E-commerce is still vulnerable to VAT and customs duties evasion, according to a new report (see EUROPE 12057/21) by the European Court of Auditors published on Tuesday 16 July.
“E-commerce is particularly open to abuse and its vulnerability to irregularities and fraud has not yet been fully mitigated”, said Ildikó Gáll-Pelcz,the Member of the European Court of Auditors responsible for the report.
The report notes that there is no estimate of the extent of uncollected VAT on cross-border service provision, but recalls that the Commission estimates that losses on supplies of low-value goods from non-Member States amounts to no less than €5 billion per year.
The auditors assessed whether the Commission had established a sound regulatory and control framework and whether Member States’ control measures helped ensure the full collection of VAT and customs duties due on goods and services traded over the Internet.
In their report, they recognise that the controls carried out by the national tax authorities are weak and that the monitoring carried out by the Commission is insufficient. The EU is unable to prevent abuses such as the deliberate undervaluation of goods below the ceilings, in order to benefit from VAT or customs duty exemption, they write.
The auditors also considered the new provisions that will come into force in 2021 (see EUROPE 11919/3). While they believe that they will resolve some weaknesses of the current framework, such as the legal vacuum regarding the liability of intermediaries with respect to VAT, they feel that they will be inadequate in some areas, in particular for the problem of undervaluation.
To remedy this, the report further recommends that the Commission monitor the extent to which non-Member States respond to requests from Member States in accordance with mutual administrative assistance agreements between them and also suggests exploring the possibility of using “technology-based” collection systems, including the use of digital currencies, to tackle VAT fraud in the field of e-commerce.
Member States should, for their part, carefully monitor traders' compliance with the new ceiling of €10,000 for intra-EU service provision, according to the auditors.
See the report: https://bit.ly/2Y6Ne95 (Marion Fontana)