EUROPEAN COMMISSION Brussels, 30.11.2017 SWD(2017) 428 final COMMISSION STAFF WORKING DOCUMENT



IMPACT ASSESSMENT

Accompanying the document Amended proposal for a Council Regulation Amending Regulation (EU) No 904/2010 as regards measures to strengthen administrative cooperation in the field of value added tax {COM(2017) 706 final}

{SWD(2017) 429 final}



TABLE OF CONTENTS 1. Introduction and policy context 1.1. Common system of value added tax (VAT) 1.2. Council Regulation (EU) 904/2010 on administrative cooperation and combating fraud in the field of value added tax 2. What is the problem and why it is a problem 2.1. The VAT gap – overall fraud assessment 2.2. Problem tree 2.3. Missing trader intra-community fraud (MTIC) 2.3.1. Magnitude of the problem 2.3.2. Problem drivers 2.3.2.1. Weaknesses in the access and analysis of information mechanisms 2.3.2.2. A current framework that makes it difficult to carry-out coordinated actions at EU level against fraudsters 2.3.2.3. Insufficient multidisciplinary approach 2.4. Fraud in relation to the dual VAT regime applicable to cars 2.4.1. Magnitude of the problem 2.4.2. Problem drivers 2.4.2.1. Impaired access and mechanisms for information exchange and analysis 2.5. Fraud in relation to the customs procedures No 42 and 63 2.5.1. Magnitude of the problem

2.5.2. Problem drivers 2.5.2.1. VAT exemption is granted by customs authorities without proper checks of VAT numbers 2.5.2.2. Information collated by customs authorities on exempted importations is not shared with tax administrations and these transactions are not properly checked 2.6. Evolution of the problem without action at EU level 3. Why should the EU act? 4. What should be achieved? 4.1. General objectives 4.2. Specific objectives 4.3. Operational 4.4. Consistency with other EU policies and with the Charter for fundamental rights 5. What are the various options to achieve the objectives? 5.1. Links between Problems/Drivers/Options/Sub-options 5.2. Baseline scenario 5.2.1. Legislative proposals with likely positive impacts on fight against VAT fraud 5.2.2. Implementation of TNA on a voluntary basis 5.3. Option 1: Implementation of Transaction Network Analysis 5.3.1. Option 1.a: TNA without mandatory provision of data by all Member States 5.3.2. Option 1.b: TNA with mandatory provision of data by all Member States 5.4. Option2: Improving the operational framework with regard to coordinated actions of control between Member States 5.4.1. Option 2.a: implementing joint audits

5.4.2. Option 2.b: coordination of Member States' multilateral actions by Eurofisc 5.5. Option 3: Developing exchange of data between Member States' tax administrations and law enforcement authorities at EU level 5.5.1. Option 3.a: automated access to VIES data by Europol and OLAF 5.5.2. Option 3b: Spontaneous transmission of VAT fraud cases involving at least two Member States by Member States' tax administrations to OLAF 5.5.3. Option 3.c: access to Eurofisc data granted to Europol and OLAF 5.5.4. Option 3.d: enrichment by and sharing with Europol of Eurofisc data 5.6. Option 4: tackling fraud in relation to the dual VAT regime applicable to cars by improving access to car registration data 5.6.1. Discarded option: improving automatic exchange of information between Member States 5.6.2. Discarded option: access to the EUCARIS network without specific provisions in Regulation (EU) 904/2010 5.6.3. Option 4.a: Access to car registration data by use of the EUCARIS network 5.7. Option 5: fighting fraud in relation to the customs procedures No 42 and 63 by removing the shortcomings in the implementation of CP42/CP63 procedures 5.7.1. Option 5.a: making compulsory granting an access to the register of VAT numbers to customs authorities 5.7.2. Option 5.b: sharing CP42/CP63 data with tax authorities by way of VIES 6. What are the impacts of the different policy options and who will be affected 6.1. Methodology 6.2. Analysis of the impacts of the various measures 6.2.1. Baseline scenario: Status Quo with implementation of TNA on a voluntary basis 6.2.2. Option 1: Implementation of a joint and automatic risk analysis system 6.2.2.1. Common impacts 6.2.2.2. Option 1.a. TNA without mandatory provision of data by all Member States

6.2.2.3. Option 1.b. TNA with mandatory provision of data by all Member States 6.2.3. Option 2: Improving the legal framework with regard to coordinated actions of control between Member States 6.2.3.1. Option 2.a. Implementing joint audits 6.2.3.2. Option 2.b. Coordination of multilateral actions by Eurofisc 6.2.4. Option 3: developing exchange of data between Member States tax administrations and EU law enforcement authorities 6.2.4.1. Common impacts 6.2.4.2. Option 3.a. Automated access to VIES by Europol and OLAF 6.2.4.3. Option 3.b. Spontaneous transmission of VAT fraud cases involving at least two Member States by Member States' tax administrations to OLAF 6.2.4.4. Option 3.c. Access to Eurofisc data granted to Europol and Olaf 6.2.4.5. Option 3.d. Enrichment of Eurofisc with Europol data 6.2.5. Option 4: Improved access to car registration data 6.2.5.1. Option 4.a. Access to Eucaris database 6.2.6. Option 5: Removing existing shortcomings in the functioning of CP42/CP63 procedures 6.2.6.1. Common impacts 6.2.6.2. Option 5.a. Granting an access to the register of VAT numbers to customs authorities 6.2.6.3. Option 5.b. Sharing CP42/CP63 information with tax authorities through VIES 7. How do the Options compare? 7.1. Summary assessment of the Impacts 7.2. Identification of the preferred options 7.3. Subsidiarity of the different options

7.4. Proportionality of the different options 7.5. Impact on SMEs 8. How would actual impacts be monitored and evaluated? 8.1. Indicators for monitoring and evaluation 8.2 Monitoring structures 9. ANNEXES 9.1. Annex 1: Procedural information concerning the process to prepare the impact assessment report and the related initiative 9.2. Annex 2: Consultations synopsis report 9.3. Annex 3: Evaluation of Regulation (EU) 904/2010 9.4. Annex 4: Consultation of Members States 9.5. Annex 5: Consultation of stakeholders other than Member States 9.6. Annex 6: Who is affected by the initiative and how? 9.7. Annex 7: Methodology 9.8. Annex 8: Additional information about the functioning of administrative cooperation in the field of VAT 9.9. Annex 9: Transitional and definitive VAT system – Origin-based and destination-based VAT system 9.10. Annex 10: Technical fiche on concrete examples of VAT fraud 9.11. Annex 11: Findings and recommendations of the 2015 European Court of Auditors report: Tackling VAT fraud: more action needed List of figures and boxes

