EUROPEAN COMMISSION Brussels, 12.12.2018 SWD(2018) 488 final COMMISSION STAFF WORKING DOCUMENT



IMPACT ASSESSMENT

Accompanying the document Proposal for a Council Directive amending Directive 2006/112/EC as regards introducing certain requirements for payment service providers



and



Proposal for a Council Regulation amending Regulation (EU) No 904/2010 as regards measures to strengthen administrative cooperation in order to combat VAT fraud

{COM(2018) 812 final} - {COM(2018) 813 final} - {SEC(2018) 495 final} - {SWD(2018) 487 final}



Contents List of figures 1.Introduction: Political and legal context 1.1.The modernisation of the VAT system on B2C cross-border supplies 1.2.Administrative cooperation 1.3.Enforcement 2.Problem definition 2.1.E-commerce VAT fraud 2.1.1. VAT fraud on cross-border supplies of services 2.1.2. VAT fraud on intra-EU distance sales of goods 2.1.3. VAT fraud on imports of goods 2.2.Size of the problem 2.3.Problem tree 2.4.What are the problem drivers? 2.4.1. No physical presence of the suppliers 2.4.2. Relevant VAT information held by third parties 2.4.3. Tax administration tools and capacities 2.4.4. Other Drivers influencing e-commerce VAT fraud (and addressed by other initiatives) 2.5.How will the problem evolve?

3.Why should the EU act? 4.Objectives: What is to be achieved? 4.1.General objectives 4.2.Specific objectives 4.3.Operational objectives 4.4.Consistency with other EU policies and with the Charter for fundamental rights 5.What are the available policy options? 5.1.Measures with a positive impact on reducing the e-commerce VAT loss introduced with the VAT e-commerce package) 5.1.1. Abolition of the distance sale thresholds and extension of the MOSS 5.1.2. Abolition of the small consignments exemption 5.1.3. Import One Stop Shop (IOSS) 5.1.4. Deemed supplier 5.2.Policy options 5.2.1. Payment services and payment service providers 5.2.2. Payment data 5.2.3. Structure of the policy options 5.3.What is the baseline from which options are assessed? 5.3.1. Policy option 1 – Baseline scenario 5.4.Description of the policy options 5.4.1. Policy option 2 (non-regulatory): Investing in administrative capacity and providing EU guideline + standard forms

5.4.2. Policy option 3 (Regulatory option): Collection and exchange of payment data 5.5.Discarded option 5.5.1. VAT split payment 5.5.2. Direct access of Member States' tax authorities to Payment Service Providers' databases 6.What are the impacts of the policy options? 6.1.Methodology 6.2.Analysis of the impacts 6.2.1. Impact on VAT fraud 6.2.2. Impact on distortion of competition 6.2.3. Impact on administrative burden and compliance costs 6.2.4. Sectoral impacts 6.2.5. Impact on terms of trade, employment and environment 6.2.6. Impact in terms of the fundamental right to protection of personal data 7.How do the options compare? 7.1.Summary assessment of the impact 8.Preferred option 8.1.Identification of the preferred option 8.2.Subsidiarity of the preferred option 8.3.Proportionality of the preferred option 8.4.Impact on SMEs

9.How will actual impacts be monitored and evaluated? 9.1.Indicators for monitoring and evaluation 9.2.Monitoring structure 10.ANNEXES 10.1.Annex 1: Procedural information 10.2.Annex 2: Consultation synopsis report 10.3.Annex 3: Evaluation of Regulation (EU) 904/2010 for cross-border Business to Consumer online supplies 10.4.Annex 4: Who is affected by the initiative and how? 10.5.Annex 5: Methodology 10.6.Annex 6: Technical feasibility of the options 10.7.Annex 7: Case Study – pricing policy and estimation of potential VAT loss 10.8.Annex 8: Result of the TAXUD 2016 survey on e-commerce compliance strategies in the EU 10.9.Annex 9: Payment Services framework in the EU 10.10.Annex 10: B2B import VAT fraud 10.11.Annex 11: Third countries using payment data as VAT control tool 10.12.Annex 12: Visual examples of the regulatory options 10.13.Annex 13: Comparison amongst different initiatives in terms of fighting e-commerce VAT fraud GLOSSARY

Term or acronym Meaning or definition B2B Business-to-business. B2C Business-to-consumers. C2C Consumers-to-consumers EBA European Banking Authority E-commerce The sale or purchase of goods or services through electronic transactions conducted via the internet or other computer-mediated (online communication) networks E-commerce VAT fraud VAT fraud on B2C cross-border supplies of goods and services. It covers intra-EU distance sales of goods, imports of goods, and cross-border supplies of services (from suppliers established in one Member State or in a third country) GDPR General Data Protection Regulation IOSS Import One Stop Shop MLCs Multilateral controls MOSS Mini One Stop Shop MSC Member State of Consumption MSE Member State of Establishment MTIC Fraud Missing Trader Intra-Community PSD2 Payment Service Directive 2 PSP Payment Service Providers SEPA Single euro payment area TBE Telecommunications, broadcasting and electronic services VAT Value-Added Tax VC Virtual Currencies List of figures Figure 1: Turnover from B2C and B2BG (Businesses and Governments) web sales, percentage share on total, non-financial enterprises, EU-28, 2017 Figure 2: Sectoral distribution of e-commerce, 2017 Figure 3: Problem tree Figure 4: Link between drivers, options (non-regulatory and regulatory) and specific objective Figure 5: Respondents to the public consultation (number) Figure 6: Country of residence of the respondents to the public consultation (number) Figure 7: Perception of the negative impact of VAT fraud in e-commerce Figure 8: Proportionality of the initiative Figure 9: Subsidiarity of the initiative Figure 10: Public consultation: Comparison of policy options Figure 11: Public consultation: Preferred technical choices Figure 12: Public consultation: Exchange of data must not reveal the identity of the customer (buyer) Figure 13: Tax authorities: evaluation of the administrative cooperation tools Figure 14: Regulation (EU) 904/2010: intervention logic Figure 15: Tax authorities: perceived effectiveness of the administrative cooperation tools

Figure 16: Positive and negative perception on the effectiveness of different administrative cooperation tools Figure 17: Tax authorities: perception on the administrative cooperation tools Figure 18 - Public consultation: Public perception of the EU added value Figure 19: Tax authorities: perception of the EU added value Figure 20: Public consultation: perception on the e-commerce VAT fraud problem Figure 21: Distributed application exchange of info Figure 22: Central repository of data List of tables Table 1: Main modalities of fraud on B2C cross-border transactions Table 2: Tax administrations' estimates of annual VAT losses, by type, EUR million Table 3 Fraud levels: net impacts over baseline, by option Table 4: Total Member State + EU Commission costs for payments data IT infrastructure (EUR million; rounded) Table 5 Audits for which the use of payments data was important Table 6: Summary analysis of impacts Table 7: Evaluation matrix Table 8: Simplified example of payment data transmitted to a Member State from the Payment Service Providers established in that Member State Table 9: Comparison amongst different initiatives in terms of fighting e-commerce VAT fraud 1.Introduction: Political and legal context Business-to-consumer (B2C) cross-border supplies of goods and services are facilitated by the rapid growing of the e-commerce , which offers more opportunities to both businesses and consumers. However, the same opportunities are also exploited by dishonest traders – located both inside and outside the EU - to gain an unfair market advantage by not fulfilling the VAT obligations. As private consumers change purchase habits and suppliers adapt their business models, tax authorities are facing new challenges in coping with B2C cross-border VAT fraud (hereinafter e-commerce VAT fraud).

