The community for leaders in finance shared services

European Commission launches tool to combat VAT fraud

NewsAnna Bowsher, Reseacher22.08.2012 Comments (2)Bookmark

The European Commission has put in place a new tool to combat VAT fraud among EU member states.

The ‘Quick Reaction Mechanism’ is able to implement a reverse charge so that the recipient of the goods is liable for VAT, rather than the supplier. The aim of the initiative is to help countries react quicker to VAT fraud, and in particular carousel fraud, one of the most common and large-scale VAT fraud schemes. In such schemes, fraudsters import goods to a Member State VAT free and then charge VAT to the buyer, failing to pay the tax to authorities before disappearing. This causes financial loss for public finances when the buyers deduct the VAT they have paid from their taxable income.

The reverse charge mechanism therefore undermines the whole basis of carousel fraud by making the customer, rather than the supplier liable for the VAT. The customer must report and pay the VAT and are then able to deduct it from their taxable income at the same time.

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, tax, fraud, carousel fraud, European Commission, EC, reverse charge mechanism

Please login to rate this news.

Your Comments

Login to add a comment

Aislinn Collins 24.08.2012

Hi Kevin,

Thanks for your comment. The source this piece of news came from stated that the tool has been put in place by the EC, so this is why we have said that here. I'll do some verifying and update the article if its misleading.

Many thanks.

Kevin Roger CARSHALTON 4 Eyes Ltd 24.08.2012

I'm not aware that this has been adopted, except as a proposal. The Council of Ministers needs to agree it before it can take effect.