Brussels, 05/03/2013 (Agence Europe) - Despite general consensus on the objectives, Germany, the United Kingdom, Sweden, Portugal and Luxembourg maintained their opposition - at the Ecofin Council on Tuesday 5 March - to the compromise developed by the Presidency of the EU Council of Ministers for implementing a Rapid Reaction Mechanism (RRM) to enable member states to adopt emergency measures in case of sudden massive VAT fraud. Italy maintained its reservation with regard to the Reverse Charge Mechanism (RCM), concurrent with the RRM, which would enable member states to apply - in cases of fraud and in an optional and temporary way - reverse charges for the payment of VAT on the supply of certain goods and services.
This is about two measures that are part of a package of six, which should enable member states to fight against VAT fraud more quickly and effectively (especially carousel-type fraud) and which, according to the Presidency compromise, should be implemented by the end of 2018.
With regard to the RRM, all member states said they supported the objective of accelerating the procedure for authorising member states to depart from the arrangements of the VAT directive by themselves adopting targeted measures to react to sudden massive fraud. By contrast, reservation was expressed as to the possibility provided for in the draft to confer executive powers on the European Commission by allowing the Commission itself to authorise the member states to depart from the directive - although this currently requires a unanimous decision at the Council on the proposal of the Commission (a procedure which lasts at least five months, according to European Commissioner for Taxation and Customs Union, Audit and Anti-Fraud Algirdas Semeta).
On this point, German Finance Minister Wolfgang Schäuble said that he clearly shares the objective of accelerating the procedure, but is not convinced that, in order to achieve this, it is necessary to renounce a unanimous decision at the Council. In his view, there are alternative solutions for reaching authorisation for a requesting state within the period of a month. The German government is, therefore, not prepared to renounce the principle of unanimity: “Once we have made the step once, it will be difficult not to prolong the regulation”, he said. “This is why I want another rapid reaction mechanism”, he added. This proposal was picked up by the finance ministers of the United Kingdom, Portugal, Luxembourg and Sweden - with the Swedish minister saying that the Council met every month and that it would be easy enough to reduce the time for granting authorisation. Malta, initially reluctant on this point (see EUROPE 10797), actually changed its position, stating that it was able to approve the package - while saying that its support did not mean challenging the principle of unanimity and it was not prejudging its future decisions on this.
With regard to the second matter under discussion, the Reverse Charge Mechanism which would enable member states - in order to fight against certain types of VAT fraud (especially carousel fraud) - to have VAT paid by the purchaser and not the supplier of certain goods and services, the objections came mainly from Italy. Italian Finance Minister Grilli supported the RRM, as it appears in the Presidency's compromise, while saying that its scope needs to be clarified at future discussions. On the other hand, he expressed the greatest reservation on the Presidency's extension of the RCM to a whole series of goods and services which were not in the original Commission proposal (mobile phones, personal computers and tablets, telecommunications, gas and electricity, as well as agricultural products and transactions in the copper sector are listed in the Presidency's compromise). This extension would, in Grilli's opinion, have a negative impact on the integrity and cohesion of VAT regimes as it would enable fraud to move to other sectors. Reservation on this subject also came from Belgium, fearing that the application of the RCM might pass fraud from the supplier to the retailer. Belgium stressed the difficulties created by an increase in bureaucracy and un-adapted accounting systems.
In conclusion, the Presidency stated that discussion on these points will continue at the technical level with a view to adopting the legislative proposals by June. (FG/transl.fl)