Brussels, 23 November 2007
VAT: The European Commission suggests ways
to improve administrative cooperation in the fight against VAT fraud
As a follow-up of the Communication for a European
strategy to combat tax fraud (IP/06/697)
and on request of the ECOFIN Council in June 2007, the European Commission has
adopted a communication containing a number of key elements for improving Member
States' capacity to tackle VAT fraud, in particular missing trader fraud
(carousel fraud). The purpose of the Communication is to seek political guidance
for future work from the ECOFIN Council meeting on 4 December 2007.
László Kovács, the Commissioner for taxation and customs,
said: "I am particularly satisfied with the intensity of the discussions between
tax authorities, businesses and the Commission which have been generated by the
Communication presented in May last year on the need for an EU-approach in order
to reduce tax fraud. As Commissioner for taxation, I believe that it is
absolutely necessary to provide the tax authorities with more modern and
efficient tools for a quick and accurate exchange of information in their
efforts to combat fraud."
The Communication puts forward certain key elements in view of improving the
current situation. The Council is invited to provide the necessary political
guidance for future work on them:
- There is a need for improving the accuracy of the information exchanged
between MS on intra-community trade If new/ quicker reporting obligations from
traders would be required, than this could be compensated with a reduction of
administrative burdens in other areas.
- A real European approach should be fully integrated into the management of
the VAT system by the tax authorities. Tax authorities taking responsibility not
only for the protection of the national VAT receipts but also for the VAT
receipts of other Member States. This should result in a higher level of
protection of revenues for all Member States.
- There is a need for a common approach to the registration and
de-registration process of taxable persons in the EU. In the Commission's view,
a Member State should be liable for the VAT loss incurred by another Member
State due to its negligence in updating the database of its taxable
- The capacity of tax administrations to collect VAT receipts in fraud cases
should be enhanced, through a targeted use of joint and several liability for
traders involved in fraudulent activities. The legal certainty for genuine
businesses and an improvement of the mutual assistance for the recovery of taxes
has to be ensured.
In its 2006 Communication (IP/06/697,
the Commission pointed out 3 possible ways to tackle VAT fraud:
- Improving the capacity of Member States to tackle tax fraud within the
existing legal framework (the so-called "conventional measures"
More far reaching measures which consist in either:
- Modifying the current VAT system by providing Member States the option to
extend the reverse charge mechanism to domestic transactions in a Member
- Modifying the current VAT system by introducing a system of taxation of
Intra-Community supplies of goods.
Since then, each Council
presidency has put the topic on the agenda of an ECOFIN Council. At the June
2007 ECOFIN Council meeting, the Ministers of finance requested the Commission
to carry out substantial work on all the 3 possible ways forward and to report
by the end of 2007 on the state of play of the discussions.
The present Communication only concerns the conventional measures.
As regards, the more far reaching measures, the substantial degree of
analysis required and the dependency on external inputs (external studies,
inputs from business and Member States administrations), entails that the
Commission will only be in a position to report on these measures at the
beginning of next year.
Further information on the Communication can be found