Anti-tax fraud measures

The aim of this Communication is to spark off a discussion on a European strategy for combating fiscal fraud. Levels of tax fraud are on the increase, and Member States can no longer act in isolation. The Commission is proposing a new Community approach to administrative cooperation with third countries and is prepared to engage in a discussion on the need to modify VAT systems. It is also proposing to develop cooperation between Member States by strengthening measures relating to indirect taxation and by improving Community legislation in the field of direct taxation and assistance in the recovery of taxes.

ACT

Commission Communication, dated 31 May 2006, to the Council, the European Parliament and the European Economic and Social Committee concerning the need to develop a coordinated strategy to improve the fight against fiscal fraud [COM(2006) 254 - Not published in the Official Journal].

SUMMARY

This communication seeks to trigger a debate based on lines of reflection regarding the factors to be taken into account in the context of developing a coordinated strategy at European level to improve the fight against fiscal fraud.

Administrative cooperation between Member States

With a view to improving administrative cooperation between Member States, the Commission proposes to:

• strengthen not merely the legislation but also the practical measures employed regarding cooperation in the field of direct and indirect taxation and assistance in the recovery of taxes;
• improve risk management so as to enable Member States to focus their inspection efforts on the sectors and companies considered to represent a major fraud risk;
• create a permanent Forum for administrative cooperation at Community level for all direct and indirect taxes.

Cooperation with third countries

Given that tax fraud does not stop at the external borders of the European Union (EU), the Commission is proposing the adoption of a Community approach to cooperation with third countries.

Modifications to existing VAT and excise systems

With a view to reducing the cases of fraud, the Commission is launching a debate on possible modifications that could be made to the existing common VAT and excise systems.

Among the potential avenues to be explored in the VAT sector are the possibility not only of strengthening the principle of joint and several liability for the payment of VAT but also of extending the use of the reverse charge mechanism. In all the cases cited, the Communication lays down the conditions to be met by the new VAT system.

In the excise sector, thought is being given to the current tobacco taxation structure.

Other avenues to be explored

The Commission is also proposing that the discussions should include a range of more specific measures such as:

• increasing tax declaration obligations for companies considered to represent a risk;
• reducing these obligations for companies which obtain an authorisation by entering into a partnership with the tax authorities;
• using standardised, high-performance IT tools for the rapid exchange of information.

BACKGROUND

In 2004, tax revenues (total tax take plus compulsory social security contributions) represented 39.3% of GDP (gross domestic product) in the EU. Tax fraud accounts for approximately 2 to 2.5% of GDP, i.e. between 200 billion and 250 billion. Tax fraud constitutes an obstacle to the smooth operation of the internal market inasmuch as it leads to significant distortion of competition among taxpayers.

RELATED ACTS

Commission Communication, dated 25 October 2005, to the Council and the European Parliament - The Contribution of Taxation and Customs Policies to the Lisbon Strategy [COM(2005) 532 final - Not published in the Official Journal].

This Communication launches a plan for EU-wide taxation and customs measures that would help the EU to achieve its Lisbon objectives. The Commission is in favour of a more concerted and coordinated approach at Community level so as to enable the Member States to combat tax fraud more efficiently.

Commission Communication, dated 27 September 2004, to the Council and the European Parliament on preventing and combating corporate and financial malpractice [COM (2004) 611 final - Not published in the Official Journal].

This Communication seeks to provide a global method for reducing the risk of corporate and financial malpractice, combining in equal measure the fiscal, judicial and law enforcement dimensions.

Proposal for a Regulation of the European Parliament and of the Council of 20 July 2004 on mutual administrative assistance for the protection of the financial interests of the Community against fraud and any other illegal activities [COM(2004) 509 final - Not published in the Official Journal] [COD/2004/0172 procedure].

Amended by:

Amended Proposal for a Regulation of the European Parliament and the Council on mutual administrative assistance for the protection of the financial interests of the European Community against fraud and any other illegal activities [COM(2006) 473 final - Not published in the Official Journal] [COD/2004/0172].

Regulation (EC) No 1798/2003 of 7 October 2003 on administrative cooperation in the field of value added tax and repealing Regulation (EEC) No 218/92 [Official Journal L 264, 15.10.2003].

This Regulation establishes a common system of administrative cooperation and exchange of information between the competent authorities of the Member States to ensure proper application of VAT and to combat fraud.

Decision No 1152/2003/EC of the European Parliament and of the Council of 16 June 2003 on computerising the movement and surveillance of excisable products [Official Journal L 162, 1.7.2003, p. 5].

Council Directive 2003/48/EC of 3 June 2003 on taxation of savings income in the form of interest payments [Official Journal L 157, 26.6.2003].

The ultimate aim of this Directive is to enable savings interest received in one Member State by natural persons who are resident for tax purposes in another Member State to be made subject to effective taxation in accordance with the laws of the latter Member State.

Council Directive 77/799/EEC of 19 December 1977 concerning mutual assistance by the competent authorities of the Member States in the field of direct taxation and taxation of insurance premiums [Official Journal L 336, 27.12.1977].

With a view to combating international tax evasion and avoidance, this Directive strengthens collaboration between the Member States' tax administrations, while at the same time facilitating the exchange of information that appears relevant for the correct assessment of taxes on income and on capital.

Last updated: 26.03.2007