Outdated and complex VAT rules are hampering Irish companies' ability to trade in other EU countries, according to an international VAT conference organised by accountancy firm KPMG.

More time needs to be spent by legislators on updating the 30-year-old VAT regime, KPMG said, although it acknowledged that combating VAT fraud was the immediate priority for EU governments.

The comments came ahead of a meeting of European finance ministers in Brussels tomorrow, where measures including anti-fraud changes to the European VAT regime will be on the discussion table.

"Out-of-date legislation, increased complexity and an increased focus on VAT controls and reporting is making it increasingly hazardous for Irish businesses to operate in many EU member states," said Niall Campbell, VAT partner at KPMG.

"What we need is for the EU to make a priority of modernising the VAT codes across Europe in a more timely and business-friendly manner."

Local interpretations by member states of common EU VAT rules alongside individual member-state regulations can cause problems for multinational businesses, according to KPMG.

"Even the rules on something as apparently simple as claiming VAT back on car-hire expenses change from country to country," said Mr Campbell.

While in the Republic companies cannot claim VAT back on car-hire expenses, half of the VAT can be claimed back in the UK and 100 per cent of it in Germany, he said.

"For an Irish business operating throughout Europe, you can see how a routine matter such as processing local expenses can become a difficult and potentially fraught exercise."

Over the past two years, there have been 66 European Court of Justice judgments on VAT matters and Mr Campbell said 26 of these had been necessary to deal with gaps in the current legislation.

Mr Campbell was speaking at KPMG's international VAT conference in Barcelona last week.

Delegates from 64 multinational companies attended the event to discuss VAT policy and practice in the EU, India, China and the rest of the world.