Figure 1: functioning of administrative cooperation in the field of VAT (source: ECA) Figure 2: functioning of VIES (source: ECA) Figure 3: VAT Gap as a percent of the VAT Total Tax Liability (VTTL) in EU-27 Member States, 2014 and 2013 (source CASE, 2016) Figure 4: Problem tree: links between Drivers/Problems/Effect Figure 5: Share of carousel fraud in VAT gap Figure 6: Flowchart of a compliant import under CP42 (ECA, 2011, Special report no 2011/13) Figure 7: Flowchart showing implementation flaws that may take place in a CP42 transaction chain of control Box 1: MTIC fraud/carousel fraud Box 2: Role of Europol and OLAF in fighting the most serious VAT fraud threats Box 3: Presentation of the MTIC fraud on CO2 quotas Box 4: New means of transport/second hand cars fraud schemes Box 5: Presentation of a significant fraud case in relation to sale of cars Box 6: Customs procedure 42 Box 7: Customs procedure 63



GLOSSARY Abbreviations

B2B Business to Business B2C Business to Consumer (not VAT registered) CJEU Court of Justice of the European Union CP42/CP63 Customs procedure No 42/Customs procedure No 63 DG TAXUD Directorate General for Taxation and Customs Union ECA European Court of Auditors ELO Eurofisc Liaison Official EMPACT European Multidisciplinary Platform Against Criminal Threats EU European Union EUCARIS European Vehicle and Driving Licence Information System EUR Euro EY Ernst &Young MLC Multilateral control MS Member State MTIC fraud Missing Trader Intra-Community (MTIC) fraud OCG Organised crime group OLAF European Anti-Fraud Office SME Small and Medium-sized Enterprises SOCTA Serious and Organised Crime Threat Assessment TFEU Treaty on the Functioning of the European Union TNA Transaction Network Analysis VAT Value Added Tax VIES VAT Information Exchange system VoW VIES on the WEB Glossary of terms in their meaning within this document and for its specific purpose Administrative cooperation All rules under which Member States do provide assistance to each other to correctly assess, control and collect VAT. In the field of VAT, these rules are provided for by Council Regulation (EU) 904/2010 of 7 October 2010. Administrative costs Costs for tax administrations in particular to provide assistance to other tax authorities. Administrative enquiry Controls, checks and other actions taken by Member States in the performance of their duties with a view to ensuring proper application of VAT legislation. Automated access Access without delay to an electronic system in order to consult certain information contained therein. Automatic exchange The systematic communication of predefined information to another Member State, without prior request and on a regular basis. Compliance costs Costs for businesses to comply with VAT rules and obligations and tax administrations requests. Cross-border trade Refers solely to intra-EU cross-border B2B trade. The terms "trading across the EU", "trading cross-border", "trading in another Member State", "doing business in other Member States" doing business across the EU", "intra-EU transactions, "intra-EU trade" refer to any situation where a business makes supplies of goods or services taxable in a Member State other than that in which he is established, acquires goods or services from a business established in another Member State or supplies goods or services to a customer established in another Member State. Definitive VAT system VAT system where intra-EU cross-border trade is based on the principle of taxation in the Member State of destination. The current VAT system is named ‘transitional VAT system’. Under this transitional system, every cross-border sale of goods between businesses is split into an exempted supply in the Member State of departure and a taxable acquisition in the Member State of arrival. EUROFISC EUROFISC is a network for the swift multilateral exchange of targeted information between Member States. It is a Member States-driven network, composed of national officials. It comprises 6 different working fields, each of it dedicated to a specific VAT fraud area. FISCALIS Action programme to improve the operation of taxation systems in the European Union for the period 2014-2020 and established by Regulation (EU) No 1286/2013 of 11 December 2013. Full Time Equivalent (FTE) A Full Time Equivalent is a unit that indicates the workload of an employed person of a business or a Member State Tax Authority. For the purposes of this document, it is defined as forty hours per week. Large business A large business is defined as a business with a turnover exceeding EUR 50 million, having more than 250 employees. Micro business A micro-business is a business which has fewer than ten employees and a turnover or balance sheet total of less than EUR 2 million. SME An SME (Small and Medium-sized Enterprises) business is defined as a business with a turnover of less than EUR 50 million and having less than 250 employees. Spontaneous exchange The non-systematic communication, at any moment and without prior request, of information to another Member State. VAT Directive Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax. VAT gap The VAT gap estimates for each Member States the difference between the expected VAT revenue and the amount actually collected. The Commission carry out an annual study to measure the size of the VAT gap in each Member State. VAT number The individual identification number allocated by tax authorities as provided for in Articles 214, 215 and 216 of Directive 2006/112/EC.



1. Introduction and policy context 1.1. Common system of value added tax (VAT) Value Added Tax (VAT) is a general tax on consumption applied to supplies of goods and services along the whole production and distribution process. It is a major and growing source of tax revenue in the European Union (EU). VAT raised slightly more than EUR 1 trillion in 2015, which corresponds to 7% of EU GDP or 17.6% of total national tax revenues. One of the EU's own resources is also based on VAT (12.4% of the EU budget in 2015). As a broad-based consumption tax, it is considered to be one of the most growth-friendly forms of taxation. One of the key strengths of VAT is that, by allowing taxpayers to exactly offset the tax incurred in previous stages of the production chain, it is much better suited than other types of indirect taxes to operate an single market free of tax distortions. This was the main reason for its early adoption by the EU. It is governed by the VAT Directive which aims at ensuring that the principles underlying the functioning of this tax apply consistently in all Member States. In recent years, however, the VAT system has been unable to keep pace with the challenges of the global economy and the opportunities offered by new technologies. Therefore, the Commission adopted on 7 April 2016 an Action Plan on VAT (hereinafter "Action Plan") setting out ways to modernise the VAT system so as to make it simpler, more fraud-proof and business-friendly. In this context, the Commission announced its intention to adopt in 2017 four VAT-related proposals: ·a definitive VAT system for intra-EU cross-border trade based on the principle of taxation in the Member State of destination in order to create a robust single European VAT area (first step); ·a modernised VAT rates policy so as to allow Member States greater autonomy on setting the VAT rates; ·a comprehensive simplification VAT package for SMEs; ·a proposal to enhance VAT administrative cooperation and E urofisc. As agreed by the European Parliament and the Council, the definitive VAT system will be based on the principle of taxation in the Member State of destination. In order to allow for a soft transition for tax administrations and businesses, this change will be implemented through a gradual approach.The Commission envisages three successive legislative steps to implement it fully. Each step will require an unanimous agreement in Council. Therefore the final features of the definitive VAT system are unknown at this stage and it is a long term project. As indicated in the Action Plan and as required by the Member States and the European Parliament, in the meantime, Member States need to adopt urgent conventional measures to contain the scale of cross-border fraud. This impact assessment relates to the possible measures that the Commission has examined with the stakeholders to enhance VAT administrative cooperation and Eurofisc in order to meet this requirement. 1.2. Council Regulation (EU) 904/2010 on administrative cooperation and combating fraud in the field of value added tax

