Analytics, EU – Baltic States, Latvia, Modern EU, Taxation

International Internet Magazine. Baltic States news & analytics Thursday, 28.05.2020, 01:26

Combating VAT fraud: new EU’s efforts to assist member states

Eugene Eteris, European Studies Faculty, RSU, BC International Editor, Copenhagen, 16.05.2019.Print version
The new system – the Transaction Network Analysis, TNA, which is introduced by the European Commission in mid-May 2019, is aimed at assisting the EU-states in rapid exchange of information and in jointly processing VAT data in cross-country’s trade. That would lead to earlier detection of suspicious networks and reduce negative effect on public finances.

The common Value Added Tax (VAT) system plays an important role in Europe's Single Market. It is a major and growing source of revenue for all EU states, raising over €1 trillion in 2015, corresponding to 7% of EU GDP. Besides, one of the EU's own resources in the EU budget is also based on VAT; as a consumption tax, it is one of the most growth-friendly forms of taxation.

Fraud in VAT: huge hole in budgets

Recent investigations once again exposed huge costs of VAT fraud in public finances, with criminal gangs profiting at the expense of honest taxpayers. The Commission has consistently pressed for the reform of the VAT system to make it more fraud proof. Progress has been made with new rules agreed on VAT for online sales and more efficient rules for the exchange of information and cooperation between Member States. A fundamental overhaul of the current system was proposed in October 2017. However, progress has been slow on the Commission's proposals to put in place a business-friendly and more fraud-proof definitive EU VAT area.

The new Transaction Network Analysis, TNA is part of the Commission's effort to put in place a modern and fraud-proof VAT system. Fraudulent VAT’s  eradication should be a top priority for the EU-states’ governments. Commissioner for Economic and Financial Affairs, Taxation and Customs, underlined that criminal VAT fraud was one of the major issues facing presently states’ public finances. The new tool will increase the speed at which authorities can uncover and act on suspicious activity.

However, he added, the new TNA would not lessen the need for deeper and more fundamental reform of the EU and the states' VAT system: it should cope with the vast amounts of trade taking place across EU borders.

Coordinating cross-border investigations

Using modern digital appliances, VAT fraud can take place in the blink of an eye, making it even more important that the states have tools to allow them to act as quickly and efficiently as possible. The TNA, which the EU states will start using, will allow tax authorities fast and easy access to cross-border transaction information, leading to quick action when potential VAT fraud is flagged.

The TNA has been developed through close collaboration between the states and the Commission; will also allow much closer cooperation between the EU's network of anti-fraud experts (so-called, Eurofisc) when it comes to jointly analysing information so that VAT carousel fraud can be detected and intercepted as fast and effectively as possible. It will boost cooperation and information exchange between national tax officials, allowing Eurofisc officials to cross-check information with criminal records, databases and information held by Europol and OLAF, the EU's anti-fraud agency, and to coordinate cross-border investigations.

Anti-fraud officials from the EU states participating in the TNA agreed on how the tool will function and how the information collected will be used in future.


Source: Commission press release, in: Brussels, 15.05.2019


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