EC Urges Enactment Of Enhanced Anti-Tax Fraud Powers

by Ulrika Lomas, Tax-News.com, Brussels

09 September 2009

The European Commission on September 4 published a report on the use of the provisions on mutual assistance in agreements between member states for the recovery of claims relating to certain levies, duties, taxes and other measures between 2005 and 2008.

Statistics contained in the report show an increase in the amounts of tax recovered through the procedures of mutual assistance between Member States.

According to the Commission, the amounts involved grew six-fold between 2003 and 2008. However, the amounts actually recovered are still low compared to the amounts that member states claim to recover.

The EC explained that:

"Although it is very difficult to quantify, the available figures show that only 5% of the amounts claimed are actually recovered. In addition, in spite of the increase in the use of mutual assistance, there are still many cases where Member States do not avail of the possibilities offered by the Directive."

Therefore, the Commission recommended that member states strengthen the 'recovery instruments' available in their domestic legislation, and invited the Council and the European Parliament to quickly adopt the legislative proposal, presented on February 2, 2009, to reinforce mutual recovery assistance.

Most tax claims (or debts) due to national treasuries are collected promptly through spontaneous payment by the debtor. When the claims are not settled promptly, national tax administrations can resort to a range of powers to recover the claim. At the limit, the claim can be recovered through the seizure and sale of the debtor's property by the tax administration.

The original Community arrangements for mutual assistance between Member States were put in place because it was recognised that it was increasingly likely that the debtor, or recoverable assets belonging to the debtor, were within the jurisdiction of another Member State.

According to the Commission, arrangements at Community level were deemed necessary to ensure that taxpayers did not evade their obligations in this way. These arrangements, though originally developed to cover agricultural levies and customs duties as sources of Community revenue, were later extended to VAT, excise duties, taxes on income and capital, and taxes on insurance premiums.

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