Along with the abolition of the physical borders within the EU and the implementation of the ‘transitional arrangements’ for intra-EU trade, a framework allowing Member States to cooperate to better manage and control VAT was put in place by the end of 1992. With the introduction of Council Regulation (EU) No 904/2010 of 7 October 2010 (hereinafter ‘Regulation (EU) 904/2010’), the first objective was to gather, in a single piece of legislation, all provisions in relation to administrative cooperation in the field of VAT. On top of that, and in response to the most severe and always sophisticated VAT frauds, improving this administrative cooperation framework overall was also viewed as a necessity. The current functioning of administrative cooperation in the field of VAT, as provided by Regulation (EU) 904/2010 can be summarised as showed below: Figure 1: functioning of administrative cooperation in the field of VAT (source: ECA) The first purpose of Regulation (EU) 904/2010 currently in force remains the exchange of information between Member States tax authorities with three different and complementary types of programmes: on request, spontaneous and automatic. To get information on businesses involved in intra-EU transactions, tax authorities can also rely on VIES, an IT tool developed as of 1992. Figure 2: functioning of VIES (source: ECA)

Certain information has also been made available to private stakeholders through ‘VIES on the web’ where VAT identification numbers delivered by Member States' tax administrations can be checked on-line. Tax administrations are now well experienced in processing these different categories of exchanges and using VIES. Regulation (EU) 904/2010 also provides for other cooperation tools i.e. simultaneous controls and presence in administrative offices and during administrative enquiries. This Regulation has also introduced a new means for an enhanced cooperation, namely Eurofisc whose characteristics are presented in annex 8, where the functioning of administrative cooperation provided by Regulation (EU) 904/2010 through the different instruments made available to tax administrations is also summarised. Statistics in relation to the use of Regulation (EU) 904/2010 are presented in the Evaluation Report drafted to feed into the work on the possible measures to amend this Regulation. This Evaluation Report is presented in annex 3 to this Impact Assessment. 2. What is the problem and why it is a problem 2.1. The VAT gap – overall fraud assessment The size of the VAT fraud is difficult to measure in itself. One of the most commonly accepted indicators used pointing to the scale of the problem is the ‘VAT gap’. It estimates the overall difference between the expected VAT revenue and the amount actually collected. It should be noted however that the VAT gap provides an estimate of revenue loss due not only to fraud and evasion, but also weaknesses in national tax collection systems, lack of compliance of taxpayers leading to a shadow economy, impediments in the enforcement of the tax obligations by tax authorities, for instance a lack of tax audits carried out by tax administration, insolvencies as well as miscalculations and other irregularities. Despite its imperfections, the VAT gap offers a useful indicator to assess the size of VAT that is not collected by Member States. According to the latest Commission's report on the VAT gap which refers to data from 2014, the overall EU VAT gap is estimated at almost EUR 160 billion revenue losses each year The VAT gap varies considerably across Member States. The smallest gaps are observed in Sweden (1.24%), Luxembourg (3.80%), and Finland (6.92%). The largest gaps are registered in Romania (37.89%), Lithuania (36.84%) and Malta (35.32%). Overall, half of the EU-27 Member States represented in Figure 1 below record a gap below 10.4% while the EU average registered in 2014 reached 14%. Figure 3: VAT Gap as a percent of the VAT Total Tax Liability (VTTL) in EU-27 Member States, 2014 and 2013 (source CASE, 2016) When analysing the phenomena contributing to the VAT gap, it can be observed that some of them – notably the weaknesses in national tax collection systems, impediments in the enforcement, or lack of compliance – fall under the direct responsibility of the Member States that must design their own legislation and enforce it at national level. The Commission can however play a role by supporting Members States in their continuous efforts to improve the situation at national level or by providing platforms where dialogues between tax administrations and exchange of good practices can take place. Enhancing the administrative capacity of tax authorities is for example one of the objectives and priorities of Regulation (EU) 1286/2013. The Action Plan adopted by the Commission on 7 April 2016 also includes actions with respect to tax administration or compliance. There are however other areas – notably with respect to cross-border transactions and, linked to them, different types of fraud – where, in addition to measures taken at national level, it is necessary to put in place cooperation mechanisms at the EU level as fighting cross-border fraud requires coordinated actions within and between Member States. This has been recognised in particular in the VAT Action Plan which set out enhancing administrative cooperation between Member States by supporting the sharing and joint analysis of information as one of the key objectives in the short term. There are three main types of cross-border fraud which are most widespread and most significant across the EU: ·carousel fraud (or missing trader intra-community fraud – MTIC fraud); ·fraud related to trading of second hand cars; and ·fraud related to the customs procedures 42 and 63. As these types of fraud are distinct, exhibit different characteristics and are driven by - mostly - different factors, they are analysed individually as three main problems this initiative aims to tackle, followed subsequently by distinct sets of options addressing each of them.

