EU says member states should share tax data to fight VAT fraud

Aug 18, 2009, 13:57 GMT

Brussels - European Union officials Tuesday called on member states to share information about their taxpayers to help combat value added tax (VAT) fraud, which costs governments billions of euros in lost revenues each year.

To do so, the EU's executive arm in Brussels, the European Commission, is proposing the creation of a new structure, referred to as Eurofisc, that would allow governments to exchange information and devise common strategies.

The commission headed by Jose Manuel Barroso has tried to step up joint efforts against VAT fraud since 2006, with little success so far. All tax-related issues require unanimity, and the commission's latest proposals are expected to face stiff resistance from some of the bloc's finance ministers.

While exact estimates are difficult to come by, fraud is believed to cost governments up to 10 per cent in lost VAT receipts each year.

In 2006, Germany estimated its overall losses in VAT receipts at 17 billion euros (24 billion dollars) per year.

Britain has estimated its annual VAT gap between theoretical and actual VAT receipts at 13.5 per cent. This includes between 1.5 and 3 billion euros in losses owing to VAT carousel - a complex fraudulent scheme involving the purchase and sale of goods in different member states.

The commission says governments should be made jointly responsible for the protection of VAT revenues in all 27 EU member states.

Its most controversial proposals involve granting national tax authorities the right to access information contained in the taxpayers' databases of other member states.

Laszlo Kovacs, the EU's taxation commissioner, argues that fighting tax fraud is particularly crucial during times of falling tax revenues, such as is the case with the current downturn.

'In the current economic situation it is more important than ever to fight tax fraud efficiently and a fully functioning administrative cooperation between tax administrations is key in that respect,' Kovacs said.