Explanatory Memorandum to COM(2009)427 - Administrative cooperation and combating fraud in the field of VAT (Recast) - Main contents
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| dossier | COM(2009)427 - Administrative cooperation and combating fraud in the field of VAT (Recast). |
|---|---|
| source | COM(2009)427  |
| date | 18-08-2009 |
Grounds for and objectives of the proposal The Council has repeatedly stressed the need for a common approach to combating tax fraud, and in particular VAT fraud, to supplement and support national efforts. VAT fraud is often organised on a cross-border basis, which is why Member States need to cooperate to combat it effectively. In its conclusions of 4 December 2007 the Council called on the Commission to make proposals to enhance Member States' management of the European Union's VAT system. In its conclusions of 7 October 2008 the Council called on the Commission to include in its proposal provisions to allow Eurofisc to be established in the near future in accordance with certain guidelines. This proposal for a recast of Council Regulation (EC) No 1798/2003 therefore aims to give Member States the means to combat cross-border VAT fraud more effectively.
General context In May 2006 the Commission adopted a Communication concerning the need to develop a coordinated strategy to improve the fight against fiscal fraud. As regards VAT fraud, and particularly intra-Community 'carousel' fraud, the Communication distinguished between conventional measures designed to enhance the VAT system without altering its principles and more radical measures with implications for the very principles of VAT collection. The ensuing discussion in the Council showed that the measures regarded as more radical could not be introduced in the short run. The Commission therefore decided to concentrate its efforts on establishing a number of conventional, mutually complementary measures. Therefore, in its Communication of 1 December 2008 on a coordinated strategy to improve the fight against VAT fraud in the European Union (COM(2008) 807, 1.12.2008), the Commission presented a short-term action programme for the introduction of such measures. A key objective of this programme was to make cooperation between tax administrations more effective. Some of the measures announced in the programme are included in this proposal. It should also be noted that the European Court of Auditors, in Special Report No 8/2007 concerning administrative cooperation in the field of value added tax, made a number of recommendations concerning the need to improve the exchange of information on intra-Community transactions. In its resolution of 2 September 2008 on a coordinated strategy to improve the fight against fiscal fraud (2008/2033(INI)), the European Parliament stressed that the Member States cannot combat cross-border fraud in isolation and called on the Commission to propose mechanisms to promote cooperation between Member States. In particular, it invited the Commission to submit proposals on the automated access by all other Member States to certain non-sensitive data held by Member States concerning their own taxable persons (business sector, certain data concerning turnover), and on the harmonisation of the procedures for the registration and de-registration of persons liable for VAT to ensure the swift detection and de-registration of fake taxable persons. It stressed that Member States must take responsibility for keeping their data up to date, in particular as regards de-registration and the detection of fraudulent registrations. This proposal covers these points.
Existing provisions in the area of the proposal Council Regulation (EC) No 1798/2003 is the reference Regulation for administrative cooperation on VAT issues. This proposal supplements it by adding provisions for more effective measures against cross-border fraud and better collection of VAT in cases where the place of taxation is different from the place of establishment of the supplier. It is also intended to make the Regulation more coherent, on the basis of the report on the operation of administrative cooperation adopted by the Commission on XXXX i.
Consistency with the other policies and objectives of the Union Combating tax evasion is part of the Lisbon Strategy. In its Communication of 25 October 2005 on the contribution of taxation and customs policies to the Lisbon Strategy, the Commission stressed that tax fraud created a significant distortion in the functioning of the internal market, prevented fair competition and eroded revenue that should be used to fund public services at national level. Increased levels of fraud resulted in an increasing tax burden on businesses that complied with tax rules as governments were forced to make up the resulting shortfall in revenue.
