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New VAT rules will not burden firms, says EC

Microscope contributor

 

The European Commission has assured traders they will not see increases to the administrative burdens already placed on them, after it outlined proposed changes to VAT regulations designed to cut carousel fraud.

 

Carousel fraud involves a company importing VAT-free goods from another country in the European Union , selling them on with VAT added, then disappearing before paying the tax owed. The practice cost the UK Treasury £3bn in 2006.

 

When an intra-community fraud happens – as the VAT carousel is also known – it takes three to six months for details of the transaction to be sent to the member state in which VAT is due.

 

Under the changes tabled by the EC last week, suppliers will have a month to declare cross-border CPU transactions within the EU, and the transmission of this data between member states will be cut from three months to one.

 

Companies that sell more than €200m worth of CPUs or mobile phones a year will also need to file VAT declarations every month, but the EC insisted the filing process would be simplified.

 

Laszlo Kovacs, European commissioner for taxation and the customs union, said the measures were the first steps towards a more effective fight against VAT fraud.

 

"Their advantages are that they can be implemented very quickly and do not impose any significant administrative burdens on economic operators," he said.

 

Last summer, the EC introduced a reverse charge, effectively forcing mobile phone and computer chips traders to vet the supply chain to ensure they do not unwittingly become involved in carousel scams.

 

The current system costs traders money said Sukh Rayat, EMEA president of sales at Avnet Technology Solutions. He called on the Government to provide HM Revenue & Customs with resources to tackle carousel fraud itself.

 

"It is administratively heavy for us and our customers to ensure we are compliant," said Rayat. "We expect the relevant authorities to police the market as we are here to sell product, not process VAT claims."


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