greece (8%) were least likely to have shopped in another EU country. The highest increases were recorded in Latvia (34%, +7 pp), Slovenia (45%, +7 pp), Czech Republic (30%, +6 pp) and Luxembourg (67%, +6 pp). Decreases were recorded in nine Member States, most markedly in Austria (37%, -19 pp), Belgium (32%, -9 pp) and Germany (25%, -6 pp). (*) The EU average of 2012 did not include Croatia and Denmark 37

A socio-demographic analysis shows that the respondents most likely to have made a purchase in another EU Member State were: Those aged 15-24 and 25-39 (both 29%), compared with respondents aged 55 and over (14%); Those who stayed in education the longest (31%) or are still studying (32%), compared with respondents who left education at the age of 15 or under (7%); Managers (39%), students (32%), the self-employed (29%) and other white collar workers (28%) compared with the other socio-professional categories (ranging from 13%-21%); Respondents who almost never or never have difficulties paying bills (26%) compared with those who have difficulties paying bills most of the time (13%). (*) The EU average of 2012 did not include Croatia and Denmark 38

3.1.3. Cross-border purchase behaviour in the European Union - Around a third have bought goods or services from other EU countries, a proportion that has remained stable since 2012 - To conclude the section on cross-border purchase behaviour, the chart below shows all the respondents who have bought goods or services in another EU Member State in the last 12 months, whether this was over the Internet, during a trip made primarily in order to purchase goods or services or while on holiday or on a business trip 13. Across the EU28, 30% of respondents have bought goods or services in another EU Member State in the last 12 months, while 70% have not. Similar results were found in the 2012 survey, when 29% had done so, compared with 71% who had not. (*) The EU average of 2012 did not include Croatia and Denmark 13 QC7. In the last 12 months have you bought or ordered any goods or services over the Internet for private purposes from any of the following? QC8 In the last 12 months, have you? 1. Made a trip to another EU Member State primarily in order to purchase goods or services (trip made for this purpose, for purchasing clothes, electronics, etc.); 2. Purchased goods or services, while on holiday or on a business trip in another EU Member State (excluding expenditures linked to the trip such as travel, accommodation, leisure activities, meals). 39

3.2. REASONS FOR PURCHASING GOODS OR SERVICES IN OTHER EU COUNTRIES - The most likely reason for purchasing goods or services in another EU Member State is the price - This last section looks at the reasons respondents gave for purchasing goods or services from another Member State in the last 12 months 14. A majority of respondents said that they had shopped in another EU country because the prices were lower than in their country (57%). Three in ten respondents (30%) said that they had purchased goods or services from another Member State because the choice was bigger (30%), whilst less than a fifth of respondents did so because the quality was better (18%). A significant proportion of respondents (17%) spontaneously said that they had shopped abroad for other reasons while less than a tenth were unable to give an answer (8%). Base: respondents who bought goods or services from another EU Member State in the last 12 months (N=8,242) 14 Q9. In the last 12 months, have you bought at least one good or service from another EU country for any of the following reasons? The prices were lower than in (OUR COUNTRY); The quality was better than in (OUR COUNTRY); The choice was bigger than in (OUR COUNTRY); Other reasons (SPONTANEOUS); DK/NA (SPONTANEOUS) 40

At the national level, price was the most important factor for respondents in 24 Member States. Respondents in Denmark (74%), Greece (71%) and Croatia (70%) were the most likely to say that they had shopped in another Member State because the prices were lower. However, only around four in ten respondents in Portugal (43%), Spain (42%) and Hungary (40%) gave this reason, as did a third of respondents in Bulgaria (32%). The only country where respondents were more likely to say that they had shopped in another EU country because the choice was better as opposed to any other reason was Luxembourg (60%). However, a majority also held this view in Estonia (61%), Malta (58%), Latvia (52%) and Slovenia (51%). At the other end of the scale, around a fifth of respondents in Portugal (22%), France (21%) and the UK (17%) said the same. Respondents in Romania (73%), Bulgaria (58%) and Hungary (48%) were more likely to say that they had shopped in another EU country because the quality was better as opposed to the other reasons. However, this was the minority opinion in 23 of the remaining Member States, most notably in Luxembourg (9%), Denmark (8%), Finland and Sweden (both 7%). It is worth mentioning that at least a fifth of respondents spontaneously said that they had bought goods or services in another Member State for other reasons in Spain (28%), the Netherlands (24%), Germany and Luxembourg (both 20%). 41

