Commission proposes new actions against rampant tax fraud

Recognising that tax fraud is a growing problem, the Commission proposes a set of new measures to increase VAT recovery.

The EU member states have been cooperating in the field of VAT and excise duties recovery since, respectively, 1981 and 1993. However, globalisation and suboptimal cooperation between member state authorities are rendering the present system increasingly outdated and ineffective. 

As EU taxation commissioner László Kovács said: “Tax fraud has become a major cause for concern”. The Commission estimates that VAT fraud costs the EU approximately 60 billion euros each year (or between 2 and 2.5 % of its GDP).

Therefore, on 7 June Kovács will propose the following measures to the EU finance ministers to combat fraud more efficiently:  

  • Improving cooperation between Member States through better administrative mechanisms, new legislative initiatives and the creation of a Community Forum for administrative cooperation
  • Development of a Community approach to cooperation with third countries, which currently is based on bilateral agreements, e.g. by including tax cooperation clauses under economic partnership agreements 
  • Modifying the current VAT and excise duty system so as to strengthen the principle of joint and several liability for tax payments and, possibly, to extend the reverse charge mechanism (requiring EU businesses to charge themselves VAT where services are received from another member state or third country, as e.g. in the construction sector) to domestic transactions 

These measures will require unanimity in the Council.

The Commission emphasises that the proposed measures should in no way hamper attainment of one the key Lisbon objectives, namely, the simplification of the fiscal environment in the EU to enhance competitiveness. 

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