8 Fraud and other illegal activities
| (25996)
12993/04
COM(04)509
| Draft Regulation on mutual administrative assistance for the protection of the financial interests of the Community against fraud and any other illegal activities
|
| Legal base | Article 280 EC; co-decision; QMV
|
| Document originated | 20 July 2004
|
| Deposited in Parliament | 6 October 2004
|
| Department | HM Treasury |
| Basis of consideration | EM of 13 October 2004
|
| Previous Committee Report | None
|
| To be discussed in Council | Possibly 21 October 2004
|
| Committee's assessment | Legally and politically important
|
| Committee's decision | Not cleared; further information awaited
|
Background
8.1 Article 280 EC places a general obligation on the Commission
and Member States to counter fraud and any other illegal activities
affecting the financial interests of the Community. Important
elements in countering such activity include the Financial Regulation,
Council Regulation (EC, Euratom) No. 1605/2002, which governs
the preparation of budgets and the management of the financial
resources of the Communities, relevant legislation of Member States,
the Commission's European Anti-Fraud Office (OLAF), the European
Court of Auditors and the relevant authorities of Member States.
Also relevant is EC legislation on VAT fraud and money laundering,
including Regulation 1798/2003 EC on administrative cooperation
on VAT matters and Directives 91/308/EEC and 2001/97/EC on money
laundering.
The document
8.2 Present legislation does not give a legal basis for the Commission
to play an active role in protecting the financial interests of
the Community through supporting and coordinating Member States'
activities, particularly in the fields of VAT fraud and money
laundering. The Commission believes that co-operation and the
exchange of information concerning fraudulent activities in a
single market of 25 Member States will become increasingly difficult,
and that there is now a need for it to take a more active role
in supporting and co-ordinating Member States' activities. This
draft Regulation is designed to give the Commission such a role.
The Commission stresses that the regulation will not give it
or OLAF any additional investigative powers. It says the proposal
would provide "the basis and tools for multidisciplinary
co-operation between the relevant competent authorities of different
Member States and between them and the Commission".
8.3 The draft Regulation:
- would require competent authorities
(Member States and the Commission) to respond to requests for
information and assistance, require some defined information to
be supplied to the Commission without a request and allow the
Commission to access the VAT databases of Member States (the
VIES system — the VAT information exchange system);
- covers the use of information, including admissibility
as evidence in administrative and judicial proceedings and confidentiality;
and
- would provide a comitology[15]
procedure for detailed rules for implementing the proposal.
The Government's view
8.4 The Financial Secretary to the Treasury (Mr Stephen
Timms) says:
"The Government welcomes initiatives to fight
fraud affecting the financial interests of the Community. It is
clear that effective co-ordination and co operation in a Union
of 25 states will be more difficult to operate successfully, and
this proposal does go some way to clarify the obligations of the
Member States and the Commission, and to facilitate trans-national
investigations. The Government notes that the proposal does not
grant any further investigative powers to the Commission or to
the European Anti-Fraud Office, and this is important particularly
in the field of VAT fraud.
"However, new arrangements for strengthening
administrative co-operation between the Member States in the VAT
area have only recently been introduced (in the shape of Regulation
1798/2003), and in this area it might be better to consider first
how this is working before adding another layer of procedures.
Equally much of what is proposed on the anti-money-laundering
side is already in place so it is not clear that a further measure
is required, particularly as a new money-laundering directive
is in the process of being negotiated.[16]
And while any information transferred as a result of this proposal
would be subject to confidentiality provisions under Article 18
of the draft, the Government would want assurance from the Commission
that taxpayer confidentiality will not be compromised."
8.5 On the financial implications the Minister adds:
"There could be financial implications for the
UK if VAT is not removed from this proposal. However, to the extent
that fraud and irregularity against the Community's financial
resources could be reduced or prevented by these measures they
could, in principle, allow the Community budget to be set at a
lower level."
Conclusion
8.6 Like the Government we welcome initiatives
to fight fraud affecting the financial interests of the Community.
But we are concerned that much of what is proposed seems, if not
unnecessary, at least premature whilst existing and other proposed
legislation is settling down. We note also the Government's concern
about taxpayer confidentiality.
8.7 We should be grateful if the Minister would
confirm that it is the Government's intention to reject those
parts of the proposal that are superfluous or premature and to
reject any provision threatening taxpayer confidentiality. Meanwhile
we do not clear the document.
15 Comitology is the system of committees which oversees
the exercise by the Commission of legislative powers delegated
to it by the Council and the European Parliament. Back
16
See (25949) -: HC 42-xxxii (2003-04), para 13 (13 October 2004). Back
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