Over the course of this review of the current administrative cooperation instruments , an evaluation of Regulation (EU) 904/2010 was undertaken. Its comprehensive results are presented in annex 3. This evaluation shows that beyond the question of VAT fraud and the availability of appropriate instruments to combat it, other problems also take place in the application of Regulation (EU) 904/2010. Amongst other things, the following shortcomings were highlighted by the Member States: - high number of late replies from other Member States to requests for information; - difficulties in using e-forms to exchange information; - perceived administrative burden; and - relative accuracy of VIES data. All these shortcomings are well-known and documented. The Commission has been working with the Member States to improve the situation. However, amending Regulation (EU) 904/2010 would not bring any added-value in this respect as the instruments themselves are appropriate. It is their implementation in certain Member States that needs to be addressed. This explains why these issues are not taken into account in this impact assessment. 2.2. Problem tree Figure 4: Problem tree: links between Drivers/Problems/Effects

2.3. Missing trader intra-community fraud (MTIC) VAT fraud is a phenomenon which is targeting inherent shortcomings of the EU VAT system and, in general, involves a non-payment of output VAT or an overstatement of input VAT. There are a number of different kinds of VAT fraud. One of the most known types of fraud in B2B transactions is the Missing Trader Intra-Community (MTIC) fraud or 'the carousel fraud'. MTIC fraud occurs in many different ways and the schemes become more difficult every time and include both goods and services. What they have in common is that they exploit situations in which goods and/or services can be bought free of VAT. MTIC fraud systematically involves a defaulting trader, literally a trader that does not submit its VAT returns and does not pay the VAT due to the tax authorities. The major characteristics of an MTIC fraud are described in box 1 below. Carousel fraud first finds its roots in the endemic weakness of the current VAT system that allows for situations to occur in which goods and services can to be bought cross-border VAT-free. The current functioning of the so-called "transitional VAT system" is described in annex 9. It splits every cross-border sale of goods between businesses into an exempted supply in the Member State of departure and a taxable acquisition in the Member State of arrival. As to B2B cross-border services, the customer is liable for the payment of VAT (so-called ‘reverse charge’ mechanism) and VAT is therefore not charged by the supplier. Fraud can occur when a supplier pretends to have transported the goods to another Member State but the goods are in fact consumed VAT-free locally. Carousel or MTIC fraud occur when a client of a cross-border transaction purchases goods or services VAT-free and charges VAT without remitting it to tax authorities while his/her customer can deduct it (as described above in Box 2 on MTIC/Carousel fraud). What is important to mention is that money is made quickly, transmitted quickly and the fraudulent company disappears quickly before any VAT due is paid and in most instances before tax administrations are able to detect the irregularity. Once the money has disappeared into the complex web of transactions, tracing and recovering unjustified VAT refunded or not paid becomes time-consuming, costly and often impossible. Different illustrative examples of MTIC fraud that have taken place within the EU are presented in annex 10. VAT fraud does not affect all EU Member States equally. As already mentioned before, the VAT gap varies from 1.24% to 37.89%. The difference in the VAT gap between Member States finds its roots in very diverse collection and control capacities of the tax administrations, which falls under the national competence of the Member States. Within the European Semester framework, in which the Commission undertakes a detailed analysis of EU Member States’ economies and provides tailored advice to them, special attention is paid to the fight against tax evasion and avoidance and to improving tax administration. Some Member States (Bulgaria, Poland and Romania) were specifically recommended in 2016 to improve their tax collection by fighting against tax fraud and evasion (notably in VAT) and the shadow economy but also by improving tax compliance. Although some progress has been made in some Member States, high tax evasion and low levels of tax compliance remain a challenge for several other Member States (amongst others the Czech Republic, Italy, Latvia, Romania and Slovakia). Although MTIC fraud is first driven by the endemic weaknesses of the EU VAT system and weak tax administrations capacities in some Member States, these two specific drivers will not be addressed by the present initiative as they are out of the scope of Regulation (EU) 904/2010. It is nevertheless worthwhile to mention them for the sake of the analysis comprehensiveness. 2.3.1. Magnitude of the problem Out of the EU VAT gap estimated at almost EUR 160 billion revenue losses each year, EUR 50 billion would be due to carousel fraud alone. In a 2013 report Europol estimated the MTIC losses at EUR 100 billion. Although it is difficult to precisely assess the weight of this phenomenon because it corresponds by essence to tax revenue not collected by Member States tax authorities, studies trying to tentatively assess its magnitude conclude that it is significant. According to a study carried-out by EY in 2015, the carousel fraud portion of the VAT gap ranges from 12% in Bulgaria to 39% in France (see figure 3 below on share of carousel fraud in VAT gap). 2.3.2. Problem drivers 2.3.2.1. Weaknesses in the access and analysis of information mechanisms Each Member State collects and stores information on its own trader population. MTIC fraud is by its nature cross-border. Relying exclusively on national information does not allow tax administrations to efficiently detect and investigate such type of fraud. Therefore cross-border information exchange is crucial to monitoring the correct application of VAT on cross-border transactions and effective fight against fraud. Regulation (EU) 904/2010 sets out a specific framework for administrative cooperation and combating fraud in the field of VAT as described in section 1.2. and in Annex 8. The VIES databases, requests for information and multilateral controls do not constitute the best instruments to combat MTIC/carousel fraud in the field of VAT: this fraud needs to be quickly detected and these communication channels do not allow Member States to get all necessary information to be able to prevent or put an end to VAT fraud. This is precisely why Eurofisc, designed as a multilateral early warning mechanism to improve their administrative capacity in combating organised VAT fraud and especially MTIC/carousel fraud, was set up in 2010 under Regulation (EU) 904/2010. Thanks to Eurofisc and by way of risk analysis tools, Member States can exchange multilaterally early warnings on businesses suspected to be involved in MTIC/carousel fraud. Eurofisc is a Member State-driven network, composed of national risks analysts working in different Working Fields per fraud risk area. The network is financed under the European Fiscalis 2020 Programme. The Commission provides administrative and logistical support to Eurofisc and does not have access to operational data. Nevertheless, after 7 years of practice, it appears that Eurofisc has not so far met all expectations because of: a- a cumbersome and lengthy process of information exchange, which can be described as follows: ·As a result of domestic risk analysis Member State 1 selects a potentially risky trader and puts it under monitoring. Member State 1 uploads on CIRCABC a spreadsheet which includes intra-EU deliveries / invoices issued / Vies-on-the-WEB data of the potentially risky trader; ·Member State 2 – a Member State where the potentially risky trader is registered – checks on him. Based on the results of the checks, Member State 2 provides a qualification on the potentially risky trader and uploads a spreadsheet on CIRCABC to this end; ·Member State 1 checks CIRCABC if the potentially risky trader was qualified. If so, then this qualification can be used for domestic risk analysis and follow-up.

