Tackling VAT fraud in the EU

New tools to make the EU's Value Added Tax (VAT) system more fraud-proof and close loopholes that can lead to large-scale VAT fraud have been unveiled by the European Commission.

The new rules aim to build trust between Member States so that they can exchange more information and boost cooperation between national tax authorities and law enforcement authorities.

The most cautious estimates show that VAT fraud can lead to lost revenues of over €50 billion a year for EU Member States – money that should be going towards public investment in hospitals, schools and roads. Revelations in the ‘Paradise Papers' have again shown how tax avoidance schemes can be used to help wealthy individuals and companies to circumvent the EU's VAT rules to avoid paying their fair share of tax. Recent reports also suggest that VAT fraud schemes can be used to finance criminal organisations, including terrorists.

The new proposals aim to strengthen cooperation between Member States, enabling them to tackle VAT fraud more quickly and more efficiently, including fraud that takes place online. Taken together, the proposals should boost the EU’s ability to track and clamp down on fraudsters and criminals who steal tax revenues for their own gain.

"Cross-border VAT fraud is a major cause of revenue loss for Member States and EU budgets,” commented Valdis Dombrovskis, Vice-President for the Euro and Social Dialogue. “Today's proposal will help to strengthen the cooperation between institutions working nationally and at EU level in order to effectively tackle this problem and improve tax collection."

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