Due to fraud, attempts at corruption, or business bankruptcies, more than 150 billion euros slipped through the cracks of the tax authorities of the European Union (EU) member states in 2015, according to a European Commission report lamenting this notable loss of revenue.
Determined to tackle the issue, the European executive has presented its ideas to rethink cross-border VAT, whose current loopholes pave the way for multiple abuses, including a well-known and widespread cheating tactic: the “carousel fraud.”
This scenario is anything but hypothetical: of the total VAT lost each year, one-third results from this technique, which is perfectly mastered by both unscrupulous entrepreneurs and criminal organizations.
Everything stems from a single market poorly secured in fiscal matters, and this has been the case since its establishment in 1993: the VAT exemption between member states, decided at that time, was supposed to be only temporary: a provisional measure that has lasted 25 years, one might say.
In concrete terms, the Commission’s proposal resembles a real “Copernican revolution” as it advances the idea of entrusting the exporting company with the collection of VAT. The company would declare it to the tax administration of its country, which would then transfer it to the tax authorities of the purchasing country.
The member states will thus entrust each other with the task of collecting VAT on their behalf. This necessitates a certain level of trust between capitals – something they sometimes lack, especially in fiscal matters.
But… but: in fiscal matters, unanimity is required, which is not the case today. Thus, the endeavor, which is urgent for multiple reasons, remains stalled!
