Ministers back plan to tackle VAT fraud

Legislation is designed to close loopholes until system is overhauled.

European Union finance ministers meeting today (21 July) in Luxembourg agreed new rules to combat value-added tax fraud.

The tougher laws are primarily aimed at cracking down on ‘carousel’ fraud, where goods are traded swiftly between different suppliers to avoid paying VAT.

The rules will mainly affect the trade in mobile phones, tablet and laptop computers, games consoles, gas and electricity supplies, industrial crops, and raw and semi-finished metals, where the largest proportion of VAT fraud takes place.

Ministers today backed a mechanism’ that will allow rapid approval to tackle individual cases of fraud.

Currently, member states have to get unanimous approval from all other EU countries; a process that can take several months.

The mechanism would allow countries to take swift action to shift liability for VAT payment from the supplier, which is normally the case, to the customer.

The European Commission would be able to object, but would have only a very short time in which to do so.

The new rules will be temporary –– expected to last until the end of 2018, by which time the Commission hopes to have a new VAT system in place.