Brussels, 19/06/2001 (Agence Europe) - With the aim of improving the fight against VAT fraud, the Commission proposed a regulation on Tuesday to enhance cooperation between national administrations and an amendment to the directive on mutual assistance regarding direct and indirect taxation, to extend information exchange to certain taxes on insurance premiums. These two proposals aim to remedy the weaknesses identified in the Commission's report on VAT fraud and by the ad hoc Working Group on tax fraud. "We hope to organise controls in such a way as to prevent fraud, rather than chasing after fraudsters", declared a Commission official.
In the first six months of 1998, Member States detected no less than 250 cases of "VAT carousel-type frauds", involving total losses in revenue in the order of 500 million euro. You may recall, by virtue of the VAT transition regime set up on 1 January 1993, sales of goods by those liable to pay the tax in a Member State to operators registered for VAT in other Member States are exonerated from this tax, the VAT being payable by the buyer in the country of destination. Given that goods move between EU Member States without being taxed, the system may induce fraud. Perpetrated by criminal organisations, intra-Community fraud, which especially concerns small-sized goods but of great value (whence, computer equipment…) goes through a chain of complex transactions that regularly escape legal control, mainly due to the ineffectiveness of the current information exchange procedures between national administrations and the lack of spontaneous cooperation.
According to the European Executive, the regulation being proposed has as goal to "establish clearer and binding rules for information exchange, ensure more direct contacts between national services in the fight against fraud and intensify information exchange". The new system will replace the two legal instruments currently governing administrative cooperation: 1 ) the directive on mutual assistance regarding direct and indirect taxation; 2 ) Regulation 218/92 on cooperation in the field of indirect taxation. "The directive is too general, whereas the system provided for by the Regulation does not allow for enough fast reaction. The new Regulation mergers these two texts into one Regulation and seeks to improve their efficiency", an official commented. The Draft Regulation sets out the rights and obligations of all parties regarding requests for information between Member States, deadlines for answering requests for assistance, the presence of foreign officials during controls and the use that may be made of the information communicated.
The main innovation consists in providing for direct communication between national services, whereas today the rule is communication between central liaison offices. Direct contact would allow for better mutual understanding of any request for information and greater motivation of controllers, and avoid wasting the few resources there are. The second expected improvement is the intensification in information exchange, inadequate as we stand except for the VIES (VAT Information Exchange System). The proposal establishes an obligation of communication, including of information received from third countries, in all cases where this information could help Member States better combat fraud..
For Jonathan Todd, the spokesman for the Commissioner responsible for the Internal Market, Frits Bolkestein, "acceleration of information exchange and cooperation at local level are two very important matters, in the sense that, for a large part of the fraud, intervention must be quick". The Commission stipulates that, in the long-term, it would like to extend the new system to third countries. Currently, such a mechanism already functions between the Scandinavian countries, including Norway.