The initiative supported by this impact assessment complements the current VAT regulatory framework as recently modified by the VAT e-commerce Directive in the framework of the Commission Digital Single Market Strategy. In December 2017, when the VAT e-commerce Directive was adopted, the Council stressed the need to strengthen cooperation between Member States in order to tackle VAT fraud. The options taken into account in this initiative have been drafted after consultation with several Member States and business representatives (including payment service providers and other online platforms) in the framework of the VAT forum . In particular this impact assessment identifies areas where the administrative cooperation framework can be improved to better tackle fraud and restore fair competition. An evaluation of Council Regulation (EU) 904/2010, on administrative cooperation and fighting fraud in the field of VAT is in annex of this report. The evaluation, based on the answers of the Member States' tax administrations to a targeted consultation and on an open consultation, shows that administrative cooperation is crucial to combat e-commerce VAT fraud, but the evolution of the business models and fraud patterns in the e-commerce pose new challenges to Member States that must be addressed with new administrative cooperation tools. 1.1.The modernisation of the VAT system on B2C cross-border supplies The general rule applying to cross-border B2C supplies of goods and services as laid down in the VAT Directive is the so-called “destination principle”: taxation in the Member State of consumption. In the EU VAT system, when applying the destination principle, in general , the suppliers of goods and services should register in the Member State of destination where the customer is established or where the goods arrive and, thus, comply with the appropriate set of rules in each different Member State. The destination principle applies also to B2C supplies from non-EU countries: the suppliers are generally liable for the VAT of the Member State where the customer resides. This represents a significant complication for businesses both in the EU and in third countries; the compliance burden is heavy enough to make it plausible that part of the VAT loss generated by non-declaration is due to businesses not understanding their tax obligations or finding them too burdensome. This problem has been addressed by a recent series of initiatives introducing new rules that make it easier for online businesses (both from inside or outside the EU) to comply with VAT obligations and to facilitate the collection of VAT for tax administrations. In 2015, a simplified electronic and registration system called Mini One Stop Shop (MOSS) entered into force in the field of telecommunication, broadcasting and electronically supplied services (TBE). The suppliers that opt for the MOSS can fulfil all the VAT obligations (identification, declaration, payments) relating to the TBE supplies in one single Member State of their choice (instead of having to register in all the Member States of consumption). The MOSS represents a simplification for the businesses in the TBE sector and has been a success for the EU Member States in terms of VAT collection . The recently adopted legislation modernising the VAT system on B2C cross-border supplies (hereinafter the VAT e-commerce package) will extend the MOSS to all supplies of services and goods intra-EU and from outside the EU (as from 2021) . Furthermore, the VAT e-commerce Directive abolished the thresholds on distance sales and the threshold on small consignment exemptions on importation that add complications for businesses and are exploited by fraudsters to avoid the payment of the due VAT (See section 2.1.2 and section 2.1.3). Finally, a new provision in the VAT Directive will make online market places, platforms and portals "deemed suppliers" for the sales of goods facilitated through their electronic interfaces. They will be deemed to have received and supplied those goods themselves for a) distance sales of goods imported from third territories or third countries not exceeding the value of EUR 150 and b) the B2C supplies of goods which are already in the EU (i.e. in fulfilment centers) by non-EU established taxable persons facilitated through these platforms. This measure also represents a simplification for the tax authorities of the Member States that will be able to collect the VAT due on certain B2C supplies of goods and imports directly from a single taxable person (the deemed supplier) and not from numerous suppliers not established in the EU. However, under this provision, the tax authorities will not be able to detect or control fraudulent transactions. Also under the deemed supplier provision Member States will have the same need they currently have to check that all the transactions are declared, or correctly declared. The recently adopted measures are designed to reduce the administrative burdens, facilitate compliance and making the VAT system more fraud proof by abolishing the thresholds on distance sales and on the exemption for small consignments. While they modernised the VAT system in order to make it easier for businesses trading cross-border to comply with their obligations and for tax authorities to collect VAT, no adequate and new administrative cooperation instruments had been introduced to address the specificities of the e-commerce VAT fraud. The consultation supporting this impact assessment, showed that the magnitude of the problem is still unknown by some of the Member States because of the lack of data at disposal of tax administrations. However, recent fraud cases in the field of e-commerce raised now the need to provide tax authorities with new tools addressing the specific problem (see section 2). 1.2.Administrative cooperation As stressed by the experts of tax authorities and businesses in the framework of the EU VAT Forum , the traditional cooperation to combat VAT fraud is between tax authorities and is based on records held by the businesses directly involved in the transaction chain. In the cross-border B2C supplies, this information may not be directly available and thus the "traditional" cooperation between tax authorities is not enough . In fact, the evaluation showed that the current administrative cooperation tools are used to a very limited extent (only five Member States reported to have received spontaneous information on e-commerce VAT fraud and half of the respondent Member States reported difficulties in receiving information on request from the other Member States on e-commerce VAT fraud). The number of requests for information to other Member States on e-commerce VAT fraud is still very low (in 2017 only 319 requests) compared to the total number of requests for information processed by the Member States in the field of VAT (in 2017 more than 45.000). The reason of these difficulties lies in the lack of third party data, as pointed out by the experts of the e-commerce sub group of the VAT forum. The Commission proposal recently agreed by the Council amending Council Regulation (EU) No 904/2010 as regards measures to strengthen administrative cooperation in the field of VAT will provide for new tools on administrative cooperation between tax administrations mainly addressed to fight the so-called “carousel fraud” (carried out on business-to-business B2B transactions), the fraud involving the margin scheme applicable to second-hand cars and the fraud exploiting specific customs regimes applicable to imports carried out by taxable persons (again on B2B transactions). In addition, Eurofisc officials will be entitled to exchange relevant information on VAT fraud cases with Europol and the European Anti-Fraud Office (OLAF). However, the above proposal will not affect VAT fraud on cross-border B2C transactions. The peculiarity of the B2C e-commerce schemes was mentioned in the Commission VAT Action plan . In particular, the Commission pledged to address VAT fraud in the electronic commerce sector by means of specific anti-fraud tools for tax administrations, in cooperation with third parties that facilitate the B2C cross border supplies of goods and services . Therefore, this initiative is to be seen as complementary to the above mentioned amendments to Regulation (EU) 904/2010 to strengthen administrative cooperation in the field of VAT, by giving tax authorities the sources of information they are currently unavailable to them, as pointed out by the experts of the e-commerce sub group of the VAT forum. 1.3.Enforcement The detection of fraudsters established in a state different from the one of consumption is only a first step for tax administrations. Making the fraudsters comply with VAT obligations (i.e. VAT registration, VAT declaration and VAT payment) is a subsequent step to be addressed through enforcement measures, which are not part of this impact assessment and of the future proposal. Still, as a matter of consistency, it is worth mentioning enforcement initiatives related to this anti-fraud initiative. When the remote suppliers are established in the EU, the tax authorities of the EU Member States can use the European mutual assistance framework to notify documents and apply recovery measures. However, when the remote suppliers are established outside the EU the enforcement may be more difficult. Member States can activate international cooperation under bilateral agreements or the Council of Europe/OECD multilateral Convention on administrative cooperation on tax matters . Nevertheless, even in this case, some countries apply the reservation of the Convention excluding VAT (and other consumption taxes) from its scope . This problem is internationally recognised and the OECD recommends strengthening the international administrative cooperation on VAT or sales tax to address the challenges of collecting VAT from non-resident suppliers, particularly in B2C trade . A step forward in this respect is the Agreement between the European Union and Norway in the field of VAT administrative cooperation (concluded in June 2018 ) that also includes specific instruments for the recovery of VAT claims. The present initiative will give Member States the evidence to detect fraudsters in third countries as a first step to activate international cooperation or to open an international dialogue to reinforce administrative cooperation tools. 2.Problem definition

2.1.E-commerce VAT fraud VAT non-compliance can be essentially ascribed to two main categories of taxpayers: suppliers (basically small and medium enterprises) not fulfilling VAT obligations because of the complexity of the system and suppliers not fulfilling the VAT obligations to intentionally gain illicit market advantages. Tax simplification policies can reduce the type of non-compliance deriving from administrative burden avoidance, but cannot address intentional non-compliance (fraud). While the initiatives described in point 1.1 addressed the first problem, this initiative addresses VAT fraud only. In particular, the problem at stake refers to VAT fraud on cross-border suppliers to final consumers (B2C). Also a taxable person can buy goods and services online from another taxable person (B2B). However, in this case the tax administration of the Member State of Consumption (MSC), where the VAT is to be paid, can in principle trace back the transaction chain through the records held by the taxable person acquiring the goods and services in its own jurisdiction, and subject to record-keeping obligations. This is not the case for cross-border B2C supplies where the consumer has no record-keeping obligations. Furthermore, consumers, unlike taxable persons, do not recover the VAT paid on their purchases. Therefore, in a B2C sale, the buyer has a clear economic incentive to avoid the tax. Unscrupulous suppliers face the same incentive because avoiding VAT will allow them to set prices lower and undercut the competition from law-abiding businesses. Finally, it should be noted that VAT fraud on B2B transactions (in particular Missing Traders and carousel fraud) is tackled already by the recently adopted amendments to Regulation (EU) 904/2010 (see section 1.2). When dealing with B2C cross-border supplies, the following VAT fraud patterns have been identified (domestic transactions are out of scope): ·The supplier might not register at all for VAT (non-registration); ·The supplier might register but not declare or pay VAT (in total or partially); ·The supplier might under-declare the value of the goods; ·Upon importation, the supplier might mis-describe the good on the package (i.e. as sample, gift…) or, under-declare its value (for example, to profit from the VAT exemption of packages under a value of 10/22 euros); ·The supplier might submit his VAT declaration and pay VAT in the wrong Member State (for example, to profit from a lower VAT rate). The above-mentioned cases can apply to three types of cross-border B2C transactions: ·Cross-border supplies of services in the cases where the destination principle is of application (both intra-EU and from suppliers located outside the EU ); ·Intra-EU distance sales of goods; ·Imports of goods from non-EU countries. No VAT registration No VAT declaration and payment Under-declaration Mis-description of the import VAT declaration in the wrong place Cross-border supplies of services ü ü Intra-EU distance selling of goods ü ü ü Imports of goods from non-EU sellers ü ü ü E-commerce business models are multiple and keep evolving. However, they all have something in common: goods and services can be ordered and paid online from the final consumers to the suppliers and no physical presence of the seller is necessary in the Member State of consumption (MSC). VAT e-commerce fraudsters exploit the Internet and its facilities to get easily in contact with consumers abroad and sell services or goods without fulfilling VAT obligations. This allows them to offer lower prices, gain illicit market advantages and remain anonymous vis-à-vis the tax authorities. The contacts between suppliers and potential clients are facilitated by online intermediaries such as online market places, online auction sites or search engines that can aggregate the best online suppliers by lower price per category of product, best rank by clients' feedback, etc. In the section below, examples of VAT fraud are presented to describe the risks posed to VAT collection in e-commerce and the need to provide tax authorities with new tools to detect these types of VAT fraud. 2.1.1.VAT fraud on cross-border supplies of services TBE services supplied cross-border to final consumers are taxable in the Member State of consumption. Businesses in or outside the EU can fulfil their VAT obligations on cross-border sales of TBE services to European consumers either through the MOSS or by registering, declaring and paying VAT in every MSC . However, various instances of VAT fraud have been reported: there are businesses providing TBE services that do not register in the MSC nor identify in the MOSS and, thus, do not declare and pay VAT on their supplies. There is evidence of this kind of fraud in the markets for online television and digital games .

