MNI: EU Commission To Propose Single VAT Area To Beat Fraud

By Tara Oakes

     BRUSSELS (MNI) - The European Commission will propose Wednesday the

creation of a single VAT area to try and revolutionise a system where

cross-border fraud currently costs the bloc E50 billion per year.

     Under plans to be unveiled by Commissioner Pierre Moscovici, suppliers

selling their goods cross-border would apply the sale price and the VAT of the

country of their destination.

     The supplier's country, having collected the tax, would then transfer the

VAT collected to the treasury of the retailer's country. 

     Charging destination rather than supplier cross-border VAT rates has

already been trialled by the EU since 2015 on telecommunications, broadcasting

and electronically supplied services.

     The roll-out to cover all goods eligible is an attempt to modernise a

system described by one commission official as "outdated". The Union's soft

borders where no VAT is charged have led to the lucrative crimes of carousel and

missing trader fraud, where goods can be bounced between countries numerous

times with no-one collecting the VAT before traders eventually disappear.

     Member states are prickly with tax meddling -- and this, like other tax

proposals, will require unanimity to come into force.

     Attempts to come up with a cross-border solution using supplier VAT rates

-- as is the case domestically -- have proved challenging. The official hoped

that the success of the smaller-scale electronic supplies VAT destination tax

would ease member states' worries.

     A transition to the new system is also envisaged to sweeten the deal, with

countries allowed to keep the old system for a select group of companies they

deem trustworthy. Those companies would then be allowed to continue purchasing

goods free of VAT in another EU country and then pay VAT in their own country --

as long as they remained on the trusted list.

     Quick fixes will also be put in place to "cut at the roots" the carousel

fraud before the single area proposal is up and running.

     But the idea would still be to shift wholesale to the new single VAT area

once its benefits had been shown - including, for one official, more

competition.

     "You are not pushed to establish in any member state to avail yourself of

the lowest VAT rate," they said.

     Large-scale carousel fraud losses could nudge sceptical states into

agreement, with technical proposals hoped for spring 2019.

--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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