MNI BRUSSELS WATCH: EC Takes Aim At E50bln X-Border VAT Fraud

By Tara Oakes

     BRUSSELS (MNI) - European Commissioner Pierre Moscovici said he will take

aim at Europe's cross-border VAT "carousel" over the coming weeks.

     European Union figures put the annual VAT loss across the bloc at around

E50 billion, which Moscovici hopes will be restored to state treasuries by new

pan-European cooperation to make sure VAT is charged on international

transactions.

     Much is lost in trades which begin as cross-border transactions, for which

VAT is currently not charged. Fraudsters then sell the goods to another

in-country company, before "shamelessly" dissolving the intermediary before

paying up their VAT receipts, according to Moscovici, EU Commissioner for

Economic and Financial Affairs, Taxation and Customs.

     "The European Commission can't accept such shocking fraud in the single

market," Moscovici told a Brussels audience Tuesday evening as he presented

documentaries made by Dutch and Danish investigative journalists linking the

fraud to terror financing.

     "The rules have been temporary for a very long time," he conceded, adding

that at present the criminals' "creativity outsmarts our capacity to stop them".

     The speed with which fraud rings trade makes them especially difficult to

catch when dealing in intangible products -- previously making millions on the

sale of CO2 certificates, but now also in gas and phone contracts.

     "My goal is to make VAT charged on cross-border transactions as per

national," Moscovici said, which he estimated would cut cross-border fraud in

the EU by 80%.

     Moscovici's departmental staff are hoping to have a proposal out in the

weeks following EC President Jean-Claude Juncker's State of the Union address,

scheduled for next Wednesday.

     It will then require the support of member states, whose own national VAT

schemes vary widely and will require complex tinkering to reach a truly

pan-European solution.

     Hungary charges the bloc's highest standard rate VAT at 27%. Luxembourg

sits at the bottom of the pack, charging only 17% at standard rate.

     According to the Netherland's ZEMBLA team and Danish documentary maker Bo

Elkjaer, fraudsters find higher VAT-rate countries particularly tempting because

they can charge more before disappearing with the funds.

     Tax-related proposals are often a tricky business for the EU, who only have

limited competencies to levy taxes themselves. In the wake of years of tax

evasion and avoidance scandals, the bloc is attempting to step up efforts to

protect revenues, but any tax measure will still require unanimous adoption by

member states.

--MNI Brussels Bureau; +44 203-865-3851; email: tara.oakes@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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