In the first case, websites advertise and offer TV programs to customers in the EU at extremely low prices compared to the normal market price. The client has to order a media box, connect it to the internet and set it to start watching the TV services under a periodic subscription. The web shops often have domain addresses located in third countries, while the real businesses behind them could be placed either inside or outside the EU. The television content is easily delivered through the Internet Protocol Television (IPTV) using the Internet, instead of being delivered through traditional terrestrial, satellite signal and cable television formats. This fraud was documented by EUROPOL and the European Union Intellectual Property Office and by the Nordic Content Protection (NCP) in the latest Report about illegal distribution and sales of access to television broadcasts . An annual estimated loss in sales of EUR 436 million for IPTV distributers in Denmark, Finland and Sweden alone (having together less than 10% of the total IPTV EU market in terms of revenues) , results in approximately EUR 103 million of potential VAT loss calculated using the standard rates. Digital games associations have also reported VAT fraud. The mechanism is again very simple: big actors in the European market established both inside and outside the EU, without VAT identification (and without declaring or paying VAT), sell games in the European market with lower prices than their legitimate counterparts . Both cases of fraud also raise copyright issues, which are not under the scope of this impact assessment report. 2.1.2.VAT fraud on intra-EU distance sales of goods When a European supplier sells goods to final consumers in other Member States, it should register, declare and pay VAT in that Member State (MSC) when its annual supplies in that MSC exceed a given thresholds . If the threshold is not exceeded, the place of supply remains in the Member State of the supplier. The distance selling thresholds had been introduced to avoid small businesses supplying abroad to register in each MSC for every supply and deal with different tax authorities, national legislations and procedures (which represents a burden for these businesses). Distance selling fraudsters exploit the internet to get easily in contact with clients in other Member States and supply abroad avoiding VAT registration (and thus declaration and payment) in the MSC even when the threshold is exceeded. In such a case, the VAT is paid in the wrong place – the Member State of establishment (MSE), where, usually, the VAT rate is lower. For example , an Irish trader could make supplies of children clothes to customers in Denmark charging the 0% rate applicable in Ireland. The corresponding rate of VAT in Denmark is 25%. The distance sales' fraudsters can also remain entirely in the black market by registering (and thus declaring and paying VAT) neither in the MSE nor in the MSC. There has been increasing evidence of the abuse of distance selling driven by e-commerce that is of great concern for the Member States. The Finnish tax administration alone, in 2016, assessed an amount of EUR 20 million of non-declared VAT by distances sellers. 2.1.3.VAT fraud on imports of goods VAT on imports must be paid applying the right VAT rate (depending on the category of goods and on the Member State of importation) to the value of the goods. VAT fraud on importation can be committed by: ·under-declaring the value of the goods (to unduly benefit from either the small consignment exemption or just a lower amount of VAT); ·mis-describing the import as a low-value sample (to benefit from the exemption) or ·pretending to make a C2C transaction (instead of B2C), thus avoiding the VAT on importation. Similarly to the previous examples, the order and the payment are made online and often the VAT number of the supplier is displayed neither in the web shop nor on the import and transport documents (or it does not exist) and the amount of VAT does not appear under the total price. There is multiple documented evidence of such VAT fraud . 2.2.Size of the problem VAT is a major source of tax revenue for the Member States and contributes to the own resources of the European Union. However, measuring the scale of the VAT loss on B2C cross-border supplies is very challenging. Most tax authorities lack the tools and the sources of information to quantify the evidence on the level of e-commerce VAT fraud. However, they consider the level of non-compliance to be significant. In the targeted consultation, only three tax authorities provided rough estimates on the VAT loss splitting in B2C intra-EU supplies of goods, B2C intra-EU supplies of services and imports of goods in 2015, 2016 and 2017. Austria B2C Intra-EU supplies of goods (2017) 160 Finland B2C Intra-EU supplies of goods (2017) 5 Croatia B2C intra-EU supply of services 1 Finland Imports (2017) 20 Austria Imports (2017) 76 The scale of VAT losses undoubtedly differs substantially from one Member State to the other because the rate of penetration of e-commerce is highly uneven. Supply side statistics show that the market for e-commerce is up to seven times more developed in certain Member States over others (see Figure 1 ); while demand-side statistics, if they existed, would most probably show a more even picture, it remains likely that the share of VAT losses are quite highly concentrated.

Source: Eurostat Statistics on the proportion of e-commerce sales in the turnover of EU businesses show, as of 2017, for the EU28, 7% of overall turnover are constituted of web sales (up from 4% five years earlier), and that this proportion increases along with the size of the business (from 4% for enterprises between 10 and 49 employees to 9% for large enterprises). The B2C portion of web sales is 41%, equivalent to 3% of turnover for EU businesses as a whole. Within this general picture, however, there is a fairly strong differentiation in the level of development of web sales depending on the Member States. The penetration rate of web sales is not merely a function of GDP per capita, but depends on a host of idiosyncratic factors; for example, in Austria the rate is less than one third of Lithuania's. The diffusion of e-commerce also differs significantly by economic sector. The highest proportion of e-commerce is found in accommodation and transport, on account of the popularity of web sales for travel services, whereas e-commerce understandably accounts for only a negligible share of turnover in construction (see Figure 2 ). Source: Eurostat Estimates of VAT loss on imports and B2C intra-EU supplies of goods at EU level have been made in the framework of the Commission proposal on "modernising VAT for cross-border B2C e-Commerce": EU Member States are estimated conservatively to be losing between EUR 2.6 and 3.8 billion annually in missing VAT on B2C cross-border supplies of goods (intra-EU and imports) . In addition, the incomplete levying of VAT on postal shipments into the EU is estimated to cause a loss the Member States' income of up to EUR 1.05 billion per year . The sellers that do not fulfil the VAT obligations gain a market advantage over the legitimate businesses. The impact on businesses has been estimated for the UK. HMRC’s estimate of the extent of online VAT fraud for imported goods of £1 billion to £1.5 billion corresponds to £6 billion to £9 billion in lost gross sales revenue for VAT‑compliant companies in 2015‑16 . Applying the same methodology, the VAT loss estimation at EU level would result in EUR 13 to 19 billion of net sales equivalent to the detriment of legitimate businesses. The loss to the Member States' and the Union's budget and the negative impact on legitimate businesses' sales are bound to get worse with the steady growth of the e-commerce. In particular, the MOSS and its extension to all supplies of services and goods intra-EU and from outside the EU (from 2021) are optional systems for compliant businesses. If not accompanied by anti-fraud measures the fraudsters will have no "incentives" in changing attitude and start complying. In other words the full success of the compliance measures in the field of e-commerce also depends on the effectiveness of anti-fraud measures to be developed in parallel. Finally, it is important to note that VAT revenues are used by the Member States to finance public services and infrastructures for their own citizens. Therefore, also the European citizens are suffering from the VAT fraud. Wide concern about e-commerce VAT fraud resulted also from the public consultation where up to 92% of the respondents considered that the e-commerce VAT fraud is damaging public revenues, consumers and, finally, compliant businesses. 2.3.Problem tree 2.4.What are the problem drivers? 2.4.1.No physical presence of the suppliers No fraudsters' records in the MSC E-commerce allows online-performed key functions common to all business models such as bringing buyers and suppliers together (i.e. own online-shop, search engines, referrals, third party marketplace); providing a safe environment to conduct transactions for buyers and suppliers (i.e. own online-shop, trust facilitators, third party marketplace); processing payments from buyers to suppliers, including payment service providers (PSPs) and payment gateways (i.e. payment intermediators, on-platform payments, direct payments through bank transfer, direct debit, cash); delivering products (goods or services) from suppliers to buyers (i.e. delivery and fulfilment managed by marketplace, by third party logistic organization, by own means). The supplier can insource or outsource all these functions, or use a combination of insourcing and outsourcing, but does not need a physical presence to get in contact with the clients or to deliver its products to its clients. Therefore, in the MSC the records needed to assess VAT liabilities might not be available or their quality/reliability may be very poor (e.g. in case of importation of goods, an invoice is not mandatorily accompanying the consignment). Furthermore, in B2B transactions the reporting obligations for businesses claiming VAT in the MSC allow tax administrations to reconstruct the transaction chain. This is not the case for B2C sales, because the final consumer does not have similar record-keeping obligations. Information on B2C supplies are available to MSCs' tax authorities only if the supplier registers, declares and pays in those MSCs or through the MOSS portal. If this is not the case, the MSC will lack VAT records or immediate information to collect data for the control of VAT liabilities. The lack of VAT identification numbers and records also affects tax authorities’ possibility to carry out risk analysis, because they may even be unaware of suppliers selling online in their own Member State. Due to this poor quality of information available in the MSC, tax administrations have limited means to (1) identify the sellers; (2) detect taxable supplies in their own jurisdiction; (3) understand whether the remote sellers are taxable persons that should pay VAT in the EU; and (4) assess VAT liabilities. Anonymity of fraudsters

