New measures to combat cross-border VAT fraud
1 December, 2017
The Commission unveiled last Thursday new tools to make the EU's Value Added Tax (VAT) system more fraud-proof and close loopholes which can lead to large-scale VAT fraud, the EU press service reported. The new rules aim at building trust between Member States, so that they can exchange more information and boost cooperation between national tax authorities and law enforcement authorities.
“The Paradise Papers have again shown how some are taking advantage of lax application of EU VAT rules to get away with paying less VAT than others. And we know that VAT fraud can be a source of financing for criminal acts, including terrorism. Combating this requires far more effective information-sharing than currently exists between the competent national authorities – and today's proposals will make that happen,” Taxation Commissioner Pierre Moscovici said.
Under the new proposals, an online system for information sharing within Eurofisc would be put in place in order to ease information sharing. The new measures would also 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. Information sharing between tax and customs authorities would be further improved for certain customs procedures which are currently open to VAT fraud.
The most cautious estimates show that VAT fraud can lead to lost revenues of over €50bn a year for all Member States. Revelations in the Paradise Papers have again shown how tax avoidance schemes can be used to help wealthy individuals and companies to circumvent the EU's VAT rules to avoid paying their fair share of tax. VAT fraud schemes can also be used to finance criminal organisations, including terrorists. The new proposals would enable Member States to cooperate more closely in the fight against these activities.