EU sets out plans to crack down on VAT fraud

The European Commission has put forward rules designed to make the EU's VAT system more fraud-proof and to close loopholes which can lead to large-scale VAT fraud, by enabling member states to exchange information more quickly and cooperate more closely to tackle losses estimated to be over €50bn a year

The proposals include establishing an online system for information sharing within 'Eurofisc', the EU's existing network of anti-fraud experts. The system would enable member states to process, analyse and audit data on cross-border activity to make sure that risk can be assessed as quickly and accurately as possible.

To improve the ability of member states to check cross-border supplies, joint audits would allow officials from two or more national tax authorities to form a single audit team to combat fraud, which the Commission says is especially important for cases of fraud in the e-commerce sector. New powers would also be given to Eurofisc to coordinate cross-border investigations.

The new measures would open new lines of communication and data exchange between tax authorities and European law enforcement bodies on cross-border activities suspected of leading to VAT fraud: OLAF, Europol and the newly created European Public Prosecutor Office (EPPO).

The Commission says cooperation with European bodies would allow for the national information to be cross-checked with criminal records, databases and other information held by Europol and OLAF, in order to identify the real perpetrators of fraud and their networks.

There are also two measures designed to tackle specific types of VAT fraud. The first is abuse of the procedure whereby goods that arrive from outside the EU with a final destination of one member state can arrive into the EU via another member state and transit onwards VAT-free. Under the new rules, information on incoming goods would be shared and cooperation strengthened between tax and customs authorities in all member states.

Secondly, in order to clamp down on frauds in the car market where recent or new cars are sold as second-hand goods for which only the profit margin is subject to VAT, rather than the whole of the purchase price, Eurofisc officials would also be given access to car registration data from other member states.

Pierre Moscovici, commissioner for economic and financial affairs, taxation and customs, said: ‘While the tax authorities of member states already exchange some information on business and cross-border sales, this cooperation relies heavily on the manual processing of information.

‘At the same time, VAT information and intelligence on organised gangs involved in the most serious cases of VAT fraud are not shared systematically with EU enforcement bodies.

‘Finally, a lack of investigative coordination between tax administrations and law enforcement authorities at national and EU level mean that this fast-moving criminal activity is not currently tracked and tackled quickly enough.

‘Today's proposals would strengthen cooperation between member states, enabling them to tackle VAT fraud more quickly and more efficiently, including on fraud that takes place online. Taken together, the proposals would give a major boost to our ability to track and clamp down on fraudsters and criminals who steal tax revenues for their own gain.’

These legislative proposals will now be submitted to the European Parliament for consultation and to the Council for adoption.

Amending Regulation (EU) No 904/2010 as regards measures to strengthen administrative cooperation in the field of value added tax is here.

Report by Pat Sweet

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