In e-commerce VAT fraud, where B2C cross-border transactions are at stake, the internet, as demonstrated above, allows the supplier to hide its own identity behind a domain name. Even when a tax authority is aware of the existence of a given online shop, the identity of the business behind it, its real location or its turnover in that Member State remain unknown. It is important to note that the objective of the tax authorities is to detect the fraudulent businesses hiding behind the online shops. 2.4.2.Relevant VAT information held by third parties Intermediaries such as online marketplaces and PSPs are involved in the trade chain without being a party in the sales contract between suppliers and buyers. In 2014, e-retailers covered 30% of the total global market share. The three biggest firms (Amazon, eBay and Alibaba) provided 65% of the global e-retailer sales and 94% of payments for cross-border online purchases use electronic payment systems, credit or debit cards, or prepaid cards . Fragmented access to third party data In 2016, the Commission services launched a survey with the tax administrations of the Member States on e-commerce VAT anti-fraud policies. The survey showed that only less than half of the respondent Member States collect data from digital platforms (or their branches) established in their own jurisdiction for VAT control purposes, while around half of them replied that they collect VAT relevant data from payment intermediaries. However, the type of PSPs involved in the transmission of data to tax authorities varies from Member State to Member State (e.g. credit card companies, banks and financial institutions, or others…). The format and the way data is collected also differs (some Member State collect payment data only on specific cases of tax audits, others all payment transactions on regular basis, etc…). Moreover, even in the cases where structured forms of cooperation between tax authorities and third parties have been established, there are emerging criticalities. In fact, Member States do not always receive the information from payment intermediaries and sometimes they get it with either significant delays or referring to a limited period. Often third parties are not providing the information because they only have a branch in the requesting Member State while the information requested is under another jurisdiction. Finally, tax administrations' non-targeted requests to identify online sellers (bulk requests) are problematic to be dealt with and are often not replied by third parties. Conversely, internet platforms can help tax administrations when they receive targeted requests on specific cases. For instance, eBay developed electronic systems that law enforcement and tax authorities can use to make targeted requests referring to the eBay platform. However, as stressed in section 2.4.1. e-commerce VAT fraudsters are often unknown and the tax authorities have difficulties in addressing targeted requests. 2.4.3.Tax administration tools and capacities Non adequate use of administrative cooperation tools When a given supplier, or the third party (i.e. online market place or PSPs) holding the relevant information on that supplier, are established in another Member State, the authorities of the MSC must ask the tax authority of that Member State to receive some relevant information through the administrative cooperation instruments under Regulation (EU) No. 904/2010. Where the fraudsters and their location are unknown, identifying the Member States where to address a request for administrative cooperation is a problem per se. Usually, the first need of a tax authority is to identify "potential" taxable persons performing economic activities giving rise to VAT liabilities in its own jurisdiction. This could result in bulk "identification requests" either to a third party (i.e. online market place or PSPs) holding this information or to a tax authority of a country where the third party is established. However, Council Regulation (EU) No. 904/2010 lays down rules for cooperation between competent authorities of the Member States, and not between competent authorities and third parties. Furthermore, under that Regulation, a Member State cannot be requested to transmit "bulk data" to a requesting Member State. Such a request would be considered disproportionate under Article 54(1). Finally, under Article 54(2), Member States cannot be required to provide information if the national legislation does not authorise them to collect it. This limits the possibilities for Member States to request third party data from other Member States. In fact, half of the respondent Member States to the 2016 survey reported difficulties in receiving information from other Member States on e-commerce B2C fraud. Still, a competent authority aware of any potential breach to the VAT legislation in another Member State can send spontaneous information. However, according to the 2016 survey only five Member States reported to have received such spontaneous information from another tax administration under Regulation (EU) No. 904/2010. Massive volume of information VAT is a consumption tax levied as a percentage of every single transaction. This makes the tax administrations' task of controlling cross-border B2C supplies particularly challenging in view of the volume of online purchases. In 2014 cross-border e-commerce across the EU-28 was estimated at EUR 96.8 billion (which represents 18% of the total online spending in the EU-28). This corresponds to several billion cross-border purchases across Europe. Part of these cross-border transactions is declared to tax authorities (i.e. through direct registration and declaration in the MSC or through the MOSS for TBE services ). However, there are still instances of non-compliance or even fraud in ecommerce transactions for which the tax authorities need additional sources of information for their control activities in order to cross-check the VAT declarations, verify the correct assessment of VAT liabilities and detect instances of non-declaration or fraud. The huge volume of data at stake requires adequate administrative capacity in terms of IT and analytical resources. However, only a very small minority of Member States (6 positive answers out of 23 in the targeted consultation) indicated to have in place a kind of risk analysis system of third party data to detect e-commerce VAT fraud. 2.4.4.Other Drivers influencing e-commerce VAT fraud (and addressed by other initiatives) The way goods are controlled at the moment they are introduced into the internal market has an impact on VAT fraud. In particular, because of the huge amount of parcels entering the internal market, the importations of parcels of law value (benefiting from the VAT exemption for small consignments) and of the ones not exceeding the threshold of EUR 150 (benefiting from the exemption from customs duties) results in significant lack of control by customs and VAT authorities . This issue has been addressed by another legislative initiative described under section 5.1 of this report. 2.5.How will the problem evolve? In 2016, the e-commerce turnover increased by 15% in Europe and it was expected to reach over EUR 600 billion in 2017 , suggesting that the penetration rate of e-commerce will continue to climb. This could potentially generate an increasing impact of VAT fraud in the coming years. On the one hand, consumers are becoming more and more confident with buying online and businesses can benefit from a growing e-commerce market. On the other hand, fraudsters benefit from the same opportunities if tax administrations are not provided with the appropriate instruments to fight e-commerce VAT fraud. 3.Why should the EU act? As demonstrated under section 2, the origin of the problem is wide-ranging: the economic trend of consumers buying online from various jurisdiction, the VAT rules that correctly seek taxation in the Member State of consumption, the huge and unstructured amount of information available in an e-commerce framework, the fact that such information is not directly available to tax administrations and the limitations of the administrative cooperation framework.

The public consultation confirmed that the problem of VAT fraud in e-commerce concerns all the EU Member States. The majority of the respondents (34 out of 52) considered that the problem should be addressed at both EU and Member States level while many (14) were of the opinion that e-commerce VAT fraud should be addressed at EU level only. In the targeted consultation, 17 tax authorities out of 23 confirmed that Member States alone are not able to fight VAT fraud in e-commerce without using the administrative cooperation. The European Court of Auditors noted that e-commerce poses challenges to Member States in terms of VAT collection especially because of a lack of information on B2C cross-border supplies . The VAT Forum subgroup on e-commerce recognised that whereas business understands the data needs of tax authorities it should be made as easy as possible for business to provide the relevant data (consistent data sets). The administrative cooperation framework is laid down in Council Regulation (EU) No. 904/2010. The way Member State tax administrations cooperate to fight VAT fraud has an impact on the internal market. Individual Member States cannot achieve the objective of ensuring a sound anti-fraud system to protect the internal market from VAT fraud unless they coordinate at EU level. It should be noted that Regulation (EU) 904/2010 also provide for a clear legal base indicating the sources of the information to be exchange by Member States' tax authorities through the electronic systems (e.g. VAT national databases, MOSS information…) . Therefore, any new form of exchange of data should be regulated under the same Regulation. The VAT Directive lays down the record keeping obligations of taxable persons and intermediaries and, thus, any new record keeping obligation for payment service providers should be foreseen under the VAT Directive. Furthermore, implementing legislation will have to be adopted in order to implement any new tool for administrative cooperation and to detail any new VAT obligation. Also the 75% of European citizens think that the EU should intervene more than at present in the fight against tax fraud, as indicated in the June 2016 Eurobarometer. The legal basis is Article 113 of the Treaty on the Functioning of the European Union. 4.Objectives: What is to be achieved? 4.1.General objectives The general objectives of the initiative are ·to reduce the VAT loss for the Member States, thus contributing to the fiscal consolidation within the EU; ·to level the playing field for the legitimate businesses in the EU that suffer from unfair competition by fraudsters. 4.2.Specific objectives The specific objective is to reduce e-commerce VAT fraud by providing tax authorities with efficient and effective instruments for detecting non-compliant businesses. At this regard it should be noted that, as described in section 2, the problem at stake refers to businesses with a real economic activity online, but defrauding VAT by not registering for VAT purposes, not declaring and paying the due VAT. As such the fight against these fraudsters is the specific objective of the initiative. 4.3.Operational objectives The operational objectives are: ·To give EU Member States' tax administrations access to relevant third party data to fight e-commerce VAT fraud ·To improve the identification and targeting of potential e-commerce VAT fraud ·To offer new or improved channels for EU Member States' tax authorities to access and share third party VAT-related information 4.4.Consistency with other EU policies and with the Charter for fundamental rights

