Action plan to combat VAT fraud in the European Union

The short-term action plan presented here is the first step towards a more tightly coordinated tax strategy within the European Union. It aims to implement three main types of measure providing for improved exchange of information between Member States and the strengthening of administrative cooperation between Member States with regard to action to combat fraud and in terms of invoicing.

ACT

Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee on a coordinated strategy to improve the fight against VAT fraud in the European Union [COM(2008) 807 final – Not published in the Official Journal].

SUMMARY

The European Commission presents a short-term plan, the aim of which is to achieve a coordinated strategy to combat tax fraud within the internal market. Three types of measure are proposed.

Scope

This Communication deals with the fight against VAT fraud and the recovery of this tax.

Preventing VAT fraud

The Commission proposes a set of measures to enhance tax systems and tax cooperation, with a view to the prevention of VAT fraud.

Firstly, the Commission proposes to introduce minimum Community standards for the registration and deregistration of traders in the VIES system in order to improve the reliability of information contained in the system.

Traders must also be able to have electronic confirmation of the name and address of business partners who are subject to VAT.

The harmonisation and simplification of invoicing rules is also planned in order to reduce the administrative burdens on business and to facilitate controls. These measures include for example common storage periods and harmonised rules concerning invoice dates.

In addition, the notion of the date of chargeability of VAT for intra-Community deliveries of goods and the provision of services should be harmonised to ensure that reporting takes place in both of the Member States concerned at the same time.

Detecting VAT fraud

In order to improve the detection of VAT fraud, the Commission intends to adopt measures to increase the effectiveness of Tax Administrations and in particular to promote better reporting between Member States in intra-Community transactions.

Rules are also proposed concerning VAT exemption on imports to better control these transactions.

The Commission is also seeking to enhance cooperation between Member States in the field of administrative cooperation. It is crucial that certain information be exchanged automatically. Many actions funded by the Fiscalis programme have already been implemented to this effect.

The establishing of a legal framework is proposed, allowing the competent authorities of one Member State to have automated access to specific data contained in the database of another Member State relating to the identification and activities of a trader.

Finally, the creation of a European network Eurofisc for early warning on the risks of VAT fraud and the analysis of these risks is proposed.

Collection and recovery of taxes

The Commission intends to propose measures to enhance the possibilities for Tax Administrations to recover VAT losses in cross border cases.

The principle of joint and several liability for tax losses should be applied to traders who do not provide the required information concerning intra-Community operations when this omission is the cause of tax losses.

The Commission also provides for the harmonisation of instruments laying down enforcement or precautionary measures with the aim of reducing administrative burdens and increasing the effectiveness of recovery.

It is also necessary to guarantee the appropriate protection of all VAT revenue in all Member States by all Member States.

Legislative proposals

The measures described above are in the form of four packages concerning:

• the reduction of timeframes to speed up the exchange of information between Member States;
• collection and recovery of taxes in cross border situations;
• enhancing administrative cooperation between Member States;
• certain aspects of the fight against fraud and invoicing.

Reflection on a longer term scale

The Commission suggests creating an ad hoc group involving tax authorities and representatives of large as well as small and medium-sized enterprises. The objective of this ad hoc group would be to examine how the use of IT tools could improve, to the mutual benefit of all parties, the relationship between taxpayers and tax authorities in terms of VAT obligations, audit, and communication in general.

Context

This short term action plan is the fruit of a long debate launched in 2006 by the Communication which dealt with the necessity of developing a coordinated strategy with a view to stepping up the fight against tax fraud. Different European institutions have looked into the question, as have Member States and representatives of the business world.

The action plan revises the VAT anti-fraud strategy.

Last updated: 25.03.2009