EU Approves Tougher Measures To Combat VAT Fraud

by Ulrika Lomas, Tax-News.com, Brussels

09 October 2003

The EU Council of Finance Ministers'(ECOFIN) adoption of a Regulation that will strengthen cooperation between member states on combating VAT fraud by remedying weaknesses in information exchange and administrative cooperation has been supported by the European Commission.

According to the Commission, the Regulation has three main aims: to lay down clearer and more binding rules governing the exchange of information, to provide for more direct contact between national anti-fraud agencies, and to facilitate more extensive exchange of information.

“This Regulation and Directive will speed up and broaden the scope of information exchange between national tax administrations” said Frits Bolkestein, European Commissioner for Taxation. “The Regulation in particular will mean that tax authorities will be better equipped to combat the serious VAT frauds that erode revenues as well as creating competitive problems for legitimate traders”.

The Regulation establishes a single legal framework with clear and binding rules to replace the two legal instruments currently governing administrative cooperation and mutual assistance in the field of indirect taxation, says the Commission.

These instruments have proved inadequate to meet the challenges posed by the Internal Market, being too general, too centralised and not sufficiently intensive to cope with the requirements created by VAT. In particular, the regulation defines more clearly the rights and obligations of tax administrations in terms of co-operation in information exchange, provides for more direct contact between anti-fraud agencies in Member States, and intensifies the level of information exchange.

In addition, The Directive amending Directive 77/799/EEC concerning mutual assistance in the field of direct taxation will mean that Member States will also be able to exchange information concerning certain taxes imposed on insurance premiums. In the Internal Market, insurance companies established in one Member State can sell their products in all the others. Up to now, however, tax authorities have had no means by which to recover taxes due on insurance premiums paid to foreign companies.

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