Richard Cornelisse

Posts Tagged ‘Member States’

A ‘European Taxpayer’s Code’ – European commission

In Uncategorized on 17/05/2013 at 5:56 pm

A ‘European Taxpayer’s Code’

Title

Consultation on a ‘European Taxpayer’s Code’ [short-name: TPCODE]

Policy fields

Taxation

Target groups

All citizens and organisations are welcome to contribute to this consultation. Contributions are particularly sought from individual citizens, businesses, tax practitioners, academics, intergovernmental, non-governmental and business organisations, tax administrations.

Period of consultation

From 25.02.2013 to 17.05.2013

Objective of the consultation

The Commission adopted on 27th June 2012 a Communication on the fight against tax fraud and tax evasion. An Action Plan which details concrete proposals to strengthen the fight against tax fraud and tax evasion was adopted on 6th December 2012.

One of the 34 measures contained in the Action Plan is the development of a European Taxpayer’s Code which is described as follows (action 17):

“In order to improve tax compliance, the Commission will compile good administrative practices in Member States to develop a taxpayer’s code setting out best practices for enhancing cooperation, trust and confidence between tax administrations and taxpayers, for ensuring greater transparency on the rights and obligations of taxpayers and encouraging a service-oriented approach.

The Commission will launch a public consultation on this at the beginning of 2013. By improving relations between taxpayers and tax administrations, enhancing transparency of tax rules, reducing the risk of mistakes with potentially severe consequences for taxpayers and encouraging tax compliance, encouraging Member States’ administrations to apply a taxpayer’s code will help to contribute to more effective tax collection.”

The Commission services are launching this public consultation in order to collect the opinions of all interested stakeholders on the development of a European Taxpayer’s Code. The questions first aim at assessing the knowledge about and the concrete experience with national taxpayer’s codes (when they exist). Stakeholders are then invited to give their views on the general and procedural principles to be considered in the context of the development of a European Taxpayer’s Code. Finally, contributions are asked on additional topics which could be seen as a natural extension of the fundamental principles, rights and obligations of a Taxpayer’s Code.

The views expressed by the contributors will be used by Commission services to identify the appropriate content of a European Taxpayer’s Code and develop the appropriate policy response. The contributions may also be used in the preparation of possible impact assessments in relation to the Action Plan and more generally the policy area concerned.

How to submit your contribution

We welcome contributions from citizens, organisations and public authorities. Please click here  to submit your contribution.

Received contributions will be published on the Internet. It is important to read the specific privacy statement attached to this consultation for information on how your personal data and contribution will be dealt with.

Please ensure that with the exception of Part III of the questionnaire where your contact details are included your contribution includes no name or personal data either from you or any other person. Otherwise your contribution will not be published nor will, in principle, its content be taken into account.

View the consultation document and questionnaire

Consultation paper(161 Kb)

View the questionnaire

Questionnaire

Reference documents and other, related consultations

COM(2012)351 : Communication from the Commission to the European Parliament and the Council on concrete ways to reinforce the fight against tax fraud and tax evasion including in relation to third countries.

COM(2012)722 : Communication from the Commission to the European Parliament and the Council including an Action Plan to strengthen the fight against tax fraud and tax evasion.

Contact details

via A ‘European Taxpayer’s Code’ – European commission.

 

VAT rates – European Commission – Situation at 14th January 2013

In EU development, Processes and Controls, Tax News on 20/01/2013 at 12:26 pm

VAT rates applicable in the EU Member States.

LIST OF VAT RATES APPLIED IN THE MEMBER STATES

VAT rates – European commission.

page3image3168

Member States

Code

Super Reduced Rate

Reduced Rate

Standard Rate

page3image7824

Parking Rate

Belgium

BE

-

6 / 12

21

12

Bulgaria

BG

9

20

-

Czech Republic

CZ

-

15

21

-

Denmark

DK

-

-

25

-

Germany

DE

-

7

19

-

Estonia

EE

-

9

20

-

Greece

EL

-

6,5 / 13

23

-

Spain

ES

4

10

21

-

France

FR

2,1

5,5 / 7

19,6

-

Ireland

IE

4,8

9 / 13,5

23

13,5

Italy

IT

4

10

21

-

Cyprus

CY

-

5/8

18

-

Latvia

LV

-

12

21

-

Lithuania

LT

-

5/9

21

-

Luxembourg

LU

3

6 / 12

15

12

Hungary

HU

-

5 / 18

27

-

Malta

MT

-

5/7

18

-

Netherlands

NL

-

6

21

-

Austria

AT

-

10

20

12

Poland

PL

5/8

23

-

Portugal

PT

-

6 / 13

23

13

Romania

RO

5/9

24

-

Slovenia

SI

-

8,5

20

-

Slovakia

SK

-

10

20

-

Finland

FI

-

10 / 14

24

-

Sweden

SE

-

6 / 12

25

-

United Kingdom

page3image127336

UK

-

5

20

-

page3image131480

N.B.:Exemptions with a refund of tax paid at preceding stages (zero rates) are not included above (see section V)

TAXUD- I

TAXUD-IITAXUD-III

MEPs back paper-free EU customs union with targeted funding

In EU development, Processes and Controls, Technology on 21/12/2012 at 8:15 pm

The EU customs union must not become a “two-speed” one, in which some member states enable businesses to complete customs formalities electronically, but others require them to do so on paper, said the Internal Market Committee on Tuesday. The committee also amended a proposed customs “action plan” to help member states to acquire high-tech equipment such as scanners.

