European Commission Seeks More Cooperation Between Tax Authorities

by Ulrika Lomas, Tax-News.com, Brussels

20 August 2009

The European Commission has adopted a proposal for changes to the regulation on administrative cooperation in the field of valued added tax (VAT), which would extend and reinforce the legal framework for the exchange of information and cooperation between tax authorities.

One of the key elements of the proposal is the creation of a legal base to set up ‘Eurofisc,’ a common operational structure allowing European Union (EU) member states to take rapid action in the fight against cross border VAT fraud. The Commission also adopted on August 18 a report on the functioning of the administrative cooperation.

László Kovács, Commissioner for Taxation and Customs, said: "In the current economic situation it is more important than ever to fight tax fraud efficiently and a fully functioning administrative cooperation between tax administrations is key in that respect. My objective is to ensure that tax authorities have all technical and legal means to take action against European Union wide VAT fraud and to ensure that each tax administration is prepared to protect other Member states' tax revenue as effectively as their own."

According to the Commission, Eurofisc would allow “very fast exchange” of information between all member states as well as the setting up of common risk and strategic analysis, in an attempt to detect and catch fraud at an early stage, and prevent new fraud schemes from emerging and proliferating around the EU.

One important change will be that in future, member states are jointly responsible for the protection of VAT revenues in all EU countries. The proposal also grants tax authorities of other member states direct access to a defined set of information contained in national databases and contains a framework to ensure the “quality, comparability and usability” of this information.

Additionally, the proposal contains rules on VAT registration, deregistration, and a secure system of validation of VAT numbers and identities in a bid to protect honest taxpayers who may innocently trade with a fraudulent counterpart. “This will significantly increase the legal certainty of their business environment when making intra-community supplies,” the Commission claims.

Current arrangements on administrative cooperation in the field of VAT date from 2003. In May 2006 the Commission launched a discussion on the need to develop a coordinated strategy to fight against tax fraud. Then on December 1, 2008, the Commission adopted a Communication setting out a short term action plan with a list of future legislative measures enhancing tax administrations capacity to prevent and detect VAT fraud, in particular ‘missing trader fraud,’ as well as to recover taxes in case of fraud.

Recommended