The objective of fighting tax fraud and evasion to help secure national and EU revenues and prevent distortion of competition is amongst Commission priorities. The political guidelines of the present Commission called for stepping up the efforts to combat tax evasion and tax fraud, including through improved administrative cooperation between tax authorities. The proposal under consideration will trigger new exchanges and processing of VAT-related information and personal data. The General Data Protection Regulation (GDPR) gives a wide definition of personal data including any information relating to an identified or identifiable natural person that can be identified directly or indirectly. As such the payment data listed above contains information falling under the scope of the GDPR and the principles for the protection of personal as laid down in the Charter of Fundamental Rights. The GDPR fixes the principles and data subjects rights to be respected while processing personal data. However, the Union may restrict by legislative measures these principles and the rights of the data subject – as long as the restrictions respect the principles of necessity and proportionality – to safeguard important objectives of general public interest of the Union, such as economic and financial interest including taxation. The impact of the different options on protection of personal data will be detailed under section 6 after the detailed description of the different options. 5.What are the available policy options? As indicated in section 2.1 the VAT loss on e-commerce is also due to the complexity of the VAT system. This was addressed by recent Commission's measures, shortly described here below in section 5.1. 5.1.Measures with a positive impact on reducing the e-commerce VAT loss introduced with the VAT e-commerce package) 5.1.1. Abolition of the distance sale thresholds and extension of the MOSS The current distance sale thresholds represent a complication for the European businesses that must be aware of the different rules in the different Member States they are supplying to, and in the case where the threshold is exceeded they must deal with different tax authorities and procedures. As from 1 January 2021, the distance sale threshold will be replaced by a new EUR 10.000 intra-EU cross-border threshold. The EUR 10.000 threshold will refer to the total value, exclusive of VAT, of the supplies of goods and TBE services to consumers in any Member State other than the Member State of the supplier in the course of the preceding calendar year . When the total annual intra-EU cross-border turnover of a given supplier does not exceed the threshold the place of supply remains in the Member State of the supplier. When the threshold is exceeded, the destination principle will apply (and the supplier will have to register in the Member States of consumption or in in the MOSS) . The abolition of the thresholds together with the extension of the MOSS to all cross-border supplies of goods and services will make the VAT system easier to comply with. Still tax authorities need relevant information to control the new EUR 10.000 thresholds, and detect non-registered distance sellers and their real turnover in the MSC. 5.1.2. Abolition of the small consignments exemption As described in section 2.1.3 the small consignments exemption is abused to avoid the payment of VAT on importations. As from 1 January 2021 the exemption on small consignments will be abolished. Still tax authorities will need tools to control the real value of goods imported in case of under-declarations. 5.1.3. Import One Stop Shop (IOSS) Also imports of parcels of a value over the small consignments exemption but under the EUR 150 customs threshold raise concerns as regard the way VAT is declared and paid. It was estimated that there were 43 million such imports in 2015. A study found that VAT is not paid on 65% of consignments from non-EU suppliers through the public postal channels. This is significant as it is estimated that 70% of transactions are sent through public postal channels. As from 1 January 2021, an Import One Stop Shop (IOSS) regime will be set up. The IOSS will streamline the VAT registration, declaration and payment process. Tax authorities will still have the need to detect the suppliers remaining outside the VAT system and to crosscheck the correctness of the information received through the VAT declarations from the taxpayers registered in the VAT system. 5.1.4. Deemed supplier As described in section 1.1, under the deemed supplier provision from 2021 online market places, platforms and portals will have to fulfil the VAT declaration and payment obligations for certain goods sold through their intermediation by non-EU taxable persons. Also the “deemed supplier” provision has been introduced to streamline the VAT declaration and payment process. The tax authorities will still need tools to control the correctness of the VAT declarations and payments. 5.2.Policy options The options have been designed after consultation with Member States and businesses representatives in the framework of the VAT forum subgroup on e-commerce. It should be noted that, as described in section 1 this initiative has to be seen as complementing the wider VAT e-commerce compliance framework where the new legislation created new VAT responsibilities for electronic interfaces such as internet marketplaces and platforms (under the deemed supplier provision). In addition to the baseline, the proposed options seek the solution to the problem described in section 2 in a better cooperation between tax authorities and PSPs. In fact, the payment is the consideration of any purchase of goods and services. In the last years more than 90% of online purchases by European customers went through credit transfers, direct debits and card payments, thus through an intermediary involved in the transaction and this is a trend that will continue in the future. As such third parties holding payment data can give a complete picture to tax authorities to properly carry out their basic task of controlling the correct fulfilment of VAT obligations on cross-border B2C supplies of goods and services. The experience of the Member States that already cooperate with PSPs at national level showed how cooperation with PSPs gives tangible results in fighting e-commerce VAT fraud. Furthermore, also some non-EU countries are using payment service data as a tool for detecting non-compliant traders in combination with simplified collection regimes for cross-border B2C supplies of goods (similar to the EU system). Furthermore, money flow information is also considered important to fight against illicit activities in other fields. Under the current Anti-Money Laundering Directive obliged entities must retain a series of documents and information for the purpose of preventing, detecting and investigating possible money laundering and terrorist financing and are required to report suspicious transactions and activities to Financial Investigations Units. Following the Action Plan against terrorist financing (2016), the Commission is analysing possible new EU systems to track the money flow. Payment data is also considered as a possible source of intelligence in Customs controls for risk management purposes by the World Customs Organisation (WCO) under the 2018 "cross-border e-commerce framework of standards". It is clear that these different policy objectives are regulated by different European legal acts: illicit activities in different fields have different patterns that require different kind of data or different methodologies for the data collection, analysis and exchange. However, the legislative framework shortly described above shows a clear trend toward cooperation between different public authorities and payment and financial institutions with the aim of enhancing the fight against illicit activities.

5.2.1.Payment services and payment service providers The payment data in the regulatory option will refer to data on credit transfers, direct debits and cards payments because – as mentioned above – they represent almost the totality of the purchases online. Therefore, the providers of that kind of payment services will be in the scope of the regulatory option. Virtual currencies (VCs), better known as crypto-currencies, are not within the present initiative. There are two reasons for that. First, cryptocurrencies are at present very rarely used for the type of transaction covered by this initiative and this does not seem likely to change in the near future. Secondly, they are not regulated in the European legal framework and in particular in the SEPA regulation and the Payment Service Directive 2. It should be noted that, as also stressed in the 2016 European Banking Authority's (EBA) opinion on virtual currencies, VCs incur technology specific risks that makes them distinct from conventional fiat currencies and do not make them – so far – a safe payment method. As such VCs are not part of this initiative. There is a potential, but not short-term, risk that part of e-commerce VAT fraud could migrate to this kind of payment. The risk appears limited at present because the volatility of cryptocurrencies exposes traders to a higher exchange rate risk than the potential gains from VAT non-payment. However, the regulatory option will foresee a periodic report of the Council which could eventually bring to a review of the scope. 5.2.2.Payment data Only the data referring to cross-border payments that will allow tax authorities to detect the e-commerce VAT fraud patterns listed under point 2.1 of this report will fall within the scope of this initiative. In particular, payment data will refer to the: ·Identification of the supplier (payee) : name, address, any kind of tax number … ·Total amount of the payment transaction ·Date of the payment transaction ·Country of origin of the payment ·Description of the supply underlining the payment transaction (good or service) – if available to the payment service provider ·Unique identifier for a payment transaction. The data to be exchanged are the same under all options. This is because each of the elements listed above is indispensable to make the records useable by tax authorities for VAT anti-fraud purposes. 5.2.3.Structure of the policy options This impact assessment takes into account three alternative policy options: 1.In the baseline (status quo) scenario the tax authorities of the EU Member States follow different approaches to fight against e-commerce VAT fraud and only some of them collect data from online intermediaries; 2.Under the non-regulatory option the European Commission helps tax authorities to develop their administrative capacity to fight e-commerce VAT fraud and publishes guidelines in order to enhance the cooperation between tax authorities and payment intermediaries; 3.The regulatory option implies the amending of the EU legal framework: üfor the PSPs to keep records of VAT relevant payment data that will have to be transmitted to the tax authorities (transmission of payment data from PSPs to tax authorities); üfor the tax authorities to collect payment data and exchange or share these data with other Member States’ tax authorities (exchange of data);

