The EU’s financial interests and the single market are not protected effectively enough against value added tax (VAT) fraud on imports when simplified customs procedures are used, according to a report by the EU’s Court of Auditors published on Monday 24 March.
There are serious weaknesses in the controls carried out by the Member States, particularly as regards the abuse of customs procedure code 42 and the ‘import one stop shop’ (IOSS). This customs procedure is the one under which EU importers can obtain exemption from VAT on intra-Community transactions, and IOSS is a procedure specific to e-commerce in goods imported from third countries. The report explains that IOSS is abused when traders who are not IOSS-registered use the IOSS number of a legitimate IOSS-trader to benefit from a VAT exemption on goods which they then import fraudulently.
The Court of Auditors also notes that there is insufficient cooperation between Member States and at EU level to combat the abuse of these procedures, in particular differences in penalties. Similarly, the conditions for becoming a tax representative under CP42 are not harmonised across the EU. The Court of Auditors deplored the diverging approaches to the invalidation of VAT identification numbers and the inconsistency between the status of VAT identification numbers and the registration and identification numbers of economic operators.
To remedy this, the Court made four recommendations: - conduct an in-depth analysis of the regulatory framework and its implementation; - strengthen this regulatory framework to ensure greater consistency across Member States; - analyse the potential benefits if Member States systematically required transport evidence for customs procedure 42 consignments upon importation; - require direct cooperation between Member States’ customs and tax authorities and strengthen the role of Eurofisc (see EUROPE 13574/23).
For the time being, the EU Council has not yet adopted its negotiating position on the reform of the Customs Union, which includes a new framework for e-commerce and revised VAT rules (see EUROPE 13543/23).
Read the report: https://aeur.eu/f/g3g (Original version in French by Anne Damiani)