b- instruments that are not adequate as they do not permit to exchange vital information on risky traders or transactions immediately. The current set-up of Eurofisc is challenged by the following: ·limited scope of exchanged data, largely attributed to the limitations arising from the manual work that needs to be carried out for data sharing; ·slow processes to request and retrieve targeted data; ·poor targeting of traders to be put under monitoring; ·lack of prioritization of suspicious cases based on risk assessment; ·no common risk analysis standard or common EU framework for risk analysis; ·issues of data quality and accuracy; ·risks of data losses. All these problems were emphasised by the European Court of Auditors (hereinafter "ECA") in its 2015 Report, which concluded that Eurofisc is a mechanism that is time consuming, labour intensive, with slow and not always well targeted exchanges made with non-user friendly instruments. All this significantly decrease the value of information exchanges while swiftness is key to fight MTIC fraud. These shortcomings were also highlighted by the Member States in the course of Regulation (EU) 904/2010 evaluation. Member States recognise that Eurofisc has had positive effects on the fight against VAT fraud and the collection of VAT on intra-EU transactions and report a high level of satisfaction. Nevertheless, they also mention the same drawbacks in its functioning as the ECA did and indicate that, due to them, Eurofisc has certainly not reached its full potential yet. 2.3.2.2. A current framework that makes it difficult to carry-out coordinated actions at EU level against fraudsters Regulation (EU) 904/2010 provides Member States with the possibility to agree to conduct simultaneous controls or so-called ‘multilateral controls’ (MLCs) of the tax liability of one or more related traders, if they consider such controls to be more effective than controls carried out by only one Member State. In addition, the Member States can agree that foreign tax auditors be present during administrative enquiries. These instruments are considered useful by Member States and can be used as flexible means to exchange targeted information in a swifter and more coordinated fashion than exchanging information on request. Nevertheless, these tools are first of all designed to exchange information but cannot be considered as instruments allowing tax administrations to coordinate their audits: ·although presence of foreign officials in administrative enquiries (be it in the framework of a MLC or not) is possible, this does not enable them to actively participate in enquiries carriedout in other Member States; ·MLCs are carried out by separate audit teams in each country. Results are shared thereafter by way of spontaneous exchanges of information. This makes it difficult to have a single strategy and to correctly coordinate actions of all national authorities involved in such simultaneous controls and operating according to their national guidelines. Nevertheless, the number of multilateral controls initiated annually is stable, at around 40. While searching for possible causes, some were offered by the Member States and included aspects such as: overall (very) slow character of the instrument; long duration of the MLCs (most lasting more than one year, making it difficult to be used to tackle the most serious fraud in an efficient fashion); difficulties with inserting MLCs initiatives in established annual audit planning programmes; extra workload for local officers combined with lack of experiences; or difficulty in convincing management that it was worthwhile investing in audits that may only show a benefit for the other Member States. All this was highlighted again by Member States over the course of Regulation (EU) 904/2010 evaluation (see annexes 3 and 4). The Commission Report to the Council and the European Parliament also mentioned that better coordination at both national and EU levels would be valuable, in particular by reinforcing ties between national anti-fraud units and Eurofisc. National anti-fraud units are at the forefront in fighting VAT fraud and are equipped with - often unique - legal measures to do so (e.g. right to search or seize). Despite a strong expertise and the fact that Eurofisc liaison officials are the first to be aware of new fraud schemes and would consequently be in the best position to dismantle these fraudulent networks by joining their efforts, Eurofisc does not play any role in coordinating multilateral controls at EU level. 2.3.2.3. Insufficient multidisciplinary approach According to the ECA and Europol, the most damaging VAT frauds are committed by organised crime groups (OCGs) through MTIC schemes. They benefit from their international criminal structures and connections to establish efficient MTIC schemes to extort money from national budgets. The ECA and Europol estimate that EUR 40-60 billion of the annual VAT revenue losses are caused by organised crime groups and that 2 % of those groups are behind 80 % of the MTIC fraud.