üfor the tax authorities carry out a risk analysis to detect remote suppliers not complying with VAT obligations (risk analysis); In particular, the regulatory option will imply amending the VAT Directive as regards the new record-keeping obligations of the PSPs, and Council Regulation (EU) 904/2010 as regards the exchange of payment data between tax authorities. Under the regulatory option, different alternative technical solutions are envisaged to make tax authorities exchange or share the relevant payment data. The regulatory option does not foresee a direct access of Member States' tax authorities to PSPs' databases because it would not be proportionate to the objective of fighting e-commerce VAT fraud. In fact, a direct access to PSPS' databases would disclose to tax authorities data which are not strictly necessary for the purpose at stake, i.e. information on the payers and on domestic payments. In fact it is important to note that the objective of the initiative is to target fraudulent businesses selling online, and not the consumers buying online. As such, payers data (i.e. data regarding the consumers paying for the purchases of products online) are not included in the scope of this initiative that does not aim at revealing the costumers behind an account. Finally, payment data are needed to detect the fraudsters. However, currently not all Member States have access to this kind of data. Few Member States collect payment data systematically (i.e. every month or every quarter) while other only on specific cases, in order to support the finding of an open VAT control. The initiative will make cross-border payment data available to all Member States in the same way, with the same set of information and with the same periodicity (quarter reporting obligations of PSPs). Only the PSPs established in the Member States will be subject to the reporting obligations foreseen in the regulatory options. It should be noted that, in a payment transaction there usually are at least two payment intermediaries: one acting on behalf of the payer and one acting on behalf of the payee. Both must have the information on the payer and payee in order to execute the payment transaction. As described in section 2 the European consumers are not directly involved in the fraud. Therefore, even when they buy from suppliers established in third countries, they keep using their own preferred and trusted payment methods and intermediary. Therefore, the payment service providers acting on behalf of the European payers will provide tax authorities with the necessary information to detect the recipient of the funds even when established outside the EU, and this without disclosing the information on the customer. The regulatory options do not foresee any additional obligation to the taxable persons supplying goods and services (both online and in the "traditional"market). 5.3.What is the baseline from which options are assessed? 5.3.1.Policy option 1 – Baseline scenario As mentioned in section 2.4.2, the survey launched with tax authorities in 2016 showed that only one third of the Member States collect data relevant for VAT controls from online market places, platforms and portals established in their own jurisdiction. The targeted consultation showed that twelve of the respondent Member States collect data from PSPs established in their own jurisdiction. Member States have no statutory right to request payment data from taxpayers established abroad. Third party data are also used in combination with other tools i.e. cooperation with the national Financial Investigation Unit/Anti-Fraud Unit (15 Member States), national custom authorities (15 Member States), post offices (10 Member States), transport and logistic companies (8 Member States), online market places (9 Member States), use of internet monitoring tools (15 Member States). However, the Member States could not indicate whether this information was useful to fight e-commerce VAT fraud. It should be noted that, as mentioned in section 5.2. of this report, different policy objectives are regulated by different legal basis, and also the information transmitted by financial institutions to different national authorities is different depending on the purpose. As regard international cooperation under the framework of Regulation (EU) 904/2010, the Member States set up a new Working Field dealing with e-commerce in Eurofisc. However, also in Eurofisc the legal constraints mentioned in section 2.4.3 apply. Member States make very little use of request for information and rarely send spontaneous information in the field of e-commerce (see section 1.2). Finally, the recently adopted amendments to Regulation (EU) 904/2010 (see section 1.2) do not address e-commerce. The envisaged cooperation between Eurofisc and Europol and OLAF will refer to specific information on VAT fraud cases related with criminal organisations. Furthermore, three Member States indicated that the tax administration has the legal authority to take down the domain name of web-shops because of breaches to the VAT legislation, independently or in collaboration with another agency (i.e. consumer protection agency). Finally, the VAT Directive allows Member States to provide that a person other than the person liable for the payment of VAT is to be held jointly and severally liable for payment of VAT. Even though three Member States indicated to have general national regulation that entails VAT responsibility for internet platforms under certain circumstances, the 2016 survey showed that this opportunity is used to a limited extent. Different from the Joint and Several liability is the "deemed supplier" provision introduced by the new Article 14a of the VAT Directive that will enter into force as from 2021 (as described in Section 1.1 of this Report). Under the Joint and Several Liability a third party is held responsible for the payment of VAT under certain conditions, i.e. if it is involved in a fraud and the third party ‘knew or should have known" about the fraud. On the contrary, under the "deemed supplier" provision the third party is directly considered as a liable person because it is "deemed" to have received and supplied the goods himself. 5.4.Description of the policy options 5.4.1.Policy option 2 (non-regulatory): Investing in administrative capacity and providing EU guideline + standard forms This non-regulatory option would consist in strengthening cooperation among EU tax authorities in the following ways:

·Investing in administrative capacity The Commission can help the Member States to invest in administrative capacity to address e-commerce VAT fraud through the Fiscalis Programme and Structural Reform Support Programme SRSP . This is already the case in the framework of Eurofisc where the Fiscalis Programme is used to finance Working Field 5 (WF5) on e-commerce . ·Providing EU-level guidelines and (optional) forms for the Exchange of Information (EoI) The Commission, acting together with Member States and PSPs, could draft and publish guidelines to collect data from PSPs. Tax administrations could use these guidelines to ask the same set of data with a standard form. Such guidelines would however be optional and non-binding for both tax authorities and businesses. An example already exists in the field of the so-called Missing Traders fraud, where guidelines for cooperation between tax administrations and businesses to fight the Missing Trader fraud were drafted in 2016 by the VAT forum and published in TAXUD website . Furthermore, the Commission, together with Member States could draft guidelines on how to use VAT relevant data from PSPs in order to detect fraudsters. 5.4.2.Policy option 3 (Regulatory option): Collection and exchange of payment data Unlike the previous option, this option would introduce binding provisions directed at both PSPs and national tax authorities. This could be realised in different variants (sub-options). Both sub-options work on the base of a “push” approach. The payment service providers will transmit every quarter the information to the tax authorities under both cases. The difference between the two sub-options is in the way Member States tax authorities will have access to the data and the data available to tax authorities. To make the regulatory option more proportional a threshold is foreseen. In order to capture only the payments that are potentially linked to an economic activity (thus excluding cross-border payments executed for private reasons) a threshold linked to the number of cross-border payments received by a payee is foreseen: only when the total amount of payments received by a given payee exceeds the threshold of 25 payments in a 3 months period, the payment service providers will have to keep the records available to tax authorities on that payee. The threshold has been established taking into account an average value of online shopping orders of EUR 95. An annual hundred payment transactions of that value will result in almost a total of EUR 10 000 which can already give raise to VAT obligations in the Member States, and matches with the EUR 10 000 threshold on intra-EU supplies introduced by the VAT e-commerce Directive. 5.4.2.1. Sub-option 3.1: Distributed application Phase I: Transmission of payment data to tax authorities The PSPs will have to keep records of the data indicated in section 5.2.2. The retention period of these records for the PSPs will be two years, which is a proportionate balance between the necessary period for tax authorities to carry out controls and the obligation for PSPs to keep personal data. Then, every quarter the PSPs will transmit that set of VAT relevant data to the tax authority of the Member State where they are established using a single EU format (to be defined with implementing measures). The VAT relevant payment data will refer to all inbound and outbound payments (where either the payee or the payer are located in the EU) in the previous reporting period (and exceeding the 25 payments per payee in a calendar quarter). The VAT relevant payment data will be stored electronically by the tax authorities. The retention period will be defined by the national legislations but no longer than ten years, in lines with the general retention period obligation imposed to tax administrations under Regulation (EU) 904/2010. Phase II: Administrative cooperation between Member States - Exchange of data As mentioned above, the VAT relevant payment data will be stored electronically at national level. The national databases will be connected through an electronic interface and distributed system available to all the tax administrations (similar to the VIES). Only the Eurofisc officials of the other Member States will have access electronically to the inbound and outbound payments from and to their own Member State. The Eurofisc officials of one Member State will have to access relevant data available in another Member State database logging a "search" in the system of the other Member State through the electronic interface. This will work in a similar way like the "automated access" currently regulated under Article 21 of Regulation (EU) 904/2010: the official starting the search should already have some piece of information in order to launch the research (i.e. an identification of a given taxpayer). Then the system will show the result almost in real time. The result would be the payment transactions referring to a given payee, in a given period. Eurofisc is a network composed of anti-fraud officials of the Member States' tax administrations for the multilateral exchange of information resulting from national risk analysis. Therefore, limiting the access to the system only to the Eurofisc officials will guarantee that the data can be used only for the detection of VAT fraud. Officials of the European Commission would have access to the system only for maintenance and development purposes. Phase III: Risk analysis for control purposes The inbound payments will allow the detection of domestic sellers while the outbound payments will allow the detection of remote sellers (established abroad). The system will not aggregate all payment data of a given payee in all the Member States. Therefore, if in one Member State there is relevant payment information referring to potential taxable transactions in another Member States, these Member States will not be alerted automatically by the system. In few words the risk analysis can only be carried out nationally by the tax authorities following their own national procedures. Based on the payment information retrieved from the system, the national Eurofisc officials will have to activate their own national tax administration to crosscheck this information with other sources of information, such as VAT, MOSS, customs’ declaration and eventually carry out VAT controls. 5.4.2.2. Sub-option 3.2: Central storage Phase I: Transmission of payment data to tax authorities As for the sub-option 3.1. also under this sub-option the PSPs will have to keep records of the data indicated in section 5.2.2., and the retention period of these records for the PSPs will be two years. Then the transmission of the data from the PSPs to the tax authorities will be like in sub-option 3.1. Like in the previous sub-option, the tax authorities will store the payment data received in their own databases. Phase II and III: Exchange of data and risk analysis for control purposes

