"In the current economic situation it is more important than ever to fight tax fraud efficiently and a fully functioning administrative cooperation between tax administrations is key in that respect," said László Kovács, Commissioner for Taxation and Customs, stressing the need to ensure that tax authorities have all technical and legal means to take action against EU-wide VAT fraud and to ensure that each tax administration is prepared to protect other member states' tax revenue as effectively as their own.
The new measures are particularly aimed at combating missing trader inter-community (MTIC) or ‘carousel’ VAT fraud, and include the significant step towards the creation of a legal base to establish Eurofisc - a “common operational structure” which would allow member states to coordinate “rapid action in the fight against cross border VAT fraud.”
Carousel fraud occurs when goods and services are bought in one country without paying VAT. The products are then resold in another EU member state with VAT charged, allowing fraudsters using false VAT identification numbers to pocket the difference and depriving governments of billions of euros each year.
The International VAT Association, an international body focusing on VAT issues, believes the crime is “predominantly achieved using mobile telephones and computer chips as a conduit to facilitate the fraud.”
The new operational structure Eurofisc is intended to create a European network of officials from national tax administrations, which the Commission claims should allow “a very fast exchange of targeted information” between member states, as well as the “setting up of common risk and strategic analysis.”
There are further changes, which the latest proposals bring in, including joint responsibility for the protection of tax receipts between states throughout the Union and direct access to national databases for other member states, in order to rapidly detect “cross-border fraud schemes”.
The proposals include also the setting up of common minimum standards for registration of taxable persons in member states. According to the Commission, abuse of ‘inactive’ VAT identification numbers is a well-known phenomenon in VAT fraud.
The Commission hopes that by establishing clear rules for registration and deregistration of taxable persons it would become impossible for potential fraudsters to obtain or abuse a VAT identification number. The EU executive also expects that the honest traders will be reassured that the information they obtain from counterparts is more reliable.
It remains however to be seen if all national governments would accept to share their VAT databases with their counterparts across the EU despite both Council and Parliament have reiterated the need for better coordination, experts said.
EU leaders have repeatedly stressed in the last two years the need for a common approach to combating tax fraud to supplement and support national efforts.
The European Parliament has also issued last year a resolution on a coordinated strategy to improve the fight against fiscal fraud and even proposed an "automated access by all member States to certain non-sensistive data (...) concerning their own taxable persons (business sector, certain data concerning turnover) and on the harmonisation of the procedures for the registration and de-registration of persons liable for VAT."
The Commission argued that a common framework is far more effective than bilateral arrangements, which may leave some countries without full and rapid access to some information.