The proceeds of MTIC fraud are usually reinvested in new criminal activities or laundered. This is corroborated by the real examples of MTIC fraud presented in annex 10. The figures provided by Europol during the public hearing before the PANA Committee on 14 November 2016 confirmed a link between companies appearing in the Panama Papers and ongoing investigations for MTIC fraud. In the same hearing Eurojust mentioned that many of its proceedings on money laundering were connected with VAT fraud. Tax authorities are not equipped to identify these criminal organisations and administrative measures against such serious VAT fraud cannot be effective. A multidisciplinary approach involving law enforcement and judicial bodies is more effective to: ·identify OCGs behind VAT fraud; ·investigate; and ·prosecute. Such were also the conclusions of the ECA 2015 Report. Most Member States are already taking this approach to a certain extent at national level. Tax authorities involve law enforcement bodies to stop criminals behind VAT frauds. In some Member States, tax authorities even received law enforcement powers which simplified the process. However, according to the 2017 SOCTA report made by Europol 70% of OCGs are active in more than 3 countries and 45% of them are involved in more than one type of criminal activity. Therefore, the multidisciplinary approach should become international as well. Most of Member States are already taking actions in this field. 27 Member States participated in the EMPACT MTIC priority that was created after the SOCTA 2013 report. The temporary activity was driven by Member States with a support from Europol. It allowed launching several operations during the period 2013 – 2017 against criminal organisations active in MTIC fraud. Despite national initiatives towards a multidisciplinary approach, there are still fields that could be improved. In particular, and as confirmed by the Member States in their replies to the targeted consultation made in the course of the Evaluation Report (see annexes 3 and 4), there is no exchange of VAT information and of intelligence on organised crime structures involved in serious VAT fraud and coordination of actions between, on the one hand, tax administrations and Eurofisc and, on the other hand, other law enforcement authorities at EU level such a Europol and OLAF – see box 2 below. A systematic cross-checking of information on missing traders between Eurofisc and Europol databases on OCGs is also absent. Box 2: role of Europol and OLAF in fighting the most serious VAT fraud threats Europol and OLAF are the two bodies that are at the forefront of the fight against frauds at EU level - Europol, headquartered in The Hague, the Netherlands, assists the 28 EU Member States in the fight against serious international crime and terrorism since these activities pose a significant threat to the international security of the EU. It is now recognised that VAT fraud, in particular MTIC fraud, is reinvested by criminal organisations to finance their activities - OLAF investigates fraud against the EU budget, corruptions and serious misconduct within the European institutions and develops anti-fraud policy for the European Commission. Although VAT is not a matter that OLAF is allowed to directly investigate, OLAF can investigate cases involving customs duties and may have an interest in receiving information about VAT fraud cases. The VAT fraud on CO2 quotas, as detailed below in box 3, that caused EUR 5 billion of revenue losses, can be cited as an example illustrating MTIC fraud in the light of a lack of multidisciplinary approach. Although Eurofisc could now help to avoid such frauds to happen, this case demonstrates a lack of cooperation and connections between all authorities in charge of fighting VAT fraud. This shortcoming was also stressed in the ECA report where it was recommended to improve the cooperation and remedy overlapping competences of administrative, judicial and law enforcement bodies. Box 3: presentation of the MTIC fraud on CO2 quotas The European Union Emissions Trading Scheme (EU-ETS) aims at reducing carbon dioxide (CO2) pollution in a cost effective way by allowing companies to trade emission allowances (commonly known as carbon credits) and thereby determine how and where they reduce the pollution. Under the EU ETS Directive, each Member State must establish and operate a national registry for the registration of emission allowances transactions within the EU ETS. One allowance represents one tonne of CO2. The total amount of CO2 emissions from industry is determined by EU Governments and distributed to operators to their account in the electronic registries set up by the Member States. Individuals and organisations can also open accounts in any EU ETS registry and trade in emissions allowances. However the registry is not a trading platform. Companies and other participants in the carbon credit market can trade directly with each other or buy and sell CO2 emissions through one of the several organised exchanges in Europe, via intermediaries or bilateral contracts. The price of allowances is determined by supply and demand. Tradable CO2 emissions are considered as services for VAT purpose and the place of taxation of their sale between businesses is located in the Member State of the customer. If the supplier and customer are established in different Member States, the customer is liable for VAT (reverse charge) so VAT is not charged like for B2B cross-border supplies of goods. Indications of suspicious trading activities were first noted in late 2008, when several market platforms saw an unprecedented increase in the trade volume of EUAs (European Unit Allowances). Market volume peaked in May 2009, with several hundred million EUAs traded in e.g. France and Denmark. At that time the market price of 1 EUA, which equals 1 ton of carbon dioxide, was around EUR 12,5. The activity of fraudulent traders in years 2008/2009 resulted in losses of approximately EUR 5 billion for several national tax revenues. It is estimated that in some countries, up to 90% of the whole market volume was caused by fraudulent activities. The VAT fraud scheme in this case required a defaulter that would buy the carbon credit from another Member State without paying VAT (reverse charge), sell them nationally with the application of VAT and go missing without paying VAT to the Treasury. The fraud was facilitated by the high volume of transactions that it was possible to perform within a short period of time. 2.4. Fraud in relation to the dual VAT regime applicable to cars

The sale of cars is also an economic sector recognised as heavily affected by VAT fraud. This situation is mainly the result of two set of rules provided for in the VAT Directive. In relation to new means of transport, including cars, and unlike the general rule for the cross-border delivery of goods between businesses and consumers, new means of transport acquired by non-VAT liable persons, are subject to VAT in the country where goods are delivered. The rationale of this rule is that the car industry is not equally widespread across Member States, while consumers are located throughout the entire EU territory. The taxation of purchases of cars in the country of the supplier as it is the case in B2C transactions would attract VAT revenue in countries where cars are produced or with low standard rates and, reciprocally, result in significant VAT losses in the country of their use i.e. where consumers live. The high value of these goods and VAT revenues associated made it even more difficult for Member States to accept taxation in the Member State of the supplier. In relation to second-hand means of transport as defined in Article 327 (1) of the VAT Directive, two different VAT regimes exist: ·on the one hand, transactions on second-hand means of transport are not subject to VAT in the country where goods are delivered. Instead, VAT is calculated on the margin realised by the supplier and must be paid in the country where this supplier is located; ·on the other hand, sales of second-hand cars for which the right to deduct the input VAT has been exercised by the owner are subject to VAT on the full transaction amount. In that case, VAT must be paid in the country where goods are delivered, as it is the case for new means of transport. It results from this that trading in cars is often used to commit VAT fraud, the easiest way being to sell recent or new means of transport taxable on the whole amount as if they were second-hand goods, taxable on the margin only. The modus operandi on car fraud is illustrated in Box 4 below. A typical example of this kind of fraud is also detailed in annex 10. Box 4: new means of transport/second-hand cars fraud schemes VAT Principle in relation to second hand means of transport The selling of second-hand goods, including second-hand cars, made by an enterprise liable to VAT and acting as such, is subject to VAT on the margin except when the means of transport is considered as a new means of transport that is, it has been in use for no more than 6 months or has been driven for no more than 6.000 kilometres or the owner has deducted the input VAT. Fraudulent scheme in relation to new means of transport/second-hand cars To develop a fraudulent scheme in relation to new means of transport, three different enterprises are usually involved. – the supplier (C) located in the origin country declares that it has made a VAT-free intra-EU delivery of new means of transport to the intermediate company (B); - the intermediate company (B), located in another Member State invoices these deliveries as second-hand cars under the margin regime to the private individual (A) – the beneficiary of the fraud; - the private individual (A) pretends to acquire second-hand cars for which VAT is due on the margin by the intermediate company (B). 2.4.1. Magnitude of the problem There is no study specifically targeting the fraud of new and second-hand means of transport so the hard data to assess the weight of this fraud in the overall VAT gap is scarce. However, the amount of data referring to cars supplies exchanged under Eurofisc Working Field 2 is significant: the monitored transactions that is, the total amount of transactions that were suspected by Member States to be fraudulent and needing further checks by tax authorities, amounted to EUR 5 billion in 2013, EUR 3 billion in 2014 and EUR 1.5 billion in 2015. Although the trend shows a decrease in the total amount of transactions under monitoring due to better targeting methodologies, this amount remains high and demonstrates that the selling of cars is a sector subject to predominant concerns at EU level. Box 5: Presentation of a significant fraud case in relation to sale of cars

