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05 Jun 2006
Channel players are waiting with baited breath to find out how a landmark EC meeting could affect the way they pay VAT.
Last week, Laszlo Kovacs, European tax commissioner, called for EC member states to debate the issue of cross-border VAT fraud and work together to devise improvements to the existing disparate VAT system. He said the system has so far lost more than ¤60bn to fraud.
Kovacs said in a statement: “It is time to consider new ways of combating tax fraud. I call on all parties concerned to give serious consideration to this problem so that we can develop an effective anti-fraud strategy.”
In the UK, HM Revenue and Customs (HMRC) has applied for a “reverse charge” procedure (CRN, 6 February), which means suppliers and resellers of components, mobile phones and chips would no longer have to account for VAT, thus eliminating the chances for missing trader VAT fraud. Instead the responsibility would be passed on to the purchaser.
Speaking to CRN, Maria Assimakopoulou, representative for the Director General of Taxation and Customs Union at the EC, said: “The EC has identified that VAT fraud is a growing problem and member states need to be more interlinked when tackling the problem. But this is just the beginning of the process.”
Assimakopoulou said more progress will be made on Wednesday in a meeting known as Ecofin – where EC finance ministers meet to discuss three possible VAT options including reverse charging.
Eddie Pacey, director of credit at distributor Bell Microproducts Europe said: “There has been a lack of cooperation in the past between EC VAT authorities, so this is a welcome development. But the EC is going to have to move pretty quickly for these plans to have any impact.”
Alias Dass, partner at Dass Solicitors, which has set up its own business crime unit to deal with VAT fraud cases against HMRC, said: “There has got to be a European solution to this problem, but if HMRC succeeds in getting reverse charge accepted it is going to have a starburst effect. This means that the problem will move away from chips and mobile phone traders and into completely new areas where the ruling won’t apply.”
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