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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 persons.
  • 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, MEMO/06/221), 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" option);

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 State;
  • 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 at:

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