The most cautious estimates show that VAT fraud can lead to lost revenues of over €50 billion a year for EU Member States – money that should be going towards public investment in hospitals, schools and roads. 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. Recent reports also suggest that VAT fraud schemes can be used to finance criminal organisations, including terrorists.
While the tax authorities of Member States already exchange some information on business and crossborder 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.
For all these reasons, the European Commission has today unveiled new tools to make the EU's Value Added Tax system more fraud-proof and close loopholes which can lead to large-scale VAT fraud. The new rules aim to build trust between Member States so that they can exchange more information and boost cooperation between national tax authorities and law enforcement authorities.
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 the ability to track and clamp down on fraudsters and criminals who steal tax revenues for their own gain.
Key measures in this legislation include strengthening cooperation between Member States and working with law enforcement bodies. Information sharing between tax and customs authorities would be further improved for certain customs procedures which are currently open to VAT fraud. Information sharing will also apply to trading in cars which is sometimes subject to fraud due to the difference in how VAT is applied to new and used cars.
During the presentation of today's proposal, Pierre Moscovici, European Commissioner responsible for Economic and Financial Affairs, Taxation and Customs, took the opportunity to touch on the upcoming adoption of an EU tax havens blacklist.
The new list of non-cooperative tax jurisdictions is part of the EU's work to clamp down on tax evasion and avoidance. It will help the EU to deal more robustly with external threats to Member States' tax bases, and to tackle third countries that consistently refuse to play fair on tax matters. The list is currently finalised by Member States and should be approved at the ECOFIN meeting on 5 December.
Source: EU Commission News