Cross-border VAT fraud an EU concern, seen as costing up to 250 billion euros

Discussions on the changing way value-added tax is imposed on goods and services in the EU is expected to be discussed at an ECOFIN meeting in Berlin today, on a issue that could have a huge impact on the way transactions in the single bloc are conducted. Cross-border value-added-tax fraud has been described by EU officials as «having assumed worrying proportions.» Experts believe that fraud could be costing EU states some – 200-250 billion in lost revenues. In January, German Finance Minister Peer Steinbrueck said, «There are a range of open issues in these VAT package directives.» An EU briefing note said the presidency will «raise the issue of a general ‘reverse charge’ system» at today’s meeting, which EU Taxation Commissioner Laszlo Kovacs will attend. The «reverse charge» means the purchaser must claim a VAT refund, whereas currently the seller can sell goods without VAT and then claim a refund. According to the note, one option raised is the taxation of transactions made within the EU at a uniform rate of 15 percent, charged in the member state of departure. Opponents of this proposal argue that this will result in more procedures that could turn into avenues for tax dodgers to take advantage of. Businesses dodging value-added tax in Greece is a major problem for the Finance Ministry despite repeated efforts to stamp out the problem. On the other hand, exports which are eligible for VAT exemption have been steadily increasing, putting pressure on budget revenues. Any change to a national sales tax system requires unanimous backing from all other EU member states. Along with the UK, Austria and Germany are seeking an optional provision in the VAT directive to apply a reverse charge system for domestic transactions.

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