VAT fraud: economic impact, challenges and policy issues
In spite of a comprehensive anti-VAT fraud regulatory framework, the EU Member States are losing billions of euros each year on account of fraud. As the EU VAT system is undergoing profound modernisation, it is important to take stock of the current state of play and to assess the relevance and effectiveness of the current system and proposals for reform currently under discussion.
In a study conducted by the TAX3 Committee within the European Parliament, it is being suggested that against this background, the first objective is to clarify the features of the main crossborder VAT fraud schemes and to provide updated figures regarding the related loss of revenue for the EU Member States. The second objective is to present the existing EU anti-VAT fraud regulatory framework, together with the most recent proposals made by the European Commission towards the adoption of the ‘definitive VAT system’. The third objective of this study is to make selected recommendations.
It is being recommended that there should be:
- Increased cooperation of the Member States withinEurofiscand active participation in the Transactional Network Analysis system.
- Better use of the existing EU bodies.
- An ambitious mandate for the European Public Prosecutor Office.
- Effective judiciary sanctions of VAT fraud at the national level, with theCriminalisationDirective as a ‘minimum standard’.
- Amendment of the definitive system proposal totake into accountnew risks of fraud and tension between the Member States.
- Accompanying measures for the e-commerce package and further reflection on more structural changes.
- Investing in new technologies to improve the robustness of collection systems,in particular inthe case where the liability to pay the VAT lies with non-EU taxable persons.