Tax fraud is costing European Union governments billions of euros and new bloc-wide legislation is probably needed to combat the rise in scams, EU Tax Commissioner Laszlo Kovacs said.
Europe's tax chief will present options for tackling value-added tax fraud later this month to stop fraudsters robbing national purses of between 2 and 10 percent of total tax revenues, he told Reuters in an interview on Thursday. "Member states are losing an enormous amount of money. It's billions of euros," Kovacs said.
The basic question that will be in the discussion document is whether the fraud should be tackled by improved use of existing tools, or through new EU legislation.
Kovacs said he wanted to propose new rules.
"I believe that we have to be open to some methods that go beyond the traditional and conventional means of co-operation," Kovacs said.
The growing problem being targeted is known as carousel or missing trader fraud, where a trader imports goods like mobile phones or computer chips, sells them with VAT added, and then disappears with the tax.
The racket has become so bad that the British government has suffered its first yearly drop in VAT revenues since the tax was introduced in 1973 - falling 0.2 percent, or 100 million pounds, in the year to March.
Many firms have been unwittingly caught up in carousel scams and have won backing from the European Court of Justice to get VAT refunds even though their goods were used in the fraud.
One fraudster, Nasser Ahmed, made so much money from VAT fraud that he came 376th on Britain's Sunday Times rich list. He was found guilty of carousel fraud, but absconded.
Britain, Austria and Germany have applied to the Commission for permission to introduce a "reverse charge mechanism" nationally to tackle VAT fraud.
Under this mechanism, VAT would not be levied on the onward supply of goods, denying a fraudster the ability to pocket the tax. Whoever buys the goods would have to account for the VAT.
The EU executive will rule on their applications after the fraud discussion document is published later this month, Kovacs said.
"The Commission is open to examining the reverse charge mechanism, but I prefer to use it in a much broader scope at community level and not in the case of individual countries," he said.
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