The European Commission launched a consultation on February 27, 2018, on proposals to enhance the amount of data available to member states and European law enforcement bodies to better combat e-commerce VAT evasion and fraud.
Introducing the consultation, the European Commission said: "Tax administrations have [few] sources of information to identify remote sellers (those situated in another EU country or in countries outside EU) that do not comply with the VAT rules when selling online to final consumers (i.e. no VAT registration, no VAT declaration, no VAT payment)."
"Market intermediaries, such as payment service providers, hold data that may be useful for tax administrations to detect these non-compliant remote sellers and correctly assess the VAT liabilities on e-commerce sales. In fact, these intermediaries are involved in almost all e-commerce sales. In 2014, 94 percent of online payments for cross-border purchases occurred via online payment intermediaries, credit or debit cards, or prepaid cards. Depending on the national legislation, in some member states the tax authorities collect data from payment intermediaries to fight against VAT fraud in the field of e-commerce, while this is not the case in other member states."
The consultation is intended to collect stakeholders's opinions on:
Responses to a questionnaire on these four areas are being sought by April 25, 2018.
The initiative is one of the last deliveries of the European Commission's 2016 VAT Action Plan, intended to complement the recently adopted VAT Digital Single Market Package. This latest effort focuses on the development of administrative cooperation tools for the competent tax authorities to detect and control VAT non-compliant sellers trading online.
Improving information exchange processes with regards to VAT, including with third countries, is a key tenet of the EU Commission's ongoing VAT reform efforts, as outlined in greater detail on November 30, 2017.
Its overall work in this area is intended to enable member states to communicate more quickly to challenge fraudsters, as fraud can happen nearly instantaneously. As part of its wider efforts, the Commission will establish an online system for information sharing within Eurofisc, a network that connects anti-fraud experts from the member states. This system would enable member states to process, analyze, and audit data on cross-border activity to make sure that risk can be assessed as quickly and accurately as possible. New powers would also be given to Eurofisc to coordinate cross-border investigations.
The new measures would also open new lines of communication and data exchange between tax authorities and European law enforcement bodies on cross-border activities suspected of leading to VAT fraud: OLAF, Europol, and the newly created European Public Prosecutor Office (EPPO). Cooperation with European bodies would allow for the national information to be cross-checked with criminal records, databases, and other information held by Europol and OLAF, in order to identify the real perpetrators of fraud and their networks.
Recently, to build on these efforts, the EU and Norway signed a new agreement on administrative cooperation on VAT compliance on February 6. It will provide EU member states and Norway with a legal framework for administrative cooperation in the prevention of VAT fraud and for mutual assistance in the recovery of VAT claims. Norway is the first country with which the EU has signed an agreement in this area but the Commission has stated that it wants to secure more agreements mirroring this pact with other countries.
VAT fraud is estimated to cause losses for EU member states of about EUR50bn (USD61bn) each year and there are growing concerns that terrorist organizations are branching out into carrying out value-added tax fraud schemes to fund their activities.