Base: respondents who bought goods or services from another EU Member State in the last 12 months (N=8,242) 42

The largest differences across the socio-demographic groups are seen for those who said that they had purchased goods or services in another Member States because the prices were lower. Younger respondents in particular were more likely to cite this reason: more than six in ten (61%) of those aged 15-24 do so, compared with just over half of respondents aged 55 or older (52%); The age at which respondents left full-time education was also salient. Generally the longer respondents had stayed in education, the less likely they were to say that they had shopped in another Member State because the prices were lower (61% of those who left school at the age of 15 or under compared with 55% of those who studied until the age of 20 or over); Difficulties with paying bills was weakly related, and those who struggle most of the time were more likely to say that they had shopped in another Member State because the prices were lower (66%). Base: respondents who bought goods or services from another EU Member State in the last 12 months (N=8,242) 43

CONCLUSIONS One of the main objectives of this research was to establish how much European citizens know about Value Added Tax (VAT), understand the importance they attach to VAT as a source of national revenue and gauge their perceptions of their own national VAT rate as compared with other EU countries. Two-thirds (65%) of European citizens were able to correctly cite their national standard VAT rate, while 35% either gave a wrong answer or were unable to answer. With the exception of Finland (49%), the UK (47%), France (41%) and Ireland (31%), a majority of respondents in all Member States were able to correctly state the standard VAT rate in their country. More than eight in ten (84%) European citizens thought that VAT is an important revenue source in their country. This opinion was shared by at least 72% of respondents in every Member State. While the majority thought VAT is an important revenue source, nearly half of respondents (48%) also believed that they pay a higher rate than in other Member States, while 25% thought it is about the same and just 10% thought it is lower. Another key element of this survey was to measure the awareness of reduced rates and perceptions of how these may impact the national public budget. Once again, a majority of European citizens (61%) were aware that reduced rates of VAT are applied in all Member States including in their country to a number of goods and services, while just over a third (36%) were unaware of these different VAT rates. When asked about the impact of reduced VAT rates on the national public budget, a majority of EU citizens (56%) thought that the application of reduced VAT rates leads to a very important or fairly important reduction in revenue. After being provided with a series of four statements relating to reduced VAT rates, this survey found that more than four in ten Europeans (43%) were in favour of abolishing reduced rates and replacing them with different alternatives, while slightly less than four in ten (39%) thought that reduced VAT rates should continue unchanged. The most chosen alternative was lowering the standard VAT rate on all good and services (24%), which was followed by a system where only the poorer households receive an annual fixed cash allowance (10%) and finally a system where every household receives an annual fixed cash allowance (9%). It is worth noting that just under a fifth of respondents (18%) did not know or understand enough to give their opinion about these alternatives to reduced VAT rates. The survey asked respondents about their cross border purchase behaviour for private purposes, both via the Internet (online shopping) and on trips to other Member States. Three in ten of respondents (30%) had purchased goods or services in another EU Member State in the last 12 months, close to the 29% who had done so in the previous survey conducted in 2012. 44

Over half of European citizens (56%) who use the Internet had made online purchases of goods and services from sellers based in their own country in the last 12 months, an increase of eight percentage points since 2012. Under a fifth or respondents (19%) had made purchases from sellers based in another EU country (+4 pp from 2012). Around a fifth of European citizens (22%, -2 pp since 2012) had made purchases of goods and services for private purposes when visiting other countries, either during a business trip or holiday or when making a trip primarily to purchase goods or services. The reasons why European citizens had chosen to purchase goods or services from another country were also explored. The most frequently mentioned reason was the lower price (57%), followed by greater choice (30%) and better quality (18%). 45