In June 2016 the French authorities dismantled a network of French merchants, linked to 50 shell companies scattered in a dozen of Member States, involved in fraudulent trading in luxury cars. Under this investigation about fifteen luxury cars, valued at nearly EUR 500.000 were seized. The authorities estimated that over a period of five years the network sold over a thousand of vehicles using the VAT fraud scheme, generating more than EUR 51 million in turnover and evading EUR 11 million of due VAT that has never been paid to the treasury. According to the Committee of French Automobile Manufacturers, the affected market was worth EUR

1,1 billion in 2012, with the fraud rate estimated at between 20% and 40%, or between EUR 45 and 90 million. Fraudulent trade into cars causing significant VAT losses and distortion of competition have also been reported by compliant car resellers. The high-value of recent cars gives a major advantage to fraudulent actors that sell these vehicles without collecting VAT on the total amount of transactions. Compliant businesses have no other appropriate means to combat these distortions than decrease their mark-ups, when possible, or to sell goods at prices not reflecting the real costs. This significantly hampers the proper functioning of the single market and does not place all economic actors on an equal footing. For example, according to the Fédération Nationale des Artisans de l’Automobile (FNAA) in France which bases its estimations on customs data, the damage caused by the fraudulent trade to cars retailers represents a loss of EUR 5 billion annually, while EUR 1 billion is lost in VAT by the French Treasury, for a total of 160 000 cars sold on the French market. This situation directly results from the VAT regime in relation to means of transport which was described above, and some loopholes in the exchange of information under Regulation (EU) 904/2010.

2.4.2. Problem drivers 2.4.2.1. Impaired access and mechanisms for information exchange and analysis Due to the free movement of persons and goods within the EU, international cooperation is crucial to efficiently monitor the VAT regimes that apply to transactions on cars. A prerequisite to exchange information on suspicious trade of cars is to know the Member State that must receive the information, leading to a two-step exchange: in first instance, an exchange of information to determine the Member State where the car, the sale of which is under monitoring, was registered and, thereafter, a second exchange of information allowing the relevant Member State to check the correct application of VAT. One shortcoming reported by Member States is that there are, to date, no suitable administrative cooperation instruments to collect identification or registration records on vehicles in an efficient fashion. The main inefficiencies that occur are: ·in relation to exchange of information on request, requests are handled manually on a case-by-case basis, without the possibility to receive a swift answer because of not well targeted procedures; ·in relation to automatic exchanges, these exchanges provided for in Article 13 of Regulation (EU) 904/2010 in conjunction with Article 2 of Commission Implementing Regulation (EU) No 79/2012 are not mandatory and when they occur, the information provided is difficult to process quickly and efficiently; ·in relation to Eurofisc, it is not possible in all instances to quickly determine the Member State to whom crucial information must be directed. Outside the legal framework of Regulation (EU) 904/2010, dedicated public or business organisations do keep information in relation to car registration in each Member State. Information maintained in these registers is already exchanged between Member States for purposes specifically defined in several pieces of legislation by way of a European platform named EUCARIS. EUCARIS started in 1994 as a co-operation among national registration authorities from five European countries to fight international vehicle crime and driving licence tourism by means of exchanging vehicle and driving licence information between its members. All EU Member States are now EUCARIS members, as well as Iceland, Norway, Switzerland, Jersey, Isle of Man and Gibraltar. The organisation of EUCARIS is based on the EUCARIS Treaty and its underlying Rules of Procedure. The General Assembly appoints the EUCARIS Secretariat and the responsible party for the execution of the operational system management, which are chosen from among the Member States. At the moment the Netherlands Vehicle Authority (RDW) is responsible for both the EUCARIS Secretariat and EUCARIS Operations . EUCARIS is an information exchange system that provides an infrastructure and software to countries to share, among others, their car and driving licence registration information helping fight car theft and registration fraud. EUCARIS is developed by and for governmental authorities and is able to support all kinds of transport related information exchange based on treaties, directives, bi- and multilateral agreements. This platform allows Member States to: ·have an automated access on real time to information kept in the national repository of the requested authority; ·send out bulk requests to identify where a specific means of transport has been registered.

