Combating tax evasion connected with intra-Community transactions (common system of VAT) - Combating tax evasion connected with intra-Community transactions - European Court of Auditors' Special Report No 8/2007 concerning administrative cooperation in the Field of VAT (debate) 
President
The next item is the joint debate on
the report by José Manuel García-Margallo y Marfil on behalf of the Committee on Economic and Monetary Affairs on the Proposal for a Council Directive amending Directive 2006/112/EC on the common system of value added tax as regards tax evasion linked to import and other cross-border transactions - C6-0154/2008 -,
the report by José Manuel García-Margallo y Marfil on behalf of the Committee on Economic and Monetary Affairs on the Proposal for a Council Regulation on the amendment of Regulation (EC) No. 1798/2003 to combat tax evasion connected with intra-Community transactions
- C6-0155/2008 - and
the report by Bert Staes on behalf of the Committee on Budgetary Control on the European Court of Auditors' Special Report No 8/2007 concerning administrative cooperation in the field of value added tax
.
José Manuel García-Margallo y Marfil
Madam President, I must start by regretting that the Commissioner responsible is not here with us, although I am not really surprised, because there is plenty of noise and not much substance on this subject: great rhetorical statements about combating VAT fraud and very few measures with which to do so.
The communications that the Commissioner has presented to us, the last of which was on 1 December this year, make quite a fuss about the damage that tax evasion causes. It affects sufficiency, it affects equity and it causes market distortions with really major amounts of money. VAT fraud accounts for between EUR 60 billion and EUR 100 billion every year.
How can fraud be stopped? The diagnosis given in these communications is also generally correct, rhetorical and grandiloquent. They say that the national authorities have the responsibility to tackle fraud, but that operations where the supplier and the customer do not reside in the same country require cooperation between Member States. They also point out that the Court of Auditors, in its Special Report No 8, states that such cooperation has been clearly unsatisfactory and that action therefore needs to be taken. The problem comes when the Commissioner starts telling us what kinds of action need to be taken. He quite reasonably says that there are two strategies: one, which he calls ambitious, comprises a major reform of value-added tax, involving either a reverse-charge system or a tax withholding system with a clearing house, while the other is what the Commissioner calls 'conventional measures'.
We gathered from his appearance here on 24 June that he was not thinking of embarking on an ambitious reform under any circumstances and that he would confine himself to the 'conventional measures'. Subsequently, however, when he described the conventional measures, he put forward four that in principle are not bad. He talked about cutting compulsory declaration deadlines, enhancing cooperation among tax authorities, establishing shared liability when the purchaser of the goods does not declare who sold them, and improving the information on VAT taxpayers. He then concluded by saying that not even these four measures were among the concrete measures he was thinking of adopting. Today he comes up with two proposed amendments to the directive and regulation. He says that the aim of the first is to reduce the period for lodging the statements that VAT taxpayers have to submit from three months to one month, and the aim of the second is to reduce the period for transmitting the information to the Member State that has to charge the tax from three months to one month. Full stop. That is all the proposal lays down.
The Committee on Economic and Monetary Affairs has tried to spice up this really insipid story a little, and we have put forward the following amendments. We have approved an amendment favouring small and medium-sized enterprises, the purpose of which is to reconcile fighting tax evasion with simplification of the administrative burden on small enterprises, to which this Parliament and the EU as a whole have a commitment. We therefore say that the Commission must shortly, within two years, present us with a report describing how these measures have performed, how they have affected the administrative costs of businesses and to what extent they have been useful in combating tax evasion.
We also point out that the Commission should get rather more involved than it has been when making legislation. It should play a more leading role. We also call on it to centralise the data that the Member States involved transfer, to draw up a handbook of best practice so that the tax authorities can perform better, to develop indicators to show which areas are risky and which are not, and to tell us who is complying and who is not. Lastly, to make it easier to pursue fraudsters, we are setting up a register of individuals who cannot evade tax by setting up companies.
I regret the fact that the Commissioner cannot respond to the amendments that we have drawn up.
Bart Staes
rapporteur. - (NL) Madam President, Commissioner, ladies and gentlemen, tax fraud and VAT fraud are punishable offences. They may be white-collar crimes, but they are crimes nevertheless, and are sometimes related to organised crime.
