Trust Bloomberg Tax's Premier International Tax offering for the news and guidance to navigate the complex tax treaty networks and business regulations.
By Joe Kirwin
The European Commission will propose a major overhaul of the European Union’s value-added tax rules in September in an effort to fight fraud associated with the tax, costing governments as much 60 billion euros ($63 billion) a year.
“The European Commission has today proposed that the fight against cross-border VAT fraud be taken up as an EU priority to combat serious and organized crime,” said European Taxation Commissioner Pierre Moscovici in an April 12 statement. “It is no longer acceptable to put our heads in the sand, pretending that this problem does not exist.”
According to a commission report published April 12, a large part of the VAT fraud in the EU can be traced to “missing trader fraud” where merchants collect VAT and then disappear. The report says 2 percent of organized crime groups are responsible for 80 percent of the missing trade cross-border fraud.
“Worse, those huge sums can be used to fund further organized cross-border crime such as human trafficking, drug smuggling and terrorist activities, as some ongoing investigations have already shown,” Moscovici said.
The new VAT proposal, which had been planned for early 2017 and will require the unanimous consent of the 28 EU member states in the Council of Ministers, would require that VAT is charged under the rules of the originating country on sales made across borders to another country in the EU at the rate applicable in the country of consumption.
The VAT on a cross-border sale, whether it be goods or services, would be collected by the tax authority of the originating country and transferred to the country where the goods or services are ultimately consumed.
A key provision of the upcoming VAT overhaul would allow EU-based businesses to sort out their VAT via an online web portal in their home country instead of having to register for VAT, file returns and make payments in every EU country where they operate.
The upcoming proposal comes amid the pending “reverse-charging” VAT legislative proposal, which is also designed to fight cross-border fraud. Countries led by the Czech Republic and Austria insist reverse charging, which puts the responsibility for collecting VAT on retailers, is the best way to fight fraud.
The pending reverse-charging plan is expected to be a temporary measure that ends in 2022. Its critics, which include the commission, believe it could clash with the upcoming EU VAT regulatory overhaul.
EU finance ministers also are negotiating two other key VAT legislative proposals. One calls for EU-member states to be given the right to allow digital publications, including e-books, to be allowed the same low or zero VAT rate as printed publications. Another would extend the EU’s one-stop-shop VAT system to allow for various electronic services to be extended to all electronic commerce sales throughout the bloc.
Another pending VAT proposal would eliminate VAT-free status for the importation of approximately 150 million small consignments into the EU, which the European Commission says is also a major source of VAT fraud.
To contact the reporter on this story: Joe Kirwin in Brussels at firstname.lastname@example.org
To contact the editor responsible for this story: Penny Sukhraj at email@example.com
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)