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Ministers make progress on VAT reform and fight against fraud

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Ministers make progress on VAT reform and fight against fraud

Hartwig Loeger - Photo © European Union 2018

(LUXEMBOURG) - EU finance ministers agreed Tuesday on new rules to exchange more information and boost cooperation on criminal VAT fraud, as well as measures to cut VAT compliance burdens for companies.

The measures were welcomed by the European Commission, which said they should help in the day-to-day running of an EU VAT system is in urgent need of 'further far-reaching reform'. It expected the 'reboot' to 'improve and modernise the system for governments and businesses alike, making the system more robust and simpler to use for companies'.

"New figures released by the Commission just weeks ago show that Member States are still losing €150 billion in VAT each year," said Economic Affairs Commissioner Pierre Moscovici: "Today's agreements are another step towards addressing that problem and changing VAT rules for the better."

The measures agreed today include:

  • New rules to improve the day-to-day functioning of the current VAT system until the overall VAT reform strategy has been implemented. These so-called 'quick fixes' should reduce compliance costs and increase legal certainty for businesses. Once the European Parliament has published its report on this file, the new rules should be enforceable by 2020.
  • A new measure to allow Member States to align the VAT rates they set for e-publications, currently taxed at the standard rate in most Member States, with the more favourable regime currently in force for traditional printed publications. Today's decision is the final step to ensure that the unequal treatment of the two products - paper versus digital - becomes a thing of the past. This agreement bodes well for upcoming discussions on the Commission's latest proposal to ensure that Member States have more flexibility to set VAT rates as they see fit.
  • Formal adoption of new rules to exchange more information and boost cooperation on criminal VAT fraud between national tax authorities and law enforcement authorities. VAT information and intelligence on organised gangs involved in the most serious cases of VAT fraud will now be shared systematically with EU enforcement bodies. Improved investigative coordination between Member States themselves and with EU bodies will ensure that fast-moving criminal activity is tracked and tackled more quickly and more effectively.

Separately, ministers formally adopted reinforced rules to control illicit cash flows in and out of the EU, a key measure in the fight against the financing of terrorism.

The formal adoption will tighten cash controls on people entering or leaving the EU with €10,000 or more in cash, enable authorities to act on amounts lower than the declaration threshold of €10,000 where there are suspicions of criminal activity and extend customs controls to cash sent in postal parcels or freight shipments, to prepaid cards and to precious commodities such as gold. Once the European Parliament has also ratified the agreed rules, the legislation will be published in the Official Journal of the European Union and will enter into force 20 days later.

VAT fraud: temporary application of generalised reverse charge mechanism in relation to supplies of goods and services above a certain threshold

Text of agreed VAT "quick fix" package

Text of the regulation on strengthening VAT administrative cooperation

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