The difference compared to sub-option 3.2 is in the way the tax authorities share amongst them the payment data and on the risk analysis. Under this sub-option the tax authorities will be required to upload the data received from PSPs in an EU central electronic repository, to be developed and maintained by the European Commission. This data repository will be available only to the EU Member States in the framework of Eurofisc. Officials of the European Commission will have access to the system only for maintenance and development purposes. The data will be retained in the central repository for an interval of two years. Then they will be erased. The storage period in the central repository is shorter compared to the ten years foreseen at national level for tax authorities in order to reduce the volume of information to be stored in the central repository. The central repository will allow the “search” function (like sub-option 3.1) and will also automatically aggregate data per payee. It means that the central system will aggregate all payment data received by all payment service providers established in the EU referring to single payees, will be able to recognise multiple records (from different payment service providers) on the same payment transactions. Furthermore, based on indicators chosen by the Eurofisc officials, can retrieve from the system transactions over a given amount, or frequent multiple payment transactions per payee, or per country etc... Finally the system will have a cleansing function: the system will recognise any inconsistency or mistake in the format of the data and will "clean" it, learning also from the past. The software will work based on criteria for the selection of the payees established jointly by the Eurofisc officials of the Member States. The central repository will be able to aggregate the data per payee based on the information available from all the Member States. Under this sub-option the risk analysis will be carried out jointly by the Eurofisc officials in the framework of the Eurofisc network. In this way they can obtain an EU wide view of the VAT fraud schemes. Finally, like in sub-option 3.1, based on the risk analysis the Eurofisc officials will have to activate their own tax administration to crosscheck data with other national sources of intelligence. 5.5.Discarded option 5.5.1.VAT split payment A split payment mechanism would change the regular VAT collection regime by introducing on payments for taxable supplies a split between the VAT amount and the taxable base (e.g. by two separate payments for every taxable transaction). It deviates from the current EU VAT regime, which mainly relies on vendor-based collection of VAT and on periodical reporting and payment of VAT by registered traders. The split payment is regarded as a measure that can combat VAT fraud and non-compliance by removing the opportunity of suppliers to charge VAT and disappear without declaring or paying it to the tax authority. A Deloitte study measured the impact of the general application of the split payment in the EU on the current VAT regime including on B2C supplies. The study concluded that the benefit in terms of reductions in the VAT Gap are not unequivocally higher than the costs imposed on businesses and public bodies (both administrative costs and cash flow impacts), and are even outweighed when applied to the entire volume of transactions. Furthermore, in order to apply the split payment of the VAT amount the payment service provider should be aware of very detailed and specific information in order to determine exactly the VAT liability. The collection of this information is considered technically highly challenging under the SEPA regulation and the PSD2. 5.5.2.Direct access of Member States' tax authorities to Payment Service Providers' databases Another technical solution to give Member States the access to payment data would be through a direct access of tax authorities to PSPs' databases. However, this solution is considered disproportionate in terms of processing of personal data. In fact, not all payment data are necessary for tax authorities to achieve the objective of fighting e-commerce VAT fraud. In particular data on domestic payments would not help to detect cross-border transactions. Finally the data on payers are disproportionate in terms of data protection, because would disclose information on the consumers that are not necessary for tax authorities. Therefore, this option has been discarded. 6.What are the impacts of the policy options? 6.1.Methodology An evaluation of Council Regulation (EU) 904/2010 was undertaken with specific regard to e-commerce VAT fraud. A public consultation and a targeted consultation with tax authorities and business representatives were launched in the first half of 2018. The outcome of the consultations, and in particular the answers and estimates provided by tax authorities and business have been taken into account. The evaluation is annexed to this report. 6.2.Analysis of the impacts Nature of the analysis and factors affecting it It was not possible to carry out a quantification of the impacts of this initiative through a CGE (computable general equilibrium) model simulation in the time available. The analysis of the impacts will therefore be laid out essentially in qualitative terms. While this is not optimal, it must be considered that the effective impact of this initiative, for reasons that will be explained in detail later, will depend to a large extent on a) the scope and pace of implementation by individual Member States of new control protocols b) the quality, degree, and timing of administrative cooperation between Member States and, c) the degree by which third country jurisdictions cooperate in enforcing EU VAT law. Given that these three parameters are very hard to forecast, any quantification of the impacts would at any rate be subject to a large error margin. The analysis mainly addresses the economic impact of the options, administrative and compliance costs for stakeholders, and the impact on the fundamental rights to protection of personal data. Social and environmental impacts are shortly addressed: a more detail analysis of these impacts was not possible due to the very technical nature of the options. Key Assumptions 1.Continued growth in e-commerce: The trend towards an increasing volume of e-commerce is expected to continue as more and more consumers familiarise with purchasing over the internet. While the rate of growth of e-commerce is likely to continue moderating as the sector matures, there is general consensus that this trend will continue. The growing concerns about the protection of personal data are assumed not to change this outlook fundamentally; the indications from stock markets, which are by their nature forward-looking, corroborate this assumption. 2.Increasing adoption of payment control tools by national tax administrations: At national level, it is assumed that in the medium term more tax administrations will seek to introduce payment control tools, on account of the successful experience of countries like Norway, Australia, and several EU Member States (see section 5.2). For the assessment of the impacts, it is also assumed that tax administrations adopt the flanking measures needed to ensure the effectiveness of the payment control tools; in particular, that they allocate sufficient staff to carry out the checks on the suspect traders identified thanks to the new tools. 3.Further reinforcement of cooperation between EU tax authorities: The effectiveness and quality of cooperation between EU tax administrations is assumed to improve further because of multiple ongoing policy initiatives to address VAT fraud and because of a more propitious political climate. 4.Increased collaboration with third country tax authorities: Finally, it is assumed that third country tax administrations will increasingly collaborate with EU tax authorities in the enforcement of VAT rules on B2C sales on EU territory. As pointed out in the problem definition, currently some important players do not cooperate with the EU in enforcing VAT payments on B2C businesses on account of exclusions stipulated in the OECD framework. However, the OECD is very active with the BEPS initiative in order to improve international cooperation also in the field of consumption taxes. Furthermore, China has recently introduced a new VAT system following the OECD guidelines: it is reasonable to expect further steps also in the field of international cooperation (jurisdictions with similar consumption tax systems based on the destination principles tend to cooperate for the assessment of VAT liabilities). Overall, it is assumed here that, as the policy options outlined in this initiative lead to a greater awareness of the e-commerce VAT fraud and to identification of the fraudsters located in third-country, changes will be made to the collaboration framework that lead to significantly greater pressure on dishonest businesses also in third countries.

Assumptions 1 to 3 are deemed to be fairly straightforward and it seems difficult at present to imagine any markedly different scenario, so that they will not be further discussed. For assumption 4, given that it depends on the actions and policy of third countries, we present – alongside our central scenario – an alternative 'non-cooperation scenario' when discussing the impacts on fraud and on trade distortion. 6.2.1.Impact on VAT fraud General considerations The judgement that payment data availability represents a quantum leap in the effectiveness of the fight against e-commerce VAT fraud is not merely a prospective opinion but is borne out of an understanding of the antifraud controls in current administrative practice. Already now, as outlined in the problem definition, the EU administrative cooperation framework allows tax administrations to retrieve information about businesses operating from other EU jurisdictions, if any wrongdoing is suspected. Information and transactions data can be sought not only from the tax administrations of other Member States, but – in some case – even from payment intermediaries themselves. However, for legal reasons related to data protection and due process, such information is normally available only on the basis of a targeted and duly motivated request, while a general 'screening' data request would be immediately refused. In other words, once a tax administration has identified a trader as suspect, existing tools can be quite effective in enforcing the VAT (at least in the case of an EU-based suppliers). However, the problem which existing cooperation agreements do not allow is how to effectively identify suspect businesses in the first place. Existing systems rely mainly on checking parcels or on follow-up work done on regular VAT audits. This approach could suffice when the volumes of cross-border B2C sales was limited. However, the exponential growth in e-commerce implies that a system based on controlling parcels would require a very high amount of random checks to provide an effective deterrent to fraudsters. Looking just at small consignments originating from outside the EU, their number was estimated at 115 million already in 2013, implying that even checking just one percent of packages would require opening more than a million parcels every year. This would require a disproportionate use of human resources. Given that the control of parcels can only identify a tiny fraction of non-compliant operators, an unscrupulous business can operate at a significant scale with little risk of being discovered by the tax administration of the country of destination of the parcels. Under these circumstances, the main hope for identifying a non-compliant business rests on VAT audits done for other reasons – which can take very long or may never take place. In contrast, the availability of data on payments allows tax administrations to identify which businesses engage in B2C e-commerce and double-check if they are VAT compliant, using IT tools. This streamlines and facilitates enormously the detection of potential fraudsters. The crucial role of payment data availability in addressing fraud is confirmed by the fact that more and more tax administrations are adopting this approach. At present, twelve tax administrations already cooperate with PSPs to collect payment data or have put in place payment data monitoring. The experience of the Finnish tax administration can provide some elements to assess what can be the quantitative impact of introducing payments data to track down non-compliant B2C sellers. In the three years from 2015-2017, the use of payments data was key in the initiation of about 300 audits, with a growing trend. These audits allowed assessing a total of over EUR 29 million. Data for 2016, the year where the amount revealed by the audits was highest; indicate that around 90% of the audits referred to distance sellers. That year, the VAT collected after the audits raised around EUR 16 million Euros. The Finnish tax administration thus gives us an example of why the use of payment data was important in recovering amounts owned by taxpayers. Consequently, payments data analysis is reported to be the key tool to tackle e-commerce VAT fraud. In the targeted consultation, almost three times as many Member States answered that new tools are needed to effectively address e-commerce fraud than those that considered existing tools sufficient. Others, however, pointed out that an impact on fraud is expected from the new measures introduced in the VAT Directive by the VAT e-commerce package) and that the impact of these should be seen before judging. Comparison with the measures introduced with the VAT e-commerce package and the regulatory option Overall, the analysis conducted in the context of this Impact Assessment suggests that the impact (in terms of fighting e-commerce VAT fraud) of the options envisaged under the payments initiative on combating fraud would go well beyond the impact of the measures introduced by the VAT e-commerce package and described in section 5.1, strengthening it in significant ways. This assessment rests in particular on the following considerations: ·The measures envisaged in the regulatory option cover a significantly larger scope than the measures included in the VAT e-commerce package; in particular, as described in section 5.1.4, while the deemed supplier provision covers only certain internet platforms and only for certain supplies of goods, the regulatory options cover all PSPs established in the EU which deal with more than 90% of online B2C supplies of goods and services, making it very difficult to escape detection; ·The measures introduced by the VAT e-commerce package are targeted to specific transactions, i.e. the abolition of distance sales thresholds apply only to intra-EU supplies, the IOSS and the abolition of small consignments exemption apply only to imports, the deemed supplier provision applies only to supplies of goods). The envisaged measures under the regulatory option (and partially option 2) will allow a control to all cross-border supplies to final consumers. ·The measures envisaged in the regulatory option (and partially option 2) will be more effective, because they introduce additional elements: in particular, they lay the groundwork for addressing the identification problem (of not VAT registered suppliers) , whereby national tax administrations may remain unaware of fraudulent activity by an operator because of legal limitations to existing data exchange procedures. Furthermore, payment data when cross-checked with VAT data will give an important indication of whether VAT declarations are submitted and correct (in terms of turnover declared). Moreover, mis-description of imports (i.e. “gift” or “low-value samples”) will be easily spotted by cross-checking payment data. Finally, the origin of the payments will support tax administrations in their task of checking whether the VAT is declared in the right place of consumption (i.e. where the buyer is located). ·The measures introduced with the VAT e-commerce package will enter into force in 2021 and it is still premature to make a real assessment. However, as already mentioned, they are mainly “simplification” rather than anti-fraud initiatives, although simplification measures to some extent should also improve “compliance”. On the other hand, payment data will help to detect VAT fraud (intentional non-compliance) and also non-compliance (non-intentional) once crossed-matched with VAT declarations. In particular, Options 2 and all sub-options of Options 3 are expected to have a significant to large impact on reducing intra-EU fraud. The impact is largest under option 3.2, because the central repository, by making possible the pooling of EU-level data, will allow to aggregate data over all EU Member States. This is essential for controlling the respect of the EU wide VAT thresholds described in section 5.1.1. Option 2 is assessed to be less effective than Options 3.1 and 3.2; while adoption of guidelines may speed up adoption in some cases, as Member States with less administrative capacity can rely on the guidelines instead of developing their analysis ex nihilo, experience in the taxation domain shows that guideline writing can in itself be a slow and complicated process. Furthermore, non-binding guidelines and the associated non-coordinated adoption of payment data analysis do not merely likely slow down adoption but also aggravate the risk of perverse incentives, exacerbating market distortions (see next section). As for e-commerce VAT fraud by extra-EU suppliers, under the assumptions laid out at the beginning of this chapter, the policy options under consideration are assessed to provide, in the medium term, a positive impact on fraud levels. The effectiveness of the options will be, however, less on extra EU suppliers than on intra-EU suppliers because within the EU, the existing administrative cooperation framework offers a series of tools to recover unpaid VAT in another jurisdiction; whereas, in comparison, administrative cooperation with non-EU tax authorities is in an embryonic state and does not yet guarantee an effective and credible recovery of unpaid VAT, as explained in section 1.3. Note however the discussion of the risks of trade diversion in section 6.2.2. Risks stemming from lower than expected collaboration from third country jurisdictions

