Brussels, 31/07/2012 (Agence Europe) - On Tuesday 31 July 2012, the European Commission published a draft directive to introduce a rapid reaction mechanism (RRM) to enable EU member states to clamp down fast on serious value added tax (VAT) fraud by bringing in emergency legislation. The RRM will allow member states to obtain, within a month, exemption from EU VAT rules on the reverse charge mechanism whereby beneficiaries of goods and services are made liable for VAT, rather than the supplier. The idea is to tackle complex tax evasion like carrousel fraud involving a number of countries and a number of companies, leading to significant loss of potential tax revenue for countries given the slow nature of normal tax recovery and investigation systems.
Fast reaction is needed for carrousel fraud and the existing system for gaining an exemption from EU rules is cumbersome. Countries have to make an official request, then the Commission draws up special legislation for the case in point, which is submitted to the Council of Ministers, which has to make a unanimous decision on the matter. The RRM will be much faster.
The draft directive will be discussed by the ECOFIN Council in November 2012. (FG/transl.fl)