Consultation of interested parties
Consultation methods, main sectors targeted and general profile of respondents As this Regulation concerns relations between Member States' tax authorities, the parties primarily interested are the tax authorities. They have been consulted via the Commission's Anti-Tax Fraud Strategy (ATFS) expert group and the Standing Committee on Administrative Cooperation referred to in Article 44 of Council Regulation (EC) No 1798/2003. The ATFS group was set up by the Commission following its Communication of May 2006. It is made up of Member State experts who meet to analyse solutions and strategies for combating tax fraud at Community level. Trade and industry representative organisations have informed the Commission of their approval of this approach as regards the aspects that might affect economic operators, in particular the establishment of common rules on the information to be collected and the checks to be conducted when a VAT identification number is registered in the VIES database. This measure is intended to guarantee the quality of the information in the databases consulted by intra-Community traders.
Summary of responses and how they have been taken into account The responses received from both economic operators and national authorities were examined in the ATFS group and have also been the subject of reports and communications to the Council.
It has not been necessary to call in outside experts.
Impact assessment This proposal concerns exchanges between tax authorities and will have no impact on economic operators. Thus it has not been the subject of a formal impact assessment. The consequences of this proposal will affect Member States' tax authorities. The Member States are in a better position than the Commission to evaluate its precise impact.
Contents
Summary of the proposed measures This proposal supplements Council Regulation (EC) No 1798/2003. The most changes are the following. - Member States' responsibility in the field of administrative cooperation is extended to protect the VAT revenue of all Member States. - The information that Member States must collect and make available to other Member States through an electronic database system is precisely defined. The Regulation also defines access rights to this information in terms of persons and situations. - A permanent framework is established to guarantee the quality of the information in the databases by laying down common rules on the information to be collected and the checks to be carried out when a VAT identification number is registered in the database. The Regulation specifies the cases in which certain information must be deleted from the databases. It also includes provisions under which Member States are mutually responsible for any erroneous information in their databases or failures to update such information in good time. - Member States are required to confirm by electronic means the name and address associated with a VAT number. Users are also given guarantees concerning the reliability and use of such information. - A legal basis is created for establishing a structure for targeted cooperation to combat fraud. This structure will make possible multilateral, swift and targeted exchange of information so that Member States can respond adequately and in a coordinated fashion to combat any new kinds of fraud that emerge. It will be able to draw on jointly organised risk analysis. In general terms, the proposal is intended to improve the exchange of information between Member States by defining the cases in which they may not refuse to reply to a request for information or for an administrative enquiry and specifying the cases in which Member States must exchange certain information spontaneously, as well as those in which feedback must be supplied, and laying down the procedures for such feedback. The proposal also aims to specify the cases in which Member States may and must conduct multilateral controls. Lastly, it provides for the setting of precise objectives for the availability and operating procedures of the database system for the exchange of information. The following aspects of Council Regulation (EC) No 1798/2003 remain unchanged: - the organisation of the departments responsible for administrative cooperation in the Member States; - the mechanism for requesting information and specific enquiries; - the request for administrative notification; - the principle of officials being present in the administrative departments of another Member State and at simultaneous controls; - the provisions on services supplied by electronic means and telecommunications and radio broadcasting services; - the provisions on the refund of VAT to taxable persons established in another Member State; - the principle of the provisions on relations with third countries; - the limitations on some of the rights and obligations provided for in Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data; these limitations are necessary and proportionate in view of the potential loss of revenue for Member States and the crucial importance of the information to effectively combating fraud.
Subsidiarity principle The principle of subsidiarity applies, as the proposal does not concern an area in which the Community has exclusive competence.
The objectives of the proposal cannot be sufficiently achieved by the Member States for the reasons below.
The proposal aims in particular to improve the quality and comprehensiveness of information exchanges between Member States on cross-border transactions, particularly where the place of taxation is different from the place of establishment of the supplier. To monitor these transactions effectively, close and swift cooperation is needed between Member States, in particular through the use of electronic databases. A Community framework for such cooperation is far more effective than bilateral arrangements between all the Member States, which may leave some Member States without full and rapid access to some information. Similarly, in view of the growth of cross-border VAT fraud, coordinated action to combat fraud at EU level is preferable to a national or even multilateral approach, which might be detrimental to some Member States by encouraging fraud on their territory.
