Brussels, 15/01/2016 (Agence Europe) - European finance ministers will examine the fight against VAT fraud at their meeting in April, once the European Commission has unveiled its action plan in this domain, probably on 8 March.
Upon request from the Czech Republic, the ministers held an initial debate at the Ecofin Council on Friday 15 January. The Czech finance minister said that there was much talk of companies wriggling out of tax, but the figures were just as high for income lost due to VAT fraud, which is estimated to cost €170 billion, compared with an EU budget of around €140 billion. The Czechs feel that the reverse-charge mechanism is the best way of tackling this type of fraud.
Amendments to the VAT directive adopted by the Council in July 2013 allow member states to temporarily apply the reverse-charge mechanism to certain predetermined sectors (mobile phones, integrated circuits, supply of gas and electricity, telecoms, game consoles, tablets and laptops, cereals and plants grown for industrial purposes, and raw or semi-finished metals), derogating from the usual VAT rules (see EUROPE 10893). In practice, liability for paying VAT falls by means of this mechanism on the client rather than the supplier (unlike the usual EU VAT system).
In a document drawn up ahead of the Ecofin Council, the Czech delegation says that extended use of the reverse-charge mechanism would eliminate fraud due to defaulting operators and asks also for the authorisation to launch a pilot study which it says could be used to prepare for the future definitive VAT system.
A source says Taxation Commissioner Pierre Moscovici said at the Ecofin Council that the Commission did not oppose the idea of the reverse-charge mechanism, but a legal assessment would be required. Two options could be examined for the action plan that the Commission will unveil in March, viz. the reserve-charge mechanism and the taxation of intra-EU transactions. An initial debate will take place among the college of commissioners at the end of January.
During the debate at Ecofin, Spain, Italy and Portugal said they feared that fraud would relocate to other countries. Austria, Germany and Malta are reported to have said they were in favour of a pilot study. The President of the Council of the EU, Jeroen Dijsselbloem, said a unanimous vote was required to allow a pilot study to take place. During the Ecofin press conference, he said the Commission's action plan would examine the pros and cons of the reverse-charge mechanism and the Council would look into the possibilities, risks and opportunities of a pilot project. (Original version in French by Elodie Lamer)