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Anti-tax fraud measures
The aim of this Communication is to spark off a discussion on a European strategy for combating fiscal fraud. Levels of tax fraud are on the increase, and Member States can no longer act in isolation. The Commission is proposing a new Community approach to administrative cooperation with third countries and is prepared to engage in a discussion on the need to modify VAT systems. It is also proposing to develop cooperation between Member States by strengthening measures relating to indirect taxation and by improving Community legislation in the field of direct taxation and assistance in the recovery of taxes.
Commission Communication, dated 31 May 2006, to the Council, the European Parliament and the European Economic and Social Committee concerning the need to develop a coordinated strategy to improve the fight against fiscal fraud [COM(2006) 254 - Not published in the Official Journal].
This communication seeks to trigger a debate based on lines of reflection regarding the factors to be taken into account in the context of developing a coordinated strategy at European level to improve the fight against fiscal fraud.
Administrative cooperation between Member States
With a view to improving administrative cooperation between Member States, the Commission proposes to:
- strengthen not merely the legislation but also the practical measures employed regarding cooperation in the field of direct and indirect taxation and assistance in the recovery of taxes;
- improve risk management so as to enable Member States to focus their inspection efforts on the sectors and companies considered to represent a major fraud risk;
- create a permanent Forum for administrative cooperation at Community level for all direct and indirect taxes.
Cooperation with third countries
Given that tax fraud does not stop at the external borders of the European Union (EU), the Commission is proposing the adoption of a Community approach to cooperation with third countries.
Modifications to existing VAT and excise systems
With a view to reducing the cases of fraud, the Commission is launching a debate on possible modifications that could be made to the existing common VAT and excise systems.
Among the potential avenues to be explored in the VAT sector are the possibility not only of strengthening the principle of joint and several liability for the payment of VAT but also of extending the use of the reverse charge mechanism. In all the cases cited, the Communication lays down the conditions to be met by the new VAT system.
In the excise sector, thought is being given to the current tobacco taxation structure.
Other avenues to be explored
The Commission is also proposing that the discussions should include a range of more specific measures such as:
- increasing tax declaration obligations for companies considered to represent a risk;
- reducing these obligations for companies which obtain an authorisation by entering into a partnership with the tax authorities;
- using standardised, high-performance IT tools for the rapid exchange of information.
In 2004, tax revenues (total tax take plus compulsory social security contributions) represented 39.3% of GDP (gross domestic product) in the EU. Tax fraud accounts for approximately 2 to 2.5% of GDP, i.e. between 200 billion and 250 billion. Tax fraud constitutes an obstacle to the smooth operation of the internal market inasmuch as it leads to significant distortion of competition among taxpayers.