The proposal simply defines a framework for cooperation between Member States, while operational control and application measures are the responsibility of the Member States. The proposal is also intended to supplement the information provided to Community operators regarding their trading partners and make it more reliable. Full and high-quality information is needed for the correct application of VAT rules, particularly as regards territorial application and the person liable for payment of VAT. All operators should be able to obtain such information easily, wherever their registered office or place of establishment may be.
The proposal therefore complies with the principle of subsidiarity.
Proportionality principle The proposal complies with the proportionality principle for the following reasons.
It is to a great extent based on the existing legislative framework, which it supplements only where there are points that need reinforcing, as highlighted by the work of the ATFS group and shown by the report on the operation of administrative cooperation. Council Regulation (EC) No 1798/2003 made provision for limitations on some of the rights and obligations provided for in Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data, and the present proposal maintains these limitations. They are essential to the fight against intra-Community VAT fraud, and are proportionate given the potential loss of revenue for Member States if they were to be removed.
The new provisions do not therefore go beyond what is necessary to enhance administrative cooperation for the purpose of combating cross-border VAT fraud.
Proposed instrument(s): Regulation.
Other instruments would not have been appropriate for the following reasons. Since the existing legislation is a Regulation, it can be amended only by another Regulation.
The proposal has no implications for the Community budget.
Repeal of existing legislation The adoption of this proposal will mean that some legislative provisions must be repealed.
Recasting The proposal involves recasting.
Detailed explanation of the proposal by chapter or by article The first chapter establishes the scope of the Regulation, provides definitions and contains provisions on the organisation of the competent authorities under the Regulation. The main changes in this chapter are the expansion of its scope to cover the establishment of common procedures where a common approach is necessary to the proper application of the common system of VAT, and the introduction of a requirement for Member States to cooperate to protect the tax revenue of other Member States. The second chapter concerns exchanges of information on request, and the main change is the limitation of cases in which a Member State may refuse to provide information or carry out an enquiry. The provision added to this chapter takes over the wording introduced in Council Regulation (EC) No 143/2008, which will enter into force in 2015. The third chapter concerns exchanges of information without prior request. This chapter has been amended to specify that such exchanges must in any case take place where certain criteria are met. Practical arrangements are established for the exchange of some specific information that meets these criteria. The fourth chapter introduces a feedback requirement, the rules and procedures for which are to be established by the committee procedure. Member States had identified the lack of feedback as a weakness in their information exchanges. The fifth chapter deals with the storage and exchange of information on taxable persons and transactions. It is amended to increase the amount and quality of information exchanged. In particular, it provides that the competent authorities are to be given access to certain information held by the Member States. The proposal also provides for the establishment of common procedures regarding the information to be collected when a taxable person is registered in the database and the updating of the database system. The sixth chapter concerns requests for administrative notification and has not been amended. The seventh chapter deals with presence in administrative offices and participation in administrative enquires. Some clarifications have been introduced concerning the non-exhaustive nature of its provisions. The eighth chapter concerns multilateral controls. It has been amended to specify the cases in which Member States must conduct this kind of control. The ninth chapter concerns the information available to taxable persons, and in particular the possibility of obtaining confirmation of the validity of a specific person's identification number, together with the associated name and address. It also provides that the invoicing provisions in force in the Member States that are applicable to taxable persons not established on their territory will be placed on the Commission's website. The tenth chapter concerns the establishment of a common structure (Eurofisc) which will provide a faster cooperation mechanism for dealing with very large-scale or new fraud patterns. The eleventh and twelfth chapters have not been amended. The thirteenth chapter, which covers relations with the Commission, has been amended to specify that Member States must conduct regular audits of the operation of administrative cooperation. The fourteenth chapter, which covers relations with third countries, has been slightly amended to extend its scope. The fifteenth chapter, which lays down the conditions governing the exchange of information, has been amended to set precise objectives for the level of service of electronic information exchanges. The sixteenth chapter sets out the general and final provisions, in which the provisions of Council Regulation (EC) No 143/2008 which are to enter into force on 1 January 2015 have been included. An annex has been added listing the goods and services to which Article 7 i applies, based on the list adopted by the Council in Regulation (EC) No 143/2008.
⎢ 1798/2003 (adapted)
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