The modernised EU Customs Code, theoretically took effect in 2008, but is not yet fully applicable, because not all its implementing arrangements are in place.  The information technology used by customs administrations that can afford it has meanwhile continued to develop, so that the Customs Code itself now needs to be updated.

“With this vote we wanted to modernize and expand the EU Customs Union. It plays a fundamental role in the functioning of the single market which needs clearer and more modern common customs rules, at the same time also adapted to the needs of European businesses and to the challenges our customs administrations face” said Constance le Grip (EPP, FR), who is steering the resolution through Parliament. The text was approved in committee with 31 votes in favour, 1 against and 2 abstentions.

Electronic data interchange or two-speed union

MEPs approved proposed paper-free customs procedures and sought to prevent the “two-speed” customs union they fear could emerge if member states fail to introduce an electronic data interchange system between customs administrations and economic operators. Only in exceptional cases and for limited periods should this information be exchanged on paper, they said.

Simpler procedures

The resolution calls for more preferential treatment for “authorised economic operators” (AEOs), such as fewer checks at the point of import or export, automatic access to some simplified customs procedures or having their customs applications processed first.

If any member state tests ways to simplify its application of EU customs legislation, then their findings should be made available to all member states, say MEPs.

IT-focused budget

Given that the modernised customs system cannot work as it should without an adequate budget, the committee also examined a Commission proposal for an EU customs action programme including a support budget of €548 million. However, Parliament will not back this figure until it sees the final results of negotiations on the EU’s next 7-year overall budget.

“The Customs 2020 programme will deliver considerable benefits to EU citizens and business by helping to enable member states to block unsafe or illegal imports and to facilitate trade. This programme should cover technical capacity building and ensure a minimum amount for  developing and maintaining IT systems. Both are vitally important to ensure effective protection of the EU’s external borders”, said the rapporteur Raffaele Baldassarre (EPP, IT).

MEPs proposed that at least 75% of Customs 2020 funds be earmarked for customs IT capacity building. The programme should also provided funding to help member states to buy and maintain high-tech gear such as scanners and laboratory equipment, they add.

Next steps

Although the committee voted some amendments to theCustoms 2020 programme, it postponed its the final vote, on the programme as a whole, to its next meeting.

The committee will also decide in January 2013 whether to open informal negotiations with the Council with a view to reaching first-reading agreements on these two regulations.

via MEPs back paper-free EU customs union with targeted funding.

New VAT rules to make life easier for businesses from 1st January 2013

In EU development, Tax News on 17/12/2012 at 9:17 pm

New VAT rules to make life easier for businesses from 1st January 2013

From 1st January 2013, new EU VAT rules enter into effect, which will make life much simpler for businesses across Europe.

First, electronic invoicing will have to be treated the same as paper invoicing, enabling companies to choose the VAT invoicing solution that works best for them.

This has the potential to save businesses up to €18 billion a year in reduced administration costs.

Second, Member States will be allowed to offer a cash accounting option to small businesses with a turnover less than €2 million a year.

This means that these SMEs will not have to pay the VAT until it has been received by the customer, thereby avoiding cash-flow problems for them.

Algirdas Šemeta, Commissioner for Taxation, Customs, Anti-fraud and Audit, said:

“These new VAT rules reflect what businesses in Europe need today: simpler procedures, reduced costs and support in applying solutions that best meet their needs.”

Background

The second Directive on VAT invoicing was adopted in July 2010, and must be applied in all Member States from 1st January 2013.

It aims to simplify rules on VAT invoicing to reduce burdens and barriers for businesses.

Electronic and paper invoices are placed on an equal footing, with common rules, under the Directive, in order to promote the uptake of e-invoicing. Member States will no longer be allowed to set pre-conditions for the use of electronic invoices, such as e-signatures, and invoices will be allowed to be electronically stored.

In addition, the new rules give, Member States the option of allowing small businesses with a turnover under €2 million to declare and pay their VAT when they receive or make payments , rather than at the time of the invoices.

In view of the long delay that can occur between invoicing the customer and receiving payment, in particular for small businesses, this will provide them with relief in terms of cash flow.

The transposition of VAT invoicing rules in the EU 27 Member States is also a key action under the Digital Agenda for Europe.

For a full explanation of the main VAT invoicing rule changes as from 1st January 2013, see:

via EUROPA – PRESS RELEASES – Press Release – New VAT rules to make life easier for businesses from 1st January 2013.

 

EUROPA – PRESS RELEASES – Speech Combatting Tax Evasion: A Tougher EU approach

In EU development on 08/12/2012 at 12:44 pm

6 December 2012

One Trillion Euro.

That is what we are losing every year to tax evasion and avoidance in the EU.

To break it down, we are talking about €2 000 per European citizen.

It is a scandalous loss of public income, particularly in these economic times.

