EU Commission Urges More Action To Combat VAT Fraud

by Ulrika Lomas, Tax-News.com, Brussels

27 April 2004

While acknowledging that there have been “major improvements” in the fight against VAT fraud in recent years, a Commission report released last week has identified areas where member states must improve measures to combat fraud.

According to the report, some member states have estimated that up to 10% of their net VAT receipts are lost each year and thus VAT fraud remains a “major concern”. However, the Commission conceded that the exact extent of fraud is “difficult to quantify.”

Rejecting calls from some member states for the VAT system itself to be reformed, the Commission’s report states that fraud can be fought effectively within the current framework and recommended that countries implement a series of measures including: more intensive use of administrative cooperation arrangements; greater use of multilateral controls; removal of remaining legal barriers (such as legislation on secrecy) to the exchange of information; and implementation of more efficient electronic tax audit systems.

The report also urges member states to adopt as quickly as possible a national plan to reduce the average response time to mutual assistance requests and implement best practices to combat carousel fraud.

"Our report highlights the important progress that has been made over the past three years in tackling the problem of VAT fraud" commented Taxation and Internal Market Commissioner Frits Bolkestein.

"Fraud can be combated effectively without making drastic changes to the VAT system as long as Member States continue both to co-operate with each other and to make improvements to their individual national control arrangements," he concluded.

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