What are the sums involved, because that always makes it interesting? In 2007, Commissioner Kovács estimated total fiscal fraud to be two to two and a half times the European budget, or a sum between EUR 200 and 250 billion. The share of VAT fraud in this is estimated at EUR 40 billion. All of this is probably a major underestimate, for the Court of Auditors estimated the loss of VAT income in 2005 to be EUR 17 billion in Germany and 18.2 billion in the United Kingdom, together responsible for just over EUR 35 billion of lost VAT revenue.
It is therefore to be welcomed that the Commission has funded a study, that this study is up and running, and that the results will be made public, so that we can see the true extent of the problem.
There are two basic problems where policy is concerned. First of all, cooperation between national tax authorities must improve and, secondly, we should really aim for shorter deadlines when the administrative bodies of the Member States gather and exchange information, so that things can be processed much more quickly.
My report mainly analyses the Court of Auditors' inquiry into VAT fraud. The Court of Auditors checked in seven Member States: in France, Italy, Luxembourg, the Netherlands, Poland, Slovenia and the United Kingdom. These countries cooperated well. Germany, though, refused all cooperation. In September, the Commission initiated infringement proceedings against Germany, something which, I have to say, Commissioner, I support.
The Court of Auditors has established that, in some Member States, the essential conditions for effective cooperation when it comes to controlling this form of fraud are completely lacking. My co-rapporteur pointed out that it takes longer than three months for requests for information to be dealt with. This is, in actual fact, inexcusable, because, in fact, these crimes should be combated in real time. The countries' internal organisation has also come under fire, though. The Netherlands and Germany, in particular, leave something to be desired. Moreover, there is a total lack of sufficiently strong control mechanisms.
It remains a mystery to me why Member States refuse to take a firm stand, even though they know they miss out on billions of revenue. This is really beyond me. The free movement of criminals is a fact of life. A united Europe in the fight against tax fraud remains a pipe dream to a large extent.
There is also good news, though. My own Member State, Belgium, has set up the European Carousel Network (Eurocanet network) that guarantees a spontaneous exchange of information. This, too, is flawed, though, since only 24 Member States have lent their cooperation, and three of the major Member States, to wit Germany, Italy and the United Kingdom, have refused to cooperate.
The Ecofin Council of 7 October has launched a new mechanism, namely the Eurofisc mechanism, to improve cooperation between the Member States in the control of VAT fraud. This is an initiative which, to my mind, is sound but will only add value if all Member States participate and if this is more than simply intergovernmental cooperation. I firmly believe that the Commission should be involved in this new initiative. It could in any event take part and even play a coordinating role.
Finally, I also think that we should work much more closely together in the judicial field too. All existing judicial obstacles in national law for cross-border, criminal prosecution should be removed without delay. In my report, I have included a list of measures to be taken. I should like to receive a response, or reaction, from the Commission, and I regret that the Council is not present because, at the end of the day, it is the Council that will have to take action in this area.
Louis Michel
Member of the Commission. - (FR) Madam President, ladies and gentlemen, I should like to thank the European Parliament and more especially the two rapporteurs, Mr García-Margallo y Marfil and Mr Staes, for the constructive reports they have presented on the delicate subject of the fight against VAT fraud within the European Union, in particular with regard to the Commission's first concrete proposal in this field.
We are today at a turning point in the implementation of our strategy to combat VAT fraud. The three reports that are to be adopted by Parliament tomorrow contain a number of recommendations on the way in which to improve the fight against fraud and reflect your opinion on the first of what will be a long series of measures.
On 1 December, the Commission adopted a communication specifying the measures that it will present in the coming months, as well as an initial directive containing some of these measures. The envisaged proposals also respond to the concerns and recommendations expressed in the report by Mr Staes.
The measures that the Commission intends to adopt can be subdivided into three categories:
The first brings together measures intended to prevent VAT fraud. One of these consists in establishing minimum standards for registration and de-registration in national databases in order to improve the reliability and comparability of information contained therein.
Improvements to the procedure used to obtain electronic confirmation of operators' VAT numbers and the corresponding names and addresses are also planned in order to guarantee greater legal certainty for suppliers.