And it is an attack on the fundamental principle of fairness.

The crisis has made the fight against tax evasion all the more urgent.

But in a globalised economy, with increasingly mobile activity, this is not a battle that can be fought alone.

Success relies on combining forces at national, EU and global level, in a strong, cohesive stance.

On that basis, and as requested by the European Council, I present to you today a comprehensive Action Plan to better fight tax evasion and avoidance as a Union.

It sets out over 30 measures to close loopholes, increase information exchange, reinforce rules and intensify cooperation between Member States.

And all those measures support a new EU stance based on 3 fundamental points:

  • Tax competition in the EU cannot open ways to fraudsters and evaders;
  • The EU should have a stronger EU stance in relation to 3rd countries that facilitate evaders;
  • Tax shopping should be made harder and businesses have to contribute their fair share to act in the single market

Tax Competition

For growth and jobs in the EU, we know that we need quality tax systems.

Tax systems which support companies and promote a favourable business environment.

But equally, tax systems founded on the principles of good governance and fairness where everyone would pay what they owe.

Allow me to focus on the issue of tax competition, as I know that this has become an issue of lively debate.

It is perfectly acceptable for each Member State to strive for a competitive tax system, so long as they do so in a fair and open way.

The problems only arise when tax regimes are artificially designed to steal tax bases or encourage aggressive tax planning.

Tax competition must not open the door to fraudulent or abusive tax practices.

In the EU, we have an instrument to ensure fair tax competition.

The Code of Conduct on Business Taxation provides a solid basis for Member States to assess each other’s tax regimes, and demand that harmful ones be amended.

However, I believe that this Code could be used with more ambition by Member States than it is today.

I urge any Member State that has any concern that our standards are being compromised to immediately put this before the Code.

They should also look into strengthening it and expanding its scope, notably to wealthy individuals.

Among the other ideas in today’s Action Plan are an EU Tax Identification Number, better tools for information exchange, and extending the scope of Eurofisc.

Through better use of our current tools and targeted new actions, we can reinforce transparency, information exchange and fair competition within the EU.

The success of these measures will be determined by the level of commitment amongst Member States themselves.

But they must keep up the peer pressure between them on these issues.

Tax Havens

The next important step that I propose is to extend our good governance principles beyond the EU.

There is no valid reason why our global partners should not respect the same minimum standards as our Member States.

So, we must take a tougher line against tax havens. And we must take it together.

It is time for the EU to have its own definition of tax havens, which goes beyond current globally accepted standards, and to define and use defensive tools against uncooperative jurisdictions.

Today, the Commission recommends that Member States use common criteria to identify and blacklist tax havens, and apply coordinated measures against them.

Acting as a Union, representing 500 million citizens, will prove far more effective in this area than a patchwork of national approaches.

Modern Economy

I have spoken on the role of fair and competitive taxation in fighting tax evasion – at home and abroad.

The third step is to strengthen our tax environment.

We must hamper those that seek to escape taxation by tax shopping amongst mismatches and loopholes between national systems.

The vulnerabilities of national tax systems in a global economy are increasingly apparent, with the greater mobility of capital and increasingly sophisticated tax planning.

Given the cross-border nature of aggressive tax planning, coordinated EU action on this issue holds major added value.

I don’t claim to have a silver bullet that can address all the complexities linked to this issue – that would require a major global shift.

But the approach I propose can certainly close important loopholes and make life harder for tax avoiders in Europe.

What the Commission recommends today is that Member States apply common measures to block opportunities for aggressive tax planners.

They should reinforce their Double Tax Conventions, to prevent them from being exploited for tax avoidance purposes.

And they should adopt a uniform General Anti-Abuse Rule, which would allow them to tax on the basis of real economic substance, and ignore artificial tax arrangements.

At EU level, we will review key legislation, such as the Parent-Subsidiary Directive, and strengthen anti-abuse measures in EU corporate tax laws.

We will also push for a high level of ambition in the international arena, working closely with the OECD to address these problems.

Businesses

Finally, let us not forget the role of the taxpayers themselves in this story.

I have spoken already of the need for business friendly tax systems, which ease compliance costs and reduce administrative burdens.

However, there must be give and take.

Businesses must acknowledge the many benefits they derive from the Single Market, by paying their fair share in taxes.

In the current economic climate, there should be little tolerance of abusive tax schemes used to escape taxation.

Arguing that they are legal does not make them right.

Aggressive tax planning goes against the very nature of corporate social responsibility, as well as undermining fair taxation.

We will develop a Taxpayers’ Code, so there is no uncertainty about the rights and obligations of those operating in the EU.

And

Meanwhile, honest businesses have everything to gain from a stronger EU stance on avoidance.

It will reduce the competitive distortion they face compared to their less honest counterparts, and level the playing field.

Conclusion

To conclude:

Today I have presented the way forward for a stronger EU approach to tax evasion. It is an ambitious agenda, but a highly achievable one.

Now it is up to the Member States to play their part.

They must commit to deeper coordination, support the new tools proposed and unite in pushing our standards globally.

To make sure that the momentum is maintained on this critical subject, I will create a new Platform for Tax Good Governance.