ANNEXES

TECHNICAL SPECIFICATIONS

SPECIAL EUROBAROMETER 424 Public perceptions of VAT TECHNICAL SPECIFICATIONS Between the 11 th and the 20 th of October 2014, TNS opinion & social, a consortium created between TNS political & social, TNS UK and TNS opinion, carried out the wave of the EUROBAROMETER survey, on request of the EUROPEAN COMMISSION, Directorate-General for Communication, Strategy, Corporate Communication Actions and Eurobarometer unit. The Special Eurobarometer 424 is part of the wave and covers the population of the respective nationalities of the European Union Member States, resident in each of the Member States and aged 15 years and over. The basic sample design applied in all states is a multi-stage, random (probability) one. In each country, a number of sampling points was drawn with probability proportional to population size (for a total coverage of the country) and to population density. In order to do so, the sampling points were drawn systematically from each of the "administrative regional units", after stratification by individual unit and type of area. They thus represent the whole territory of the countries surveyed according to the EUROSTAT NUTS II (or equivalent) and according to the distribution of the resident population of the respective nationalities in terms of metropolitan, urban and rural areas. In each of the selected sampling points, a starting address was drawn, at random. Further addresses (every Nth address) were selected by standard "random route" procedures, from the initial address. In each household, the respondent was drawn, at random (following the "closest birthday rule"). All interviews were conducted face-to-face in people's homes and in the appropriate national language. As far as the data capture is concerned, CAPI (Computer Assisted Personal Interview) was used in those countries where this technique was available. For each country a comparison between the sample and the universe was carried out. The Universe description was derived from Eurostat population data or from national statistics offices. For all countries surveyed, a national weighting procedure, using marginal and intercellular weighting, was carried out based on this Universe description. In all countries, gender, age, region and size of locality were introduced in the iteration procedure. For international weighting (i.e. EU averages), TNS Opinion & Social applies the official population figures as provided by EUROSTAT or national statistic offices. The total population figures for input in this post-weighting procedure are listed below. TS1

Readers are reminded that survey results are estimations, the accuracy of which, everything being equal, rests upon the sample size and upon the observed percentage. With samples of about 1,000 interviews, the real percentages vary within the following confidence limits: Statistical Margins due to the sampling process (at the 95% level of confidence) various sample sizes are in rows various observed results are in columns 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 95% 90% 85% 80% 75% 70% 65% 60% 55% 50% N=50 6,0 8,3 9,9 11,1 12,0 12,7 13,2 13,6 13,8 13,9 N=50 N=500 1,9 2,6 3,1 3,5 3,8 4,0 4,2 4,3 4,4 4,4 N=500 N=1000 1,4 1,9 2,2 2,5 2,7 2,8 3,0 3,0 3,1 3,1 N=1000 N=1500 1,1 1,5 1,8 2,0 2,2 2,3 2,4 2,5 2,5 2,5 N=1500 N=2000 1,0 1,3 1,6 1,8 1,9 2,0 2,1 2,1 2,2 2,2 N=2000 N=3000 0,8 1,1 1,3 1,4 1,5 1,6 1,7 1,8 1,8 1,8 N=3000 N=4000 0,7 0,9 1,1 1,2 1,3 1,4 1,5 1,5 1,5 1,5 N=4000 N=5000 0,6 0,8 1,0 1,1 1,2 1,3 1,3 1,4 1,4 1,4 N=5000 N=6000 0,6 0,8 0,9 1,0 1,1 1,2 1,2 1,2 1,3 1,3 N=6000 N=7000 0,5 0,7 0,8 0,9 1,0 1,1 1,1 1,1 1,2 1,2 N=7000 N=7500 0,5 0,7 0,8 0,9 1,0 1,0 1,1 1,1 1,1 1,1 N=7500 N=8000 0,5 0,7 0,8 0,9 0,9 1,0 1,0 1,1 1,1 1,1 N=8000 N=9000 0,5 0,6 0,7 0,8 0,9 0,9 1,0 1,0 1,0 1,0 N=9000 N=10000 0,4 0,6 0,7 0,8 0,8 0,9 0,9 1,0 1,0 1,0 N=10000 N=11000 0,4 0,6 0,7 0,7 0,8 0,9 0,9 0,9 0,9 0,9 N=11000 N=12000 0,4 0,5 0,6 0,7 0,8 0,8 0,9 0,9 0,9 0,9 N=12000 N=13000 0,4 0,5 0,6 0,7 0,7 0,8 0,8 0,8 0,9 0,9 N=13000 N=14000 0,4 0,5 0,6 0,7 0,7 0,8 0,8 0,8 0,8 0,8 N=14000 N=15000 0,3 0,5 0,6 0,6 0,7 0,7 0,8 0,8 0,8 0,8 N=15000 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 95% 90% 85% 80% 75% 70% 65% 60% 55% 50% TS2

TS3