Finally, the Commission is proposing to simplify the rules governing invoicing and to rationalise those concerning the chargeability of tax in order to guarantee its improved application, a move that will facilitate controls.
The second category relates to measures intended to improve the effectiveness of tax authorities with a view to detecting VAT fraud. The measure concerning the cutting of deadlines, which is dealt with in the two reports by Mr García-Margallo y Marfil, falls into this category. To improve the detection of fraud, it is also necessary to ensure that exemptions from VAT on imports are better monitored, as the Commission proposed last Monday, and to extend the scope of the information that Member States will have to make available to the tax authorities of the other Member States via automated access to their databases.
Finally, as you indicated, this category also includes the creation of a European network, known as Eurofisc. The latter is intended to improve operational cooperation between the Member States in the fight against VAT fraud on the model of the Eurocanet network, which was set up by the Belgian tax authorities and which is supported by the Commission and the European Anti-Fraud Office.
The third category comprises measures intended to strengthen tax authorities' capabilities with regard to the levying and collection of taxes. These include, in particular, a measure that specifies the cases in which suppliers and customers making cross-border transactions are held jointly responsible for the payment of tax. This is no doubt intended to strengthen the legal framework governing cross-border tax collection.
Finally, they include a measure intended to establish shared responsibility between the Member States in order to protect overall tax revenues.
The Commission also notes that Parliament has demonstrated an ongoing concern to ensure the protection of the European Community's financial interests, given that VAT fraud also has consequences for the European budget's own resources.
I welcome the support given to the proposal for a regulation on mutual administrative assistance in the fight against fraud and, in particular, against VAT fraud.
The Commission also welcomes the request made by Parliament to the Council to continue negotiations on this proposal, which will provide a detailed framework enabling the Commission and the European Anti-Fraud Office to provide the Member States with operational support and information as part of their fight against VAT fraud.
The positive opinion expressed by Parliament in the draft report on the cutting of deadlines and the rapid progress of the work conducted on this issue within the Council bode well for the more far-reaching proposals that the Commission will adopt in the near future.
Lidia Joanna Geringer de Oedenberg
draftsman of the opinion of the Committee on Legal Affairs. - (PL) Madam President, controlling fraud, hitherto chiefly within the province of Member States, is a problem which cannot be resolved solely at the national level. Combating tax evasion must involve closer cooperation between the administrative authorities of Member States, as well as cooperation with the Commission.
The proposals for the Directive and Regulation forming the subject of the Draft arise only partly from the priority recommendations made by ECOFIN in June 2007. The proposed changes have as their main purpose speeding up gathering and exchanging information about intra-Community procedures, by standardising the procedures and by reducing to one month the period covered by declarations on intra-Community transactions and the time limit for the exchange of information about these transactions between Member States.
Harmonisation of VAT requirements will ensure effective verification of the information provided. Requiring Member Sates to accept electronically submitted VAT returns will also significantly simplify the process.
The proposed legislative instruments represent no more than the first steps towards putting the above ECOFIN proposals into practice. We do not yet have a detailed assessment of the impact of the new formal requirements on service providers, and it would be advisable to prepare a special report dealing with this issue, especially as it relates to the administrative costs borne by taxpayers and administrative authorities and the effectiveness of combating tax evasion.
Bearing in mind the justified criticism offered by the Court of Auditors, concerning the lack of effective administrative cooperation in this area, the European Commission should consider playing a greater role, especially where preparing analyses and providing good models is concerned.
Gabriele Stauner
on behalf of the PPE-DE Group. - (DE) Madam President, ladies and gentlemen, approximately 2.25% of the gross domestic product of the EU, in figures approximately EUR 200 billion a year - as Mr Staes has already said - is lost in value added tax evasion, circumvention and fraud. Those are the facts on which Mr Staes' report is rightly based.
From the replies to five written questions on this topic which I put to the Council and Commission - by the way, I also regret that the Council is so sparsely represented - it has emerged, among other things, that in 2005 value added tax losses in Germany alone amounted to EUR 17 billion and in the United Kingdom to EUR 18 billion. These figures really make it clear to everyone that considerable damage is being done to the national economy and that this must be stopped as soon as possible.