This will closely monitor progress and create incentives for action through peer pressure.

The rewards on offer are great: billions of euros in revenue, and fair and competitive tax systems for recovery and growth.

via EUROPA – PRESS RELEASES – Press Release – Speech Combatting Tax Evasion: A Tougher EU approach.

 

European Commission’s Press Release – The 2013 Annual Growth Survey: Towards fair and competitive tax systems

In EU development, Tax News on 29/11/2012 at 8:35 am

The 2013 Annual Growth Survey: Towards fair and competitive tax systems

National tax reforms in 2011 and 2012 were driven more by consolidation needs than in the preceding few years, resulting in increases in income tax and/or VAT in most Member States.

However, Member States have also faced the challenge of balancing their increased revenue needs with the need to support recovery and growth over the medium to long term.

It is here that the dual function of taxation comes into play. Taxation is more than just a revenue raising instrument.

Depending on how it is applied, it can be used to promote growth and competitiveness, boost employment and address specific social needs. Member States’ should therefore harness this potential of taxation. In their reforms they should focus on making their tax systems growth-friendly, as well as a source of quality revenues.

Tax changes in 2011 and 2012

What does the 2013 Annual Growth Survey say on taxation?

This year’s Annual Growth Survey is consistent with last year’s, in terms of the guidance given for Member States’ tax reforms.

The 5 key objectives which Member States should pursue for growth-friendly tax reforms are as valid now as they were 12 months ago. They should continue to be followed and implemented. These 5 objectives are:

  • Shift taxes away from labour towards more growth enhancing taxes such as consumption and property
  • Broaden tax bases rather than just arbitrarily raising rates, for smarter revenue raising
  • Increase environmental taxation;
  • Improve tax collection and compliance, particularly through the fight against evasion
  • Remove the tax bias which encourages debt

In addition, this year the Commission urges Member States to focus on increasing both the competitiveness and fairness of their tax systems, as these 2 principles determine the legitimacy of any tax system for the public.

Why is a “tax shift” advised?

Economic studies show that certain types of taxes – such as those on labour and income – are more distortive, while others such as consumption and environmental taxes are considered to be more growth-friendly.

These latter can also steer certain behaviours in a way that meets wider societal needs and objectives. The Commission therefore advises Member States to shift taxes away from areas that impede growth (labour, corporate taxes) towards more growth-friendly taxes (consumption, environment).

The Commission recommends in particular limiting the tax burden on labour, notably for the low-paid. Not only can this create more incentive for workers to work and employers to employ, but it also contributes to a fairer tax system by reducing the burden on the most vulnerable.

Despite the general consensus on the need to lower taxes on labour, in 2011 and 2012, the tax burden on labour has remained high.

The latest analyses shows that 1/3 of Member States1 could do more to shift taxes away from labour towards consumption, environment or property.

Moreover, the extent to which focus has been put on redistributing the burden and benefits of this taxation in an equitable way varies considerably depending on the Member State.

Therefore, the Commission reiterates the need for Member States to work on a growth-friendly and fairer tax shift in their reforms.

Why does the Commission recommend broadening tax bases, and how can this be done?

Increasing tax rates isn’t the only way of increasing tax revenues. In fact, a smarter way can often be to remove or reduce the number of tax breaks and exemptions.

For example, limiting the use of reduced VAT rates could provide Member States with important new revenue, without any need for further standard rate increases.

In fact, studies show that if all reduced rates were removed, the standard rate could actually be lowered by up to 7.5 percentage points in some cases, without any impact on overall revenues.

Tax breaks, exemptions and hidden tax subsidies not only reduce national income. They also contribute to a more complex tax system, which creates burdens for businesses and compliance difficulties for taxpayers.

Therefore broadening the tax base can also improve the overall efficiency of the tax system and ease life for companies.

A yearly independent review on all tax exemptions and reduced VAT rates is recommended by the Commission to make sure that intended economic and social objectives are achieved. Very often, this does not seem to be the case.

At EU level, a fundamental reform of the VAT system is currently underway, in order to make it simpler, more efficient and more robust (see IP/11/1508).

As part of this reform, the Commission is carrying out a review of reduced VAT rates, to see whether they are all still justifiable.

A public consultation on this issue was recently launched (see IP/12/1079), and the feedback should feed in to a Commission proposal on reduced rates next year.

The Financial Transactions Tax, which 11 Member States are currently keen to push forward through enhanced cooperation (see IP/12/1138) is another way for Member States to broaden their tax base without burdening ordinary citizens.

One of the objectives of the FTT is to ensure that the financial sector makes a more equitable contribution to public finances.

What is the benefit of increasing environmental taxation?

Green taxes (environment and energy) are considered to be amongst the most growth friendly, and also support wider policy objectives related to climate change, resource efficiency and energy security. Twenty Member States increased excise duties and other environmental taxes in 2011 and the first half of 2012.

However, this comes from a low starting point, and environmental taxes remain underdeveloped in many Member States.

Therefore, the Commission encourages Member States to take further measures to improve the existing design of taxes in this area including by adjusting the structure of tax rates on fossil fuels, indexing environmental taxes, or considering the abolition of reduced VAT rates on energy.

At EU level, the revision of the Energy Tax Directive (IP/11/468) would support Member States in a growth friendly shift towards environmental taxation, while also contributing to the EU’s climate change and energy efficiency goals and removing competitive distortions that currently exist between fuels.

Environmental tax revenues

2000-2010, % of GDP, arithmetic averages

Environmental Tax Revenue across Member States

2010, in % of GDP

Why has the Commission made fighting tax fraud and evasion a priority objective?

Hundreds of billions of euros are lost from national budgets every year due to tax evasion and fraud. Not only does this affect public income, but it also undermines the fairness of tax systems.

Honest taxpayers must pay higher taxes to compensate for evaders not paying their share.

Member States need to strengthen their administrations to combat this problem, and ensure that the controls and sanctions they have in place are strong enough deterrents.

Given the inherently cross-border nature of tax evasion, this is a problem that needs a multi-facetted approach.

Different and complementary actions need to be built up at national, EU and international level if the fight against evasion is to be effective. Close cooperation between Member States’ authorities is crucial for success, as is a strong common approach in dealing with third countries that facilitate EU evaders.

In June, Commissioner Šemeta presented concrete measures to crack down on tax fraud and evasion in the EU (see IP/12/513).

This will be reinforced in the coming weeks with the Commission’s Action Plan to tackle tax evasion and Recommendations on tax havens and aggressive tax planning.

An immediate step that Member States must take, to bring quick and important results in the fight against tax evasion, is to agree on the revision of the EU Savings Directive and the mandates to negotiate stronger agreements with Switzerland and other neighbouring countries. (see MEMO/12/353).

Why should Member States address the debt and housing bias in their tax systems?

Today’s high levels of debt means that many EU economic actors need to reduce their financial exposure.

However, the tax system of some Member States appears to encourage both households and corporate indebtedness.

The favourable tax treatment of mortgages is regarded as one of the contributing factors to over-investment in real estate and the housing price bubble that has played an important role in the crisis in several countries.

In some Member States, EU companies have tax incentives to favour the use of debt over equity. Malta, Greece, Luxembourg and France stood out as the countries with the highest gap between the tax treatment of debt and equity in 2011.

Although clearly lower, the gap was also significantly above the EU average gap, in Portugal and Italy, and above the EU average in Belgium, Spain, Germany and Sweden in 2011.

Tax induced incentives for debt financing should be reduced and debt bias in corporate and housing taxation kept under control. Similarly, aspects of tax schemes which increase the debt bias on households, typically through tax relief for mortgages, should be reviewed.

How can tax systems support competitiveness?

The competitiveness of a tax system extends far beyond merely the tax rate.

In fact, just as important are the cost and ease of compliance, the level of administrative burden, the transparency and stability of the system improving the business environment.

Moreover, a competitive tax system is one that supports the modernisation of the economy.

Dealing with the challenges of developing environmentally friendly taxation can help here, as can addressing the debt bias issue.

At EU level, the Commission is promoting a simpler, more efficient and more robust VAT system and has already initiated work to achieve this.

The proposed common consolidated corporate tax base (CCCTB), could also considerably contribute to the competitiveness of Member States and of the EU as a whole.

By providing harmonised and simplified rules for businesses tax returns, it would lower compliance costs by nearly €1 billion, reduce the administrative burden for cross-border businesses and ensure greater legal certainty.

This, in turn, would create a more favourable environment for business and a more attractive market for investors.

What contributes to the fairness of a tax system?

A fair tax system is one in which everyone pays no more and no less than their share, everybody pays what they owe and the benefits of the tax are evenly redistributed.

Among the ways that Member States can ensure fairer tax systems are by clamping down on tax evasion and avoidance, removing hidden tax subsidies which create competitive distortions, ensuring that social effects are taken into account, and rewarding desirable activities (e.g. rewarding work and enterprise, or environmentally-friendly behaviour).

Fair taxation is an issue which also extends beyond national borders, to the extent that every Member State should be able to collect the tax revenues that it is due.

EU coordination in taxation ensures greater fairness by limiting non-taxation and abuse and preventing a “race to the bottom” approach which can curtail national reform efforts.

It also allows Member States to draw on their strength in numbers when tackling common problems such as harmful tax competition from third countries.

More information is available in taxation paper n° 34 Tax Reforms in EU Member

via EUROPA – PRESS RELEASES – Press Release – The 2013 Annual Growth Survey: Towards fair and competitive tax systems.

VAT fraud – Quick reaction mechanism | European Economic and Social Committee

In EU development on 20/11/2012 at 10:36 am

The Commission has stressed the need to raise efficiency of VAT due to the great need for fiscal consolidation.

As it has been estimated, VAT frauds cost the EU and national budgets several billion euro every year (a recent example is the estimated loss of EUR 5 billion between June 2008 and December 2009 in relation to the greenhouse gas emission allowance trade).

To raise efficiency of the VAT system, the EU needs to improve tax collection and tackle tax evasion.

In this context, on 31 July 2012, the Commission adopted a proposal for a Quick Reaction Mechanism (QRM), which would enable Member States to face the aggressive forms of VAT frauds more rapidly and battle against fraudsters that have become quicker and cleverer.

Member States would no longer face legal difficulties to implement specific emergency measures in the event of sudden and massive VAT frauds.

This is not the case in the EU VAT law that is currently in force, which renders the process slow and cumbersome. This can lead to doubtful results, as it provokes significant delays to the Member States in taking action to stop the fraud immediately, or challenge them before the Courts in case they adopt immediate measures without an appropriate legal basis in the EU legislation.

Under the QRM, it is provided that a Member State would have the possibility, within the period of one month, to apply a “reverse charge mechanism” (the only anti-fraud measure currently specified).

The latter provides that the person who is liable for VAT becomes the recipient rather than the supplier of the goods or services.

This would considerably improve Member States’ chances of tackling complex fraud schemes more efficiently (e.g. carrousel frauds and missing trader fraud), and of reducing the possibility of irreparable financial losses.

Related documents

Via VAT fraud – Quick reaction mechanism | European Economic and Social Committee.

EUROPA – PRESS RELEASES – Taxation: Questions and Answers on reduced VAT rates

In EU development, Tax News, Uncategorized on 13/10/2012 at 3:02 pm

Taxation: Questions and Answers on reduced VAT rates

What EU rules are in place for VAT rates?

Under the EU VAT Directive, Member States must apply a standard VAT rate of no less than 15% to the vast majority of goods and services. Member States also have the option of applying one or two reduced rates of no less than 5% to a restricted list of goods and services.

This list of eligible goods and services is annexed to the Directive and must be strictly respected i.e. Member States cannot interpret it flexibly.

Some examples of goods and services eligible for a lower rate include: foodstuffs, medicines, medical equipment for the disabled, books on all physical means of support, newspapers, periodicals, passenger transport, admission to shows, theatres, museums, etc.

In addition, there is a multitude of derogations on the application of zero rates, super-reduced rates lower than 5%, and reduced rates for products or services not usually eligible.

Some of these derogations were granted during the negotiations in Council or as part of an Accession process. Other particular derogations are included in specific articles of the VAT Directive, such as the possibility to apply a reduced rate to the supply of natural gas, electricity or district heating in certain circumstances.

Why is a review of reduced VAT rates necessary?

The fundamental idea behind VAT is to have a broad-based, universally applied consumption tax. VAT is recognised to be one of the most growth-friendly types of taxes, and is an important source of income for national budgets (accounting for around 20% of all revenues).

However, the wide-scale use of reduced rates by Member States has chipped away at their tax bases.

Limiting the use of reduced VAT rates and exemptions could provide Member States with important new revenue, without having to increase the standard VAT rate.

Studies show that the standard rate could actually be reduced by up to 7.5 percentage points, in some cases, if all reduced rates were to be removed.

In addition, the divergent approach to reduced rates across the Member States has created complexity for EU businesses.

They are currently faced with a large number of different rates across the Single Market, rather than a relatively harmonised system as was envisaged originally.

An economic evaluation carried out by the Commission also confirmed that the use of reduced rates is often not the most suitable instrument for pursuing policy objectives, particularly for ensuring redistribution to poor households or encouraging the consumption of a good that is deemed socially desirable.

In fact, the existing application of reduced rates translates into significant subsidies for businesses, without consumers feeling the benefits of lower final prices.

Moreover, certain reduced rates appear now to contradict wider EU objectives, such as energy efficiency and climate change.

Finally, new questions have arisen that didn’t exist when the rules and list of eligible goods and services for reduced rates were implemented. For example, fast-paced technological developments have led to questions such as whether digital and non-digital products, which serve similar purposes, should be taxed in the same way.

For all these reasons, and as part of the work to make the EU VAT system simpler, more efficient and more robust, the Commission feels that a fundamental review of the reduced VAT rates applied across the EU must be carried out.

How is the Commission conducting the review of reduced VAT rates?

In the Communication on the future of VAT (VAT Strategy) last December, the Commission set out the following guiding principles for a review of reduced VAT rates:

  • Abolition of those reduced rates which constitute an obstacle to the proper functioning of the internal market;
  • Abolition of reduced rates on goods and services for which the consumption is discouraged by other EU policies;
  • Similar goods and services should be subject to the same VAT rate and progress in technology should be taken into account in this respect; so that the convergence between the on-line and the physical environment is addressed.

These principles are now being used to guide an assessment of reduced rates, which the Commission is conducting in close cooperation with businesses and other stakeholders. The public consultation launched today is part of that assessment. It focuses its questions strictly on the 3 criteria laid down, in order to ensure well-targeted and relevant feedback.

The results of this consultation, along with a number of further studies that will be carried out as part of the impact assessment, will feed into new proposals on reduced VAT rates, which the Commission will table next year.

Does the Commission plan to abolish some or all reduced VAT rates?

This consultation is part of the assessment process, and does not pre-suppose the elimination of any particular reduced rate at this stage.

The Commission will only make proposals on the possible abolition or introduction of certain reduced rates next year, once it has completed its thorough review and gathered extensive feedback.

Moreover, it should be remembered that even if the Commission were to propose getting rid of one reduced VAT rate or another, this would have to be unanimously endorsed by Member States before it could happen.

So the review of reduced rates will be a holistic and very inclusive one.

The full list of reduced VAT rates applied in each Member State can be found here: (table of rates)

via EUROPA – PRESS RELEASES – Press Release – Taxation: Questions and Answers on reduced VAT rates.

 

Action programme for customs in the European Union for the period 2014-2020 (Customs 2020)

In EU development, Technology on 03/09/2012 at 7:37 pm

On 29 June 2011, the Commission adopted a proposal for the next Multi-Annual Financial Framework for the period 2014-2020: a budget for delivering the Europe 2020 Strategy proposing among others a new Customs programme.

The Customs 2020 programme will contribute to the Europe 2020 Strategy for smart, sustainable and inclusive growth, by strengthening the functioning of the customs union.

The customs union protects the financial interests of the Union and its Member States collecting duties, fees and taxes.

It requires that goods originating from third countries comply with Union legislation before they can move around freely within the Union.

This implies the management of large trade volumes on a daily basis – handling 7 customs declarations every second – requiring customs to strike a balance between the facilitation of trade for business and the protection of citizens against risks to their safety and security.

This can only be achieved through intense operational cooperation between customs administrations of the Member States, between them and other authorities, with trade and other third parties.

The proposed programme will support the cooperation mainly between the customs authorities but also with other parties concerned.

It is the successor programme of the Customs 2013 programme which ends on 31 December 2013.

The proposed programme will support customs cooperation in the Union clustered around human networking and competency building, on the one hand, and IT capacity building on the other hand.

The first cluster allows for the exchange of good practices and operational knowledge amongst the Member States and incidentally other countries participating in the programme.

The latter enables the programme to fund appropriate IT infrastructure and systems that allow customs administrations in the Union to evolve to fully-fledged e-administrations.

The main added-value of the programme is generated by enhancing the capacity of Member States in raising revenue and managing increasingly complex trade flows, while cutting costs in developing the tools for these purposes.

Read more: EUR-Lex – 52012PC0464 – EN.

Richard Cornelisse is CEO of the KEY Group and worked previously as Big4 Partner in the Tax Performance Advisory and Indirect Tax Practice and blogs on Tax Function Effectiveness and Tax Control Framework developments.

VAT: Commission proposes new instrument for speedy response to fraud

In EU development, Indirect Tax Strategic Plan, Tax News on 31/07/2012 at 2:03 pm

 

A proposal for a Quick Reaction Mechanism (QRM), that would enable Member States to respond more swiftly and efficiently to VAT fraud, was adopted by the Commission today.

Under the QRM, a Member State faced with a serious case of sudden and massive VAT fraud would be able to implement certain emergency measures, in a way which they are currently not allowed to under VAT legislation.

In this context, the proposal provides that Member States would be able to apply, within the space of a month, a “reverse charge mechanism” which makes the recipient rather than the supplier of the goods or services liable for VAT.

This would significantly improve their chances of effectively tackling complex fraud schemes, such as carrousel fraud, and of reducing otherwise irreparable financial losses.

In order to deal with possible new forms of fraud in the future, it is also foreseen that other anti-fraud measures could be authorised and established under the QRM.

Algirdas Šemeta, Commissioner for Taxation, Customs and Anti-Fraud, said: “When it comes to VAT fraud, time is money. Fraudsters have become quicker and cleverer in developing schemes to rob the public purse. We must strive to be one step ahead of them. The Quick Reaction Mechanism will ensure that our system is sufficiently equipped to tackle VAT fraud effectively. It will help preserve much needed public revenues and create a fair and level-playing field for honest businesses.”

VAT fraud costs the EU and national budgets several billion euro every year. In some serious cases, vast sums are lost within a very short timeframe, due to the speed at which fraud schemes evolve nowadays. For example, between June 2008 and December 2009, an estimated €5 billion was lost as a result of VAT fraud in greenhouse gas emission allowances.

Currently, if a Member State wishes to counteract VAT fraud through measures not provided for under EU VAT legislation, it must formally request a derogation to do so.

The Commission then draws up a proposal to this effect and submits it to Council for unanimous adoption before the measures can be implemented.

This process can be slow and cumbersome, delaying the Member State in question from taking the necessary action to stop the fraud.

With the Quick Reaction Mechanism, Member States would no longer have to wait for this formal process to be completed before applying specific anti-fraud measures. Instead, a much faster procedure would grant them a temporary derogation within a month. The derogation would be valid for up to one year.

This would allow the Member State in question to begin counteracting the fraud nearly immediately, while more permanent measures are being established (and if necessary while the standard derogation procedure is being launched).

Background

The Quick Reaction Mechanism was foreseen in the new VAT Strategy (see IP/11/508), as well as the Communication on fighting tax fraud and evasion (seeIP/12/697), as a means of strengthening the fight against tax fraud in the EU and safeguarding public revenues.

How much is lost every year because of VAT fraud?

Although, due to the very nature of fraud, it is difficult to put a precise figure on VAT losses due to fraud, it is thought to be several billion euro each year. In a study on the EU VAT gap1, the Commission compared what Member States actually got in VAT receipts with what they could have expected.

While this VAT gap covers more than just fraud (also legal avoidance and insolvencies), the study set the gap at €106.7 billion in 2006 within the EU-25.

This represents an average of 12% of the net theoretical liability although several Member States were above 20%.

VAT fraud does not only affect the financial interests of the Member States and the EU.

It also has an impact on honest businesses which find themselves unable to compete on a level playing field in those sectors which are affected by a significant amount of VAT fraud.

What has the Commission done to address the problem of VAT fraud?

In 2006 the Commission presented a Communication to launch an in depth discussion at EU level on the need for a co-ordinated approach in the fight against fiscal fraud in the internal market. In 2008, the Commission set out a coordinated strategy to improve the fight against VAT fraud in the EU.

This Strategy included a series of targeted measures, including plans for legislative proposals (which have now all been put forward), and a longer-term reflection on how to fight the problem.

One key element was to see how administrative cooperation between tax administrations could be improved, and to establish a network of national officials to detect and combat new cases of cross-border VAT fraud.

This network – Eurofisc – is now operational and working to coordinate data exchange and establish an early warning mechanism against fraud.

What further measures to tackle VAT fraud does the Commission foresee?

In its Communication on the future of VAT, which it presented in December 2011 (IP/11/1508), the Commission set out priority actions needed to create a simpler, more efficient and more robust VAT system in the EU.

One of the overriding objectives for the new VAT system was to tackle VAT fraud more effectively, and a number of ideas were laid out on how to achieve this.

First, the Commission intends to monitor the full implementation of the abovementioned Anti-Fraud Strategy, making sure that all instruments in place against fraud are functioning to full potential.

It will examine ways to extend the automated access to information, and will assess whether anti-fraud mechanisms, such as Eurofisc, need to be strengthened. In 2014, it will report on whether further action is needed to strengthen or complement these measures.

In addition, the Commission will embark on a number of new anti-fraud projects.

The Quick Reaction Mechanism, proposed today, was one such initiative. In addition, the Commission launched the idea of setting up a EU cross border audit team composed of experts from national tax authorities to facilitate and improve multilateral controls.

As the success of any anti-fraud measure depends directly on the administrative capacity of the national tax authorities, the Commission will intensify its monitoring of the efficiency and effectiveness of the tax administrations of the Member States.

In the Commission’s Country Specific Recommendations for 2012, adopted by the Council in June, 10 Member States2 were told to improve tax compliance and collection. The Commission will also encourage the exchange of best practices in combating fraud in high risk sectors.

What is carousel fraud?

Carousel fraud is one of the most common types of large-scale VAT fraud schemes in the EU. Under EU legislation VAT on domestic sales is generally due by the seller while VAT on cross border sales is generally due by the purchasing companies.

In carousel fraud schemes, fraudsters import goods to a Member State VAT-free, and then charge VAT to the buyers. The sellers then disappear without paying the tax to the authorities, while the buyers deduct the VAT they paid from their overall taxable income, thus creating a loss to public finances.

It is called carousel fraud because there are usually a number of companies involved, each liable to VAT which goes unpaid, and the final buyer reclaims the VAT from the tax authorities before disappearing.

What is the “reverse charge mechanism”?

The reverse charge mechanism undermines the whole basis of carousel fraud, by switching the tax liability. Under this mechanism, the customer, rather than the supplier, is liable for VAT.

The customer (if a taxable person) must report and pay the VAT, and can deduct this VAT from their taxable income at the same time.

1 : DG Taxation and Customs Union, Report 21 September 2009, Study to quantify and analyse the VAT gap in the EU-25 Member States, Reckon LLP

2 : Bulgaria, Cyprus, Czech Republic, Estonia, Hungary, Italy, Lithuania, Malta, Poland and Slovakia.

Useful Links

  1. The Draft Council Directive
  2. For more information, see MEMO/12/609
  3. Widespread Irregularities In Italian VAT Invoices Found
  4. EUROPA – Press Releases – VAT: Commission proposes new instrument for speedy response to fraud.
  5. Reblog – Exclusive: Hungary Losing 1 Billion Euros A Year From Food VAT Fraud | Reuters
  6. Combat VAT Fraud: Dutch Introduction Of Reverse Charge For E-gadgets
  7. Netherlands Intensifies Efforts To Combat VAT Fraud
  8. Algirdas Šemeta EU Commissioner – Press Conference On European Semester Brussels, 30 May 2012
  9. Algirdas Šemeta EU Commissioner – Press Conference ECOFIN Council Brussels, 15 May 2012
  10. European Commission – Press Release About Future Of VAT
  11. Luxembourg Below Tax Budget
  12. European Parliament Demands Accurate Information On Tax Evasion
  13. European Commission – Taxation Trends In The European Union
  14. Auditors Anticipate Finding Fraud At Clients
  15. US VAT Introduction: Any Lessons To Be Learned From European VAT Fraud?

 

Richard Cornelisse is CEO of the KEY Group and worked previously as Big4 Partner in the Tax Performance Advisory and Indirect Tax Practice and blogs on Tax Function Effectiveness and Tax Control Framework developments.

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