As outlined under assumption 4, it is assumed that availability of data on fraud will trigger greater collaboration with third countries authorities, because of higher awareness in EU countries and because third countries tax authorities, too have an interest in maintaining a good working relationship with foreign tax authorities in general and with the EU in particular. Given the importance of the EU on the world stage, it seems unlikely that foreign tax authorities would find a non-collaboration strategy sustainable in the long term, although it has to be recognised that in the short term, non-collaboration is a possibility. The existing level of administrative cooperation with third countries should not be taken as a given, because, if the payment data initiative is adopted, this will in itself give a strong impetus to conclude new, stepped up cooperation agreements. This is because the higher awareness provided by data and the transparency about transactions at risk of VAT fraud will inevitably create a significant pressure for upgrading existing cooperation frameworks. The situation will be markedly different from today’s status quo in which there is very little certainty about the size and existence of fraudulent transactions. As such, the level of cooperation with third countries should not be treated as exogenous to the policy options, but is to a large extent endogenous (dependent) on them. Overall, we conclude that both policy options would have a positive impact on reducing e-commerce VAT fraud; this effect would be significantly stronger for the two sub-options of option 3; in addition, the impact on intra-EU transactions would be stronger than on extra-EU transactions, but would be positive for both. Non-cooperation by third-country jurisdiction would have two main negative impacts: first, it would reduce the positive impact of the policy options on VAT revenue; second, it could trigger trade diversion as businesses might concentrate their operations in non-cooperative jurisdictions. The second impact appears to be the more serious of the two, because about 80% of cross-border e-commerce sales originate from other EU countries, whereas a shift in the market towards third-countries would create more lasting damage. Despite the risk of non-cooperation outlined above, we expect for the medium/long term a positive impact of the envisaged policy options is nevertheless expected even with respect to traders located in countries where no cogent enforcement framework is put in place. This assessment is based on three sets of arguments: Psychological and reputational considerations; the risk of blocking of non-compliant traders’ web pages by tax authorities, and the possibility for tax authorities to introduce additional measures targeting non-compliant non-EU businesses. a) Psychological and reputational considerations encourage in particular larger traders to be compliant It is known from the literature on behavioural economics that economic agents tend to comply with tax rules more than they would rationally be expected to do solely looking at the risk of detection and the prospect of a financial penalty. As such, the mere introduction of a scheme to collect data on B2C at EU level seems likely to spur greater compliance than is presently the case. Furthermore, while many smaller traders may not be overly concerned by the reputational damage they might incur if charged with VAT fraud, it seems likely that platforms operated by large, well-known multinational businesses, which play an important role in the e-commerce market, would not want to see their name associated with systematic VAT fraud, or, even worse, to be accused of facilitating VAT fraud. Thus, pressure for voluntary compliance would certainly increase once businesses become aware that authorities have ways to detect VAT fraud and non-compliance, even in the absence of a cogent and operational enforcement mechanism. b) Persistently non-compliant traders face a risk of blocking of web pages A number of administrations have indicated that they are legally empowered to block, on their territory, the operation of web pages associated with wrongdoing, and that in the case of persistent violations, this tool could be used to sanction non-compliant foreign suppliers. While, faced with such a sanction, a foreign supplier might open another website, it seems that this would inevitably result in the loss of some business as clients would no longer be able to place their orders on the customary website and would have to identify the new web page through a new search, or following a link to a new page sent by the vendor, both of which processes are likely to result in some leakage. The deterrent effect of such sanctions would probably vary considerably from one supplier to the next, because of different demand price elasticities; the experience with sites streaming audio-visual content suggest that blocking sites can have a limited effect in cases of a very high price sensitivity and where the content is an e-service. However, in most cases one can believe that businesses would view the potential disabling of web pages as a significant problem and that this is likely to induce greater compliance. Basing on payment data statistics, national authorities would also be able to roll out such sanctions in a more effective manner. Therefore, overall one can conclude that the combination of greatly enhanced detection thanks to availability of payments data, coupled with the threat of blocking the supplier’s site by the tax authority is likely to have an impact on reducing extra-EU e-commerce VAT fraud even in the absence of strong cooperation mechanisms between the EU and the country of establishment of the supplier. c) Member States could introduce additional, specific measures to target non-compliant third country businesses In case of persistent non-collaboration by third country jurisdictions, Member States could introduce specific measures. Member States could for example require, non-EU businesses to appoint a local VAT representative with joint and several liability or impose joint and several liability on online marketplaces for unpaid VAT on goods sold through the website. These measures would be significantly more effective once it is coupled with payments data information, than it is at present. Impacts on fraud volumes, by option Table 3 presents the expected impacts of the options on fraud volumes side by side to facilitate comparison. Option 1 is not included because it is the status-quo option.

Option 2 This option consists of developing voluntary guidelines for Member states to facilitate introduction of payment data tools and coordination between EU tax administrations. This option is assessed to have a modestly positive impact, because it will speed up adoption of payment data tools by tax administrations and will reduce its costs thanks to better sharing of know-how; the impact will depend on how many Member States adopt these tools. However, adoption will likely be gradual; thus, this option implies that the EU will not be able to collectively exert pressure on third countries to enter into cooperation agreements. As such, the impact of this option on non-EU traders would be rather limited. Option 3.1 Compared to option 2, this option would imply a simultaneous introduction of the tool throughout the EU; the coordinated adoption of the tool would also allow better cooperation between EU tax authorities. Both of these aspects would correspondingly create a stronger deterrent effect for fraudsters. This option is thus expected to result in a sizeable reduction of fraud levels and a greater reduction of fraud than under Option 2. As for non-EU fraudsters, the impact would be less strong owing to the fact that administrative cooperation agreements with third countries are now at an incipient stage, compared to the EU. However, availability of data from all EU Member States would facilitate collective action to improve administrative cooperation agreements with third countries. As such, this option is expected to result in a perceptible decrease of fraud over the medium to long-term in our central scenario. In the alternative non-cooperation scenario, where no effective agreements with third countries are struck, the expected impact would be a limited reduction in extra-EU fraud levels. In theory, fraud levels could even increase in case of strong trade diversion (see also next section) but this would require a rather implausible set of assumptions (high demand and supply price elasticities, absence of reputational effects, ineffectiveness of countervailing measures by Member States, on top of the non-cooperation hypothesis which is in itself not a likely outcome). Option 3.2 This option has the strongest effect on fraud levels as its centralised nature fosters cooperation more effectively and makes data analysis more efficient because of easier data pooling. The impact on extra-EU fraud is similar to that of option 3.1, with a slightly stronger effectiveness compared to option 3.1 because of easier cooperation (under the central scenario). Scenario Location of traders Option 1 (status quo) Baseline Option 2 Voluntary guidelines Option 3.1 Distributed application Option 3.2 Central storage Central scenario EU traders VAT fraud volumes increase. From 2021, impact of the VAT e-commerce package measures may reduce growth of VAT loss volume + Limited reduction in VAT fraud in line with speed of adoption ++ Coordinated adoption will speed up update and allow better cooperation between tax authorities +++ Better suited than 3.1 to monitor threshold; fosters cooperation more effectively than 3.1; better and wider process of data and central risk analysis Non-EU traders VAT fraud volumes increase. From 2021, impact of the VAT e-commerce package measures may reduce growth of VAT loss volume 0/+ Negligible to limited: a patchwork-like adoption will limit coordinated action vs. third countries +/++ While enforcement will depend on third country cooperation, increased detection expected to result in positive impact through spontaneous compliance and