How is this to be accomplished, however? The answer to date was - according to the Court of Auditors, which has devoted itself to this topic in a special report - through cooperation between the national administrative authorities responsible, but that is precisely what has not worked at all in recent years.
Once again Europeans find themselves in a situation where they are pursuing a well-intentioned goal but are counting their chickens before they are hatched. And in this case the chickens are the Member States which are unable to crack down on international evasion of value added tax by means of administrative measures.
Thus, for example, there are major unexplained differences in the figures for requests for information received and requests for information answered. The mirror image differences in the statistics for intra-Community trade notified by the Commission in reply to my written question of 6 May, which are supposed to have amounted to the princely sum of EUR 77 billion in 2007, may also be an indication of value added tax fraud. I would take this opportunity to ask the Commission when the results of the study will be presented to us.
Vladimír Maňka
on behalf of the PSE Group. - (SK) Colleagues, imagine that there was no tax evasion in the European Union. If the funds acquired in this way were distributed fairly, every citizen of the European Union, including children and pensioners, would have EUR 500 more in their wallet every year.
No country can combat tax evasion effectively on its own. International cooperation is imperative, especially in the VAT area, where the monitoring of intra-Community transactions is complicated by the current system. One solution with a long-term positive effect in combating tax evasion would be the creation of a VAT system under which transactions between Member States would be taxed at a rate other than zero. The zero-rate tax on exports of goods is being abused by fraudsters and criminal groups that, for example, create fictitious transactions and fraudulently drain billions of euros from state budgets.
The current long deadlines for the submission of tax returns also provide room for the commission of such tax frauds. The report on the draft directive that we are discussing now represents an acceleration of the exchange of information necessary for the fight against tax fraud. That is one of the reasons we are shortening the deadline for the submission of tax returns for intra-Community transactions.
The VAT system created in 1993 is only transitional. I believe that at the beginning of the next term of office, the Commission will present more ambitious measures dealing with final and comprehensive VAT reform. The provisional nature of the current system is one of the reasons why in my amendment, which was approved by the Committee, I request that the Commission evaluate the impact of the adopted measures three years earlier than was proposed in the original amendment proposal. This is to avoid a situation where the system would be evaluated at a time when it is no longer in force.
To conclude, I wish to thank and congratulate the rapporteur on a well-balanced report. The draft allows for an early response to tax fraud. It is also positive that business people themselves have stated that the administrative burden will be minimal.
Miguel Portas
on behalf of the GUE/NGL Group. - (PT) Madam President, when the Court of Auditors says that the volume of VAT fraud could be greater than the total budget of the Community and Mr Staes asserts that this figure must be more than doubled, the discussion of these reports is fully justified. In particular, it is obvious that Member States must support the creation of a register of natural persons who use shell companies for tax evasion. I also support the proposals of Mr Staes.
Having said this, it is not avoidance of payment of VAT that is the main problem in terms of tax evasion in Europe, because there is a type of legal evasion that is permitted and allowed by governments in the shape of offshore financial centres. It is in these centres that the proceeds of crime are laundered and legitimate funds become criminalised. When the money from our taxes is ending up being used to bail out banks and bankers, the end of tax havens is the real test of courage that is being set for Europe in the near future. That is how we will be judged and we are still light years away from what is required regarding tax evasion.
Sergej Kozlík
(SK) Madam President, honourable Members of Parliament and guests, it is indisputable that tax evasion causes significant disruption to competition and the functioning of the internal market, and reduces public revenues. The explanatory statement is not completely convincing when it states that the proposed measures, aimed solely at accelerating the collection and exchange of data relating to intra-Community transactions, will not represent an excessive burden for the entrepreneurial sector.
At the same time, the Commission's explanatory statement recognises doubts in the entrepreneurial sector regarding the ability of tax authorities to utilise the information provided. The statement does nothing to dispel these doubts. Nevertheless, the measures aimed at combating tax evasion need to start somewhere. Probably only practice will show whether the proposed measure works or becomes just another administrative burden for the entrepreneurial sector.
Bogusław Liberadzki
(PL) Madam President, I should like to consider both the report and the problem itself from the point of view of firstly fraud, secondly budget loss and thirdly distortion of business competitiveness, since tax fraud undermines the principles of fair competition.
I wish to express my special appreciation of the report and the rapporteur, Mr Staes, who has produced an excellent report. It is one of the few reports which not only refers to the amounts but also names the Member States where these irregularities occur. I also wish to express my gratitude to the Court of Auditors, which has highlighted two main groups of reasons. Firstly reasons associated with Member States, which we could interpret as a kind of passivity on the part of the Council, or inertia on the part of Member States, that could make a significant contribution to solving the problem by taking seemingly simple steps such as the prompt exchange of information, reliable exchange of information and demonstrating the will to identify and eliminate the causes of the existing state of affairs.
There is also a second important issue, which was not given sufficient prominence in the Commissioner's address: what can the Commission, together with its subordinate agencies, such as the Directorate General for Taxation and Customs Union, and the European Anti-Fraud Office (OLAF), actually do, in place of the frequently bureaucratic explanation along the lines of however much effort we make, so far it has produced no results?
Louis Michel
Member of the Commission. - (FR) Madam President, ladies and gentlemen, I should like to thank you for the observations and points of view that you have expressed during this debate.
The Commission will take account of the suggestions made by the European Parliament in its current and future legislative proposals.
I am pleased to note that the opinions of the European Parliament are similar to those of the Commission with regard to the measures to be taken to improve the fight against VAT fraud within the European Union. I am particularly happy about the widespread support for the main objective of the Commission's first concrete proposal, namely to accelerate, by January 2010, the gathering and exchange of information concerning intra-community transactions.
We have spoken about the impact assessment. The Commission has examined the effects on business costs. It appears that these costs are limited. In order to examine the real effects more precisely, the Commission is ready to produce an evaluation report. The preliminary results of the current assessment, to which you refer, Mrs Stauner, will be known during the course of the coming weeks and will then be validated in cooperation with the Member States.
The Commission, I am told, can only accept Amendments 4 and 7 of the report ...
Are you therefore unable to accept Amendments 4 and 7 of the report?
In fact, we can accept Amendments 4 and 7 of Mr García-Margallo y Marfil's report.
I apologise for proceeding in this way but I am not, as you will have noticed and as you know, the responsible Commissioner, and I am therefore far less expansive on these issues, which are extremely challenging for me, than on others.
José Manuel García-Margallo y Marfil
Believe me, Commissioner Michel, I appreciate your kindness in being here with us and dealing with topics that actually are tough for anyone.
The Commission asked us to be quick and we have responded swiftly. The Committee on Legal Affairs duly issued its opinion in good time and, in a rare show of unanimity, the Committee on Economic and Monetary Affairs approved the report that we are debating today.
Commissioner, you have read out to us the proposals that the Council adopted on 1 December, from the notes that were prepared for you in the Committee on Fiscal Affairs. Those proposals, however, are not precisely the ones that we are debating here. What we are debating is something else. I am not surprised that they have told us what they are thinking of doing, because what they have actually done is very little, as I said before.
The speed with which Parliament has acted on this really important topic, as my fellow Members have pointed out, has not been matched by enthusiasm in either the Commission or the Council.
A very important committee chairman once said that he expected 'de l'audace, encore de l'audace et toujours de l'audace' from the Commission - boldness, more boldness and forever boldness. The Commission holds a monopoly on legislative initiative, and this Parliament has wanted it to be so, but holding this monopoly means that these initiatives have to be put on show and proposed boldly and fearlessly, without holding back for fear that the Council may not approve them.
Initiatives need to be launched, pushed forward and fought for, and the Council will have to answer to the Commission and to this Parliament if the proposals are not successful. This has not been the case. What I described in my earlier speech was a story of declining ambition, from the most absolute proposals to conventional measures, to a package of measures from which only two, the most modest of them, are selected.
I am grateful to Mr Michel and ask him to pass on to the Commissioner responsible my thanks for having accepted a couple of amendments, but I feel really frustrated by what we have debated here.
Bart Staes
rapporteur. - (NL) Madam President, Commissioner, ladies and gentlemen, I can only endorse what Mr García-Margallo y Marfil had to say. To my mind, both reports, in fact the three reports that are before us, and the way in which they have been approved, by the Committee on Economic and Monetary Affairs on the one hand and the Committee on Budgetary Control on the other, demonstrate a high level of resolve - a resolve not to take this lightly.
A great deal of money is involved. Just imagine we could only recoup even a quarter of that money. We would end up with a fund of EUR 60 billion in the Member States and in the European Union. We need this money. Mr Verheugen, who is here today, knows he has an important job to do. We therefore know what we are fighting for. We are also fighting unfairness and injustice. After all, those who fail to pay their taxes, who try to evade them, display anti-social behaviour. This is therefore something that calls for resolve in this House.
I should like to say to Commissioner Michel that I understand his response. He has his own competences. He is here to replace someone else, and I can understand that he is simply reading out a response. That is not a problem. I will take his text with me, and we will work with it.
I would like to ask the Commission, though, not just to discuss the study on the extent of fraud, which should be ready by the end of the year, with the Member States, but also to submit it to the Committee on Economic and Monetary Affairs and the Committee on Budgetary Control, so that we can include a number of other aspects too.
President
The debate is closed.
The vote will take place on Thursday 4 December 2008 at 12 noon.
Written Statements (Article 142)
Sebastian Valentin Bodu  
The report in question is particularly important due to the fact that it introduces mechanisms aimed at eliminating or reducing the opportunities for defrauding the budget by means of fraudulent intra-Community transactions liable for VAT.
At the moment, annual losses generated as a result of carrying out fictitious transactions involving missing traders is estimated at EUR 100 million (16% of the EU's actual resources).
Reducing the deadlines both for collecting information and exchanging it between the Member States' tax authorities can help to improve monitoring of transactions of this type.
According to an approved amendment to the report in question, put forward by the Commission, the tax authorities in the Member States will be connected to a shared database where details will be registered of the physical persons behind the missing traders responsible for carrying out fraudulent transactions of this nature.
This will deter these traders from continuing to set up other companies anywhere in the whole of the European Union, and not just in a single Member State, as happens at the moment. This will be achieved as they will be identified in real time when a check is run on the database and also because the information will be sent to the commercial register to which the application for registering a new company has been made.
Zbigniew Krzysztof Kuźmiuk  
in writing. - (PL) As I take the floor in a debate devoted to combating tax fraud, I should like to draw attention to the following issues. The loss of income resulting from VAT fraud in the various Member States is extremely high, and increases every year. For instance in Germany in the year 2005 the loss was approximately EUR 17 billion and in the United Kingdom in the 2005-2006 tax year it was over EUR 18 billion.
In spite of the fact that the European Union has introduced many initiatives to combat VAT fraud, such as EUROCANET (a network for exchange of information about companies suspected of VAT fraud, which unfortunately does not include Germany, United Kingdom or Italy), and of the work of institutions such as Europol, Eurojust and OLAF, these losses increase significantly year by year.
In the circumstances, we should abandon actions leading to the creation of new intergovernmental agencies, and instead strengthen the role of the European Commission as the central coordinator of administrative cooperation between individual Member States concerned with combating VAT fraud. Consequently, it is at least debatable whether we should create a new mechanism, Eurofisc, conceived as a new decentralised network in which Member States would participate on a voluntary basis.
Andrzej Jan Szejna  
in writing . - (PL) The report on combating tax evasion in relation to intra Community transactions is a very significant legal act.
Tax fraud amounts to an attack on the principle of fair and transparent taxation. It also undermines the basis on which the Union operates. Less money going into the Union's budget means we are unable to implement policies in full.
Combating tax fraud falls largely within the competence of the Member States. The latter should not, however, act in isolation. There is a clear need to coordinate work at Community level and to strengthen cooperation between the national administrations of Member States and the European Commission.
Reform of VAT is a long-term and time-consuming process. Accordingly, the report discussed states that conventional resources should be used. The latter involve changes to legislation in the area of the taxpayer's responsibility should the necessary documents not be submited on time or be submitted incorrectly. Other changes include shortening the time for obtaining the information and swift correction of inaccurate data, together with the acceleration of exchange of information linked to intra Community transactions.