To this end, a client application which has been developed by the EUCARIS Secretariat, is distributed in each Member State and can be used for specific purposes such as enforcement of road offences. 2.5. Fraud in relation to the customs procedures No 42 and 63 The customs procedures No 42 and 63 (CP42 and CP63) are two VAT regimes provided for by Article 143(1) of the VAT Directive that allow for a VAT-free importation of goods in a Member State if it is followed by an exempted B2B supply or transfer to another Member State. This simplification has been implemented to allow for transit of Community goods without imposing on traders an unnecessary VAT burden. In principle, an import of goods should be subject to VAT and this input VAT reported and offset in the VAT return of the importer. In normal scenario the importer will sell the goods in the same country enabling a compensation of import VAT (input VAT) with the VAT on the sales (output VAT). However, in case the importer does not have VAT taxable transactions in the country of importation compensation of input VAT with output VAT is not possible. The importer will need to request a reimbursement of the VAT to the tax authorities and is then supporting the burden of financing VAT while in the end no VAT is due in the Member State of importation. To compensate this situation, a VAT exemption on importation of goods that are transiting to other Member States has been introduced. It improves the cash flow situation of businesses and reduces their administrative burdens. The functioning of these procedures is shown in the flowchart below. Figure 6: Flowchart of a compliant import under CP42 (ECA, 2011, Special report no 2011/13) To differentiate such VAT exempt importation from others, customs authorities have established two specific customs procedures namely CP42 and CP 63: These two procedures are widely used. There were 8.5 million importations under VAT exemption in 2015, representing a total value of EUR 74 billion. In terms of value, 60% of these importations were concentrated in Belgium (EUR 33.1 billion for 570 000 transactions) and Germany (EUR 17.3 billion for 707 000 transactions), followed far behind by France, Austria, the UK and Sweden. 17 Member States did not exceed 12 000 of such customs procedures in 2015. In some Member States, like the Netherlands, they are not used at all as the importers make use of the possibility to defer the payment of the import VAT until the submission of their VAT return. With respect to the countries of origin, the top of the list is dominated by China, Switzerland, the USA and Japan. If one looks at the Member States of destination to where the goods imported under CP 42 are subsequently transported, depending on the criteria (value or number of items) one can find France, Germany, the UK, the Netherlands and Italy. If the benefit for legitimate business to use CP42 and CP63 cannot be denied, the risk of VAT fraud linked to these importations cannot be ignored as well. Based on the information available, it would appear that the main VAT fraud linked to CP42 and CP63 is avoiding paying VAT and selling the goods in the shadow economy. Fraudsters selling goods on the black market in the EU would be looking for any ways to bring goods into the single market at the lowest possible costs. This includes reducing the customs duties by under valuating and avoiding VAT at importation with the use of CP42 and CP63. The last OLAF investigation (see below section 2.5.1.) and ECA reports confirm that these two phenomena are closely connected. 2.5.1. Magnitude of the problem No precise assessment of the level of fraud committed by misuse of the CP42 and CP63 is available. In its report published in 2011 on the control of CP42 in seven Member States, the ECA mentioned that for year 2009 and by extrapolation, the level of VAT losses in relation to the CP42 only would approximately reach EUR 2.2 billion. For this specific year, this represented 29% of the VAT theoretically applicable on the taxable amount of all the imports made under the CP42. This estimation was made before the EU legislation in relation to this procedure was amended, providing for stricter application conditions, although these new rules do not seem to always be consistently applied (see below, section 2.5.2.1). In its report released in 2015, the ECA did not further estimate the level of this fraud. Nevertheless, several recommendations were made, demonstrating that defects in the application of this procedure still remain. Recently, in March 2017, OLAF imposed a fine of EUR 2 billion on the UK for uncollected customs duties on under-evaluated imports of footwear and textiles through the UK during the period 2013-2016. Imports were done mainly with CP42 and under VAT exemption. According to OLAF, goods were sold by criminal organisations on the black market in several Member States. If this were the case, VAT losses for these transactions would amount to several billion of Euro, the estimation of VAT losses being at that early stage, only an extrapolation based on the findings of customs operations. Another concrete example of CP 42 fraud involving traders in China, the UK and France is also presented in annex 10. It is also possible that exempted imports, instead of being dispatched to the supposed country of destination, are in fact locally sold free of VAT. It is also possible for these goods to be involved in a carousel fraud with a supposed recipient in the country of destination that is, in fact, a missing trader. This fraud, like carousel and fraud on cars, heavily distorts competition within the single market as goods can be introduced VAT free and sold at underestimated prices. VAT fraud can then be combined with customs duties fraud as the goods are also often strongly under-evaluated. Some EU producers and retailers in certain economic sectors are more heavily affected and could not face competition with non-EU operators in a position to sell under-priced goods in the single market. 2.5.2. Problem drivers Already in 2011, the ECA report on the control of CP42/CP63 in seven Member States pointed out that the control process of the CP42/CP63 was deficient and recommended improving the communication of key data within and between Member States, encouraging the automatic verification of VAT identification numbers, creating a common EU risk profile for imports under CP42/CP63 and encouraging action on a proposed amendment to the VAT Directive. Answering this last recommendation, the general conditions for the exemption were added to the VAT Directive in 2009 under Article 143(2) (see below). Goods that are imported onto the EU territory under CP42/CP63 should at least be subject to the following checks: ·VAT numbers of the importer and customers; ·evidence that goods are intended to be transported to another Member State.

In practice, as showed in flowchart 5 below, several implementation flows in the CP42/CP63 chain of customs controls and in the exchange of information were identified at national level: ·these preliminary checks are not in all instances carried out by customs authorities upon import, as detailed under 2.5.2.1; ·tax authorities in the Member State of import are not always notified that goods have entered the EU territory VAT free, preventing them to further check whether information reported upon import, on the one hand, and information reported by the importer to tax authorities upon submission of its recapitulative statement, on the other hand are consistent and if the goods have actually been dispatched to another Member State (see 2.5.2.2); ·information on CP42/CP63 stays in the country of importation. Only the information on the subsequent intra-EU supply is shared with the second Member State (if the importer reports it correctly in the recapitulative statements); However, the link with the importation is lost. This prevents tax authorities in the Member State of destination to properly cross-check this information with that provided by the recipient of the goods (see 2.5.2.2). 2.5.2.1. VAT exemption is granted by customs authorities without proper checks of VAT numbers As mentioned above, CP42 and CP63 can be granted upon provision of the valid VAT numbers of the importer and customers. Registers of VAT numbers are usually maintained and kept up-to-date by tax authorities. Access to all VAT identification numbers delivered by Member States tax authorities and registration data concerning enterprises to which these VAT identification numbers have been allocated is granted to all Member States through VIES (see annex 8). It appears that, in practice, national databases as well as access to VIES are not made available to customs authorities in certain Member States. As a result, customs authorities are not, in all instances, in a position to check on the spot if VAT numbers declared by the importer are valid. It can therefore well be the case that the recipient of goods does not have any valid VAT number. In such instance, there is high risk that goods will be sold on the black market in the country of importation or any other Member States without VAT being paid in both cases. This problem was stressed by the Commission in its 2014 report. It results from this assessment that a significant number of Member States failed to check systematically the validity of VAT identification numbers (BE, BG, FR, HU, IE, LU, NL, PT, and UK) at the moment of importation. This was reported again by the ECA in its more recent report dated 2015. 2.5.2.2. Information collated by customs authorities on exempted importations is not shared with tax administrations and these transactions are not properly checked Once CP42/CP63 is approved by the customs authorities, tax administrations should take over the responsibility for following up the physical flow of goods: onward supply to and acquisition in another Member State. To this end, cross-checks between customs data on imports under CP 42/CP63, VAT recapitulative statements and return submitted by the importer, and the VAT return of the recipient are key for ensuring that onward supplies of goods do not remain untaxed in the territory of the Member State of consumption of the goods or in another Member State. However, both tax administrations of the Member States of importation and of destination do not systematically receive from customs authorities, information on imports made under CP42 and CP63 despite the risks inherent to these procedures. In addition, traders are not obliged to flag separately or identify the intra-EU supplies following these imports in their VAT recapitulative statements as it is the case for triangular transactions. As a result, tax authorities can only rely on the compliance of the importer to be informed. In any event, if reported, the information is transmitted at the earliest one month after the importation and the tax administration cannot see that the reported intra-EU supply was preceded by a risