REPORT 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

1.4.2009 - (COM(2008)0805 – C6‑0039/2009 – 2008/0228(CNS)) - *

Committee on Economic and Monetary Affairs
Rapporteur: Cornelis Visser

DRAFT EUROPEAN PARLIAMENT LEGISLATIVE RESOLUTION

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

(COM(2008)0805 – C6‑0039/2009 – 2008/0228(CNS))

(Consultation procedure)

The European Parliament,

–   having regard to the Commission proposal to the Council (COM(2008)0805),

–   having regard to Article 93 of the EC Treaty, pursuant to which the Council consulted Parliament (C6‑0039/2009),

–   having regard to Rule 51 of its Rules of Procedure,

–   having regard to the report of the Committee on Economic and Monetary Affairs (A6-0189/2009),

1.  Approves the Commission proposal as amended;

2.  Calls on the Commission to alter its proposal accordingly, pursuant to Article 250(2) of the EC Treaty;

3.  Calls on the Council to notify Parliament if it intends to depart from the text approved by Parliament;

4.  Asks the Council to consult Parliament again if it intends to amend the Commission proposal substantially;

5.  Instructs its President to forward its position to the Council and the Commission.

Amendment  1 Proposal for a directive – amending act Recital 5
Text proposed by the Commission	Amendment
(5) VAT is payable by the person liable for the payment to the tax authorities. To safeguard payment of VAT, Member States may however provide that under appropriate circumstances another person is held jointly and severally liable for the payment of that VAT.	(5) VAT is payable by the person liable for the payment to the tax authorities. To safeguard payment of VAT, Member States may however provide that under appropriate circumstances another person is held jointly and severally liable for the payment of that VAT. In so doing, Member States should ensure that any measures to counter fraud are proportional and targeted at persons that have committed fraud.
Justification
The proposal must ensure that the anti-fraud measures are proportional and target the fraudsters.
Amendment  2 Proposal for a directive – amending act Recital 6
Text proposed by the Commission	Amendment
(6) In order to guarantee that a supplier of goods who contributes to a VAT loss occurring when the goods supplied exempt of VAT are acquired by another person, may also be held jointly and severally liable for the payment of VAT due on the intra Community acquisition of those goods in a Member State where the supplier concerned is not established (non-established supplier), it is appropriate to provide for that possibility.	(6) In order to guarantee that a supplier of goods who contributes to a VAT loss occurring when the goods supplied exempt of VAT are acquired by another person, may also be held jointly and severally liable for the payment of VAT due on the intra-Community acquisition of those goods in a Member State where the supplier concerned is not established (non-established supplier) , it is appropriate to provide for that possibility. By...*, the Commission should evaluate the functioning of joint and several liability and, if appropriate, submit a proposal for amendment in that regard.
	* OJ please insert date: five years after the date of entry into force of this Directive.
Amendment  3 Proposal for a directive – amending act Article 1 – point 2 Directive 2006/112/EC Article 205 – paragraph 2
Text proposed by the Commission Amendment 2. In the situation referred to in Article 200, the person supplying goods in accordance with the conditions laid down in Article 138, shall be held jointly and severally liable for the payment of the VAT due on the intra-Community acquisition of those goods where he has not complied with the obligation provided for in Articles 262 and 263 to submit a recapitulative statement containing the information concerning the supply or the recapitulative statement submitted by him does not set out the information concerning this supply as required under Article 264. 2. In the situation referred to in Article 200, the person supplying goods in accordance with Article 138, shall be held jointly and severally liable for the payment of the VAT due on the intra-Community acquisition of those goods where that person has not complied with the obligation provided for in Articles 262 and 263 to submit a recapitulative statement containing the information concerning the supply or the recapitulative statement submitted by him does not set out the information concerning this supply as required under Article 264.   Prior to holding a person supplying goods in accordance with Article 138 jointly and severally liable, the authorities to which that person is required to submit his recapitulative statement under Article 262 shall notify him of his non-compliance and shall give him the opportunity to justify his shortcoming within a period not shorter than two months. However, the first subparagraph shall not apply in the following situations: The first subparagraph shall not apply where: (a) the customer has, for the period during which the tax became chargeable on the transaction concerned, submitted a VAT return as provided for in Article 250 containing all the information on this transaction; (a) the customer has, for the period during which the tax became chargeable on the transaction concerned, submitted a VAT return as provided for in Article 250 containing all the information on this transaction; (b) the person supplying goods in accordance with the conditions laid down in Article 138 can duly justify to the satisfaction of the competent authorities his shortcoming referred to in the first subparagraph of this paragraph. (b) the person supplying goods in accordance with Article 138 can duly justify to the competent authorities to which the recapitulative statement must be submitted in accordance with Article 262 his shortcoming referred to in the first subparagraph of this paragraph.   (c) more than two years have elapsed between the supply of goods and the date on which the person supplying goods in accordance with Article 138 received the notification referred to in the second subparagraph of this paragraph.
Amendment  4 Proposal for a directive – amending act Article 2 a (new)
Text proposed by the Commission	Amendment
	Article 2a
	Commission evaluation
	By ...*, the Commission shall draw up a report evaluating the impact of joint and several liability under Article 205 of Directive 2006/112/EC, including its impact on administrative costs for suppliers and on tax revenue gained by Member States. If appropriate, and provided that the Commission is able to demonstrate that the VIES (Value-added Tax Information Exchange System) database and the exchange of information between Member States function correctly, the Commission shall submit a proposal to amend Article 205 of Directive 2006/112/EC.
	* OJ please insert date: five years after the date of entry into force of this Directive.
Justification
A full liability, without the requirement of a fraudulent intention, could only be justified if the administrative cooperation amongst member States in the field of VAT (VIES database, exchanges of information) functions correctly.

EXPLANATORY STATEMENT

Background

The fight against fraud, although to a large extent the responsibility of the Member States, cannot be undertaken at national level alone. Combating tax evasion must be a priority for the EU and must entail closer cooperation between Member States' administrative authorities and with the Commission. In this connection, the Commission, following the guidelines marked out by the Council since 2007, launched a two-pronged strategy, i.e.:

§ to envisage a major reform of VAT, which could consist of either introducing a reverse charge mechanism or of taxing intra-Community transactions via measures including a clearing-house; a description of the context and the operation of these options can be found in Mrs Sharon Bowles INI report;

§ a set of conventional measures, that is, alterations to the rules on VAT which do not require root-and-branch changes to the system in place and are aimed at introducing technical improvements to the administration of the tax.

The current speed of discussion in the ECOFIN Council does not suggest that there will be an in-depth VAT reform in the near future. This was confirmed by Commissioner Kovács when addressing the Committee on Economic and Monetary Affairs in December 2008. What remains, therefore, are the conventional measures.

Reference should also be made to the Court of Auditors' Special Report No 8/2007, which is highly critical of the Member States, reproaching them for not having made sufficient efforts as regards administrative cooperation on VAT matters. This report makes a number of recommendations, including the following:

§ reducing drastically the deadlines for obtaining and compiling data;

§ ensuring the swift rectification of incorrect data.

A first series of conventional measures were adopted by the European Commission on 17 March 2008 (one amending Council Directive 2006/112/EC on the common system of value added tax ('the VAT directive'), and the other amending Regulation (EC) No 1798/2003). These measures provide for tax administrations to obtain much faster than today information about intra-Community transactions and they were dealt with in Mr García-Margallo's reports of 15 November 2008.

A second series of conventional measures were adopted by the European Commission on 1 December 2008 (Proposal for a Council Directive amending Directive 2006/112 on the common system of value added tax as regards tax evasion linked to import and other cross-border transactions). This proposal is the one which is the subject of the present report. This new proposal includes modifications to the VAT Directive in order to clarify some conditions for the exemption at importation and to define the possibility for applying joint and several liability in cross border situations. The proposal aims at modifying two existing Articles of the VAT Directive, as follows:

§ The importation of goods is exempt from VAT if followed by a supply or transfer of those goods to a trader in another Member State. Inadequate implementation of this exemption in national law has lead to difficulty in following-up the physical movement of the imported goods. Experience shows the increasing use of this particular exemption in missing trader fraud schemes. Therefore, the Commission proposes to tighten the conditions under which the importer can benefit from the exemption: at the time of importation, he shall clearly indicate to the Member State of import his VAT identification number, the VAT identification number of his customer and he shall prove that the imported goods will be transported to another Member State.

§ Fraud investigators have reported that traders in intra-community supplies intentionally do not report (or report incomplete/false data or report late) their supply to the tax authorities. As a consequence, the Member State of destination gets no information about the arrival of goods on its territory, which impedes the detection of potential VAT losses. The Commission therefore proposes that the supplier in intra-community transactions be liable for the VAT loss created by his missing customer in another Member State, when the supplier contributed to the loss by not reporting (or by reporting false or incomplete information or by reporting late) his supply to his VAT authority. The proposal will provide tax administrations with a tool for recovering VAT from non-established traders. In order to respect the principle of proportionality, the measure introduces the liability of the supplier only if the acquirer has not submitted his VAT return related to the acquisition to his tax authority. Furthermore, it is foreseen that the supplier can refute the presumption of liability by duly justifying his shortcoming to the competent tax authority.

Together with this new proposal, the Commission presented a Communication on a coordinated strategy to improve the fight against VAT fraud (COM(2008)807). This Communication sets out a coherent short term action plan announcing three sets of legislative proposals to be presented in the coming months. It also initiates a reflection on a longer term scale, notably about the relation between tax payers and tax administrations and the opportunities offered by information technologies in that context. The new conventional measures that will be proposed by the Commission cover the following areas:

· provisions for enhancing the administrative cooperation between Member States, notably providing a sound legal basis for EUROFISC (network which would provide a multilateral early warning mechanism for combating VAT fraud);

· a modification of the VAT Directive regarding VAT chargeability on Intra-Community transactions and invoicing rules.

Assessment

Tax fraud has serious consequences for Member States' budgets and the European Union's resource system, leads to violations of the principle of fair and transparent taxation, and is liable to bring about distortions of competition, thereby affecting the operation of the internal market; whereas honest businesses have competitive disadvantages because of tax fraud, and the loss of tax revenue is ultimately replenished by the European taxpayer through other forms of taxation. In so far as the Commission's proposal aims at addressing all this issues, your rapporteur welcomes the Commission's proposal.

With this new proposal, the Commission wants to tackle specific cross-border related issues such as the increasing occurrence of missing-trader fraud and the deliberate abuse of the VAT system by criminal gangs who set up such schemes to take advantage of the failures in the system.

There is consensus amongst Member States about the fact that they cannot combat cross-border tax fraud in isolation. In this respect, your rapporteur notes that exchanges of information and cooperation between Member States and with the Commission have been insufficient to combat tax fraud effectively as regards either substance or speed. Both the European Parliament and the Court of Auditors have consistently stated that the system for exchanging information between Member States on intra-Community supplies of goods does not provide relevant or timely information for tackling VAT fraud efficiently. There is a clear room for improvement.

Moreover, it is a fact that traders can often obtain only very fragmented information on the VAT status of their customers. In this respect, business organisations have warned about the fact that the cross-border joint and several liability could disproportionally raise the risk and costs of making intra-Community supplies., It should be recalled in this connection that, according to data provided by the Commission, 10% of large and 14% of small and mid-sized companies are not involved in cross-border trade due alone to VAT.

Currently Member States have the option to hold a person other than the person liable for payment of VAT jointly and severally liable on their territory. This national law concept has created a certain degree of legal uncertainty, as it is shown in various ECJ cases. The translation of this concept into a cross-border context, in a situation where the joint liability is linked to the quality of reporting of intra-community supplies, implies that a breach of law in one Member State through wrong reporting by the supplier can be punished by another Member State. Such a serious outcome requires further study. Your rapporteur notes that the proposal does not provide an impact assessment in this respect.

Rather than a bold cross-border expansion of the jurisdictional power of Member States in recovering VAT revenue lost in their territory, more emphasis should be placed on enhancing the exchange (and the quality) of information. As noted by the European Court of Auditors in its Special Report 8/2007, half of the information exchange upon request between Member States does not take place within the timescales required by the legislation. This statement implies, amongst other things, that not all Member States are doing their reporting job properly. The rapporteur believes that businesses should not bear to responsibility for the shortcomings of administrative cooperation between Member States. If Member States are simply given an additional power to prosecute suppliers on a cross-border basis, Member States will have no incentive to bring a real improvement to administrative cooperation.

That is why as a matter of urgency, the Commission should submit further proposals on the automated access by all other Member States to certain non-sensitive data held by Member States on their own taxable persons (such as, in the business sector, certain data concerning turnover), and on the harmonisation of the procedures for the registration and de-registration of persons liable for VAT to ensure the swift detection and de-registration of fake taxable persons. Member States must take responsibility for keeping their data up to date, in particular, as regards de-registration and the detection of fraudulent registrations.

Conclusion

Your rapporteur welcomes a Commission's initiative that goes in the right direction. Based on the above considerations, your rapporteur proposes to amend the Commission's proposal in order to make it more balanced vis-à-vis honest businesses.

PROCEDURE

Title	Common system of value added tax as regards tax evasion linked to import and other cross-border transactions
References	COM(2008)0805 – C6-0039/2009 – 2008/0228(CNS)
Date of consulting Parliament	28.1.2009
Committee responsible        Date announced in plenary	ECON 5.2.2009
Rapporteur(s)        Date appointed	Cornelis Visser 17.12.2008
Discussed in committee	11.2.2009		30.3.2009
Date adopted	31.3.2009
Result of final vote	+: –: 0:	19 0 10
Members present for the final vote	Paolo Bartolozzi, Zsolt László Becsey, Pervenche Berès, Sebastian Valentin Bodu, Sharon Bowles, Udo Bullmann, David Casa, Manuel António dos Santos, Jonathan Evans, Elisa Ferreira, Ingo Friedrich, Jean-Paul Gauzès, Donata Gottardi, Benoît Hamon, Karsten Friedrich Hoppenstedt, Sophia in ‘t Veld, Wolf Klinz, Kurt Joachim Lauk, Astrid Lulling, Gay Mitchell, Sirpa Pietikäinen, John Purvis, Dariusz Rosati, Olle Schmidt, Margarita Starkevičiūtė, Ieke van den Burg
Substitute(s) present for the final vote	Harald Ettl, Gianni Pittella, Eva-Riitta Siitonen
Date tabled	1.4.2009