Brussels, 28/11/2006 (Agence Europe) - There were differing opinions within the Ecofin Council on the best way to deal with tax fraud. Such is the feeling emanating from discussions among European finance ministers on Tuesday. The Econfin Council asked the Commission to bring forward an overall European strategy in this area for June 2007 (see EUROPE 9315). On the VAT package, to simplify requirements on Value Added Tax (VAT), it agreed to extend directive 2002/38/EC on VAT rules applicable to broadcast services, television and some electronic services until the end of 2008.
Germany and Austria restated their desire to have application of the reverse charge mechanism extended throughout their territory. Under this mechanism, which today is only possible in these two countries on a sectoral basis (e.g. the building sector in Germany), only whoever is last subject to VAT is liable to this tax. The Austrian finance minister felt the application of this mechanism had had a positive effect on combating fraud and tax revenue in his country, and had not had any effect on other Member States. In the opinion of his German counterpart, the application at national level would remain only an option for Member States. Around eight or nine billion euro are lost through VAT fraud pointed out Mr Steinbrück. In the opinion of the experts, Germany is making adoption of the VAT package conditional on its being offered the opportunity to amply the reverse charge mechanism on its territory.
The Commission is not convinced of the benefits of this mechanism at the level of a Member State. It feels that it is one way among others of combating tax fraud. It also feels that application of the reverse charge mechanism nationally would complicate the situation for companies and would present difficulties for the operation of the internal market unless conditions for the application were harmonised. Laszló Kovács, European Commissioner with responsibility for taxation pointed out that around twenty Member States opposed such an eventuality. They feared the transfer of tax fraud to countries which did not apply this system. Earlier in the year, the Commission said no to Germany's request, but proposed to allow the United Kingdom the opportunity to apply the reverse charge mechanism on certain electronic products, such as computer chips and MP3 players. On Tuesday, ministers did not make a decision on the British request, the UK having removed this point from the Ecofin Council agenda. (mb)