15 Value added taxation
| (a)
(35815)
6613/14
+ ADD 1
COM(14) 69
(b)
(35816)
6614/14
+ ADD 1
COM(14) 71
|
Commission Report: Seventh report under Article 12 of Regulation (EEC, Euratom) No. 1553/89 on VAT collection and control procedures
Commission Report on application of Council Regulation (EU) No. 904/2010 concerning administrative cooperation and combating fraud in the field of value added tax
|
| Legal base | —
|
| Documents originated | 12 February 2014
|
| Deposited in Parliament | (a) 21 February 2014
(b) 24 February 2014
|
| Department | HM Treasury
|
| Basis of consideration | EMs of 13 March 2014
|
| Previous Committee Report | None
|
| Discussion in Council | Not yet known
|
| Committee's assessment | Politically important
|
| Committee's decision | Cleared
|
Background
15.1 "Own Resources" for the EU budget are partly
funded from an agreed percentage of each Member State's harmonized
national value added tax (VAT) base. Council Regulation (EEC,
Euratom) No. 1553/89 concerns uniform arrangements for the collection
of Own Resources accruing from VAT. Article 12 of the Regulation
requires Member States to provide the Commission with details
of their system for registering taxable persons and collection
and control procedures for the Commission to report on those procedures
and any contemplated improvements.
15.2 Council Regulation
(EU) No. 904/2010 concerns administrative cooperation and information
exchange provisions, with the aim of improving taxpayer compliance
and fighting VAT fraud. The Regulation re-cast its predecessor
and introduced various changes to enhance the effectiveness of
information exchange and administrative cooperation.
Article 59 of the Regulation required the Commission to make the
first of five-yearly reports on application of the Regulation
by 1 November 2013.
The documents
15.3 The Commission Report, document (a), is
the seventh in response to Article 12 of Council Regulation (EEC,
Euratom) No. 1553/89. In it the Commission considers the operation
of the VAT regime as a whole and makes recommendations for named
Member States aimed at improving the operation of the VAT system.
The is accompanied by a Staff Working Document, which contains
a summary of the Commission's main recommendation and its findings,
based on Member State responses to a detailed questionnaire and
some discussions with individual Member States. It also contains
detail of the responses from Member States, along with the full
recommendations.
15.4 The Commission notes that:
· in
most fields a majority of administrations have implemented best
practice, but that more work could be done on estimating the VAT
gap (the difference between the theoretically collectable amount
and the amount actually collected) and measuring the impact of
different components of a compliance strategy;
· the
UK is one of only five Member States to measure the VAT gap and
one of only eight to measure the impact of components of the compliance
strategy;
· the
stock of VAT arrears across the EU is high and increasing in most
Member States; and
· the
UK is one of only six Member States to reduce their stock by more
than 4%.
15.5 The Commission Report, document (b), is
the first in response to Article 59 of Council Regulation (EU)
No. 904/2010. The Commission assesses the overall functioning
of VAT administrative co-operation in the EU and the extent to
which Member States have made effective use of new arrangements
such as the creation of the Eurofisc network[44]
of specialist fraud investigators, direct access to limited data
in other Member States databases and the introduction of feedback
mechanisms. The report is accompanied by a Staff Working Document,
which contains a summary of the Commission's findings along with
the main recommendations and details of the responses from Member
States. The findings are based on Member State responses to a
detailed questionnaire and some discussions with individual Member
States. The Commission's overall conclusion is that Member States
need to do more to ensure they meet the deadlines for responding
to information requests, to make more use of cross border audit
tools and to strengthen their joint risk analysis capability.
The Commission confirms its willingness to act to pave the way
towards more effective cooperation and to take legal action when
necessary.
15.6 The next report under the Regulation is
due by the end of 2018, but the Commission says that it will produce
an interim update on the state of play before the end of 2015,
because of the seriousness of VAT fraud and the importance of
administrative cooperation in addressing the problem.
The Government's view
15.7 The Exchequer Secretary to the Treasury
(Mr David Gauke) introduces his remarks about the first Commission
Report, document (a), by noting that the principal focus is on
recommendations on best practice in a number of areas and that
in the majority of cases the UK is already compliant with the
recommended best practice highlighted.
15.8 The Minister then comments on the most important
recommendations of action to be taken by Member States, as they
apply to the UK, saying that:
· Customs
Procedure 42 is a trade facilitation measure which allows a business
importing goods from outside the EU to claim relief from import
VAT if the goods are going to be moved to another Member State
— instead of import VAT being paid, VAT becomes due in the
Member State to which the goods are moved;
· the
recommendation is that when a business uses Customs Procedure
42, the VAT numbers quoted should be systematically checked and
consideration should also be given to using licenses or guarantees
for risky traders;
· HM Revenue
and Customs is aware of the risks inherent in the procedure and
has previously conducted sampling exercises to ensure the system
is not being abused;
· it continues
to monitor the operation of the system and will look to implement
additional controls should it become apparent that the system
is being misused;
· another
recommendation is that a non-sequential and integrated debt collection
process should be developed; and
· HM Revenue
and Customs is currently developing a non-sequential and integrated
debt collection process.
15.9 The Minister adds that:
· the
other recommendations in the report relevant to the UK will be
assessed and considered within the Government's overall strategy,
taking into account any potential additional financial or administrative
burdens; and
· the
Government notes the actions to be taken by the Commission and
agrees that the sharing of best practice is appropriate.
15.10 The Minister noting in relation to its
second Report, document (b), that the Commission has recommended
that Member States do more to meet the statutory deadlines for
responding to information requests from other Member States, make
more use of cross border audit tools, such as joint audit exercises,
and strengthen fraud investigators' joint risk analysis capability,
says that:
· the
UK is already one of the best performing Member States, having
responded to over 81% of requests within the statutory deadline,
compared to the EU figure of 57%, while the performance on higher
priority cases is over 90%;
· the
Government also takes steps to ensure that requesting Member States
are always kept informed if there are any delays in sending a
response;
· the
UK is also a leading user of cross border audit tools and is,
in conjunction with the Netherlands, involved in a joint audit
pilot;
· the
Government is not, however, convinced as to the value to fraud
investigators of a joint risk analysis tool; and
· the
information that would be used in such a tool is already available
to all Member States and there is a danger that a centralised
risk analysis would not take sufficient account of individual
Member States risks and priorities.
15.11 The Minister continues that:
· the
Government supports the other recommendations made by the Commission
in this report;
· it makes
more use of feedback than any other Member States and fully participates
in automatic exchanges;
· in relation
to a coordinated approach to establishing administrative cooperation
agreements with third countries, any such approaches would have
to be authorised by Council; and
· the
Government believes this will ensure that these approaches are
proportionate and appropriate.
Conclusion
15.12 Whilst clearing these documents, we
draw them to the attention of the House as illustrative of how
the Commission seeks to make the VAT system more efficient.
44 See http://ec.europa.eu/taxation_customs/resources/documents/2011-02-07_eurofisc_pressrelease_en.pdf.
Back
| 
