HARMONISATION VALUE ADDED TAX IN THE EU

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International exchange of VAT information within
the EU
DONATO RAPONIEuropean Commission - DG TaxudHead
of the Unit for administrative cooperation and
fight against tax fraud
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Why exchange information ?

• VAT consumption tax on the supply of goods and
  services
• European Union free movement of goods and
  services ? important international trade
• Thus need to control the correct application of
  the VAT rules an international problem

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History of VAT information exchange

• 1979 first EU rules on exchange of VAT
  information(simultaneously with the adoption of
  the 8th VAT directive, on VAT refunds to taxable
  persons in other Member States
• 1993 Removal of tax borders between EU Member
  States
• ? Reg. 218/92 to strengthen the exchange of
  information for intra-Community supplies and
  acquisitions of goods
• ? main innovation VIES (VAT Information
  Exchange System)

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VIES

• Vat Information Exchange System
• links together national VAT databases
• electronic means of transmitting information
  between Member States relating to
• tax exempt intra-Community supplies
• VAT registration of companies registered in the
  EU
• in 2004 80 million messages exchanged through
  VIES

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VIES

• Vat Information Exchange System
• Companies can verify the validity of VAT numbers
  of their contracting parties
• in 2004 11 million such verifications
• How facility available on the internet at
• http//europa.eu.int/vies

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Recent evolutions

• Increase of the international VAT fraud
• Reasons
• growth of international trade
• expansion of the EU
• VAT rules susceptible to fraud (missing trader
  fraud)
• possible weaknesses in the control systems

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Recent evolutions

• The EU anti-fraud strategy
• adapt the control systems to the new fraud trends
  
• (training seminars for tax inspectors exchange
  of experiences and best practices)
• improve administrative cooperation between the
  Member States ? new legislation
• Council Regulation 1798/2003
• implementing Commission Regulation 1925/2004

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Purposes of the new legislation

• More and better cooperation by clearer, better
  and more binding rules
• 1. More direct contacts
• 2. More efficient rules
• 3. More information exchanges

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1. More direct contacts are possible

• using the available resources in the most
  effective way
• functional decentralisation
• territorial decentralisation

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territorial decentralisation
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territorial decentralisation
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Functional decentralisation

• Anti-fraud units
• Specific anti-fraud teams
• Intelligence units

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2. More efficient rules

• a. Request for information
• new possibility request for a specific
  administrative enquiry
• clear (and shorter) deadlines for replies
• use of standard forms
• electronic exchange of information

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2. More efficient rules

• b. Participation of foreign auditors in controls
  
• now a specific legal base for such actions
• note the administrative enquiry itself is
  carried out exclusively by officials of the
  requested authority

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2. More efficient rules

• c. Simultaneous controls
• whenever such controls would appear to be more
  effective than controls carried out by only one
  Member State
• new regulation provides for a clear legal
  structure

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2. More efficient rules

• d. Request for administrative notification
• The authority of a Member State can be requested
  to notify all instruments and decisions of the
  applcant authority of another Member State, which
  concern the application of VAT legislation in the
  territory of the applicant Member State.

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3. More information exchanges

• Exchange of information without prior request
• - What kind of information ?
• - info on non-established traders (allocation of
  VAT numbers VAT refunds)
• - info on intra-Community supplies of new means
  of transport
• - info concerning distance selling not subject
  to VAT in the Member State of origin

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3. More information exchanges

• - info concerning intra-Community transactions
  presumed to be irregular
• - info on (potential) 'missing traders'
• - How ?
• - immediate or periodical exchange
• - electronic exchange
• - use of standard forms

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E. Conclusions and Future developments

• CONCLUSION a strong "framework" for
  administrative cooperation
• New legislation provides lots of possibilities.
• The electronic exchange system and the use of
  standard forms allow a rapid exchange.
• Practical assistance by SCAC (Standing Committee
  on Administrative Cooperation).

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E. Conclusions and Future developments

• New developments
• Exchange of information also covers new fraud
  trends.
• Special attention is paid to risk management.
• Further extension of the electronic exchange
• for information on electronic services
• in the future for B2B intra-Community services

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E. Conclusions and Future developments

• However
• Member States must dispose of the necessary
  resources to collect and to use the information
  they exchange
• The fight against fraud as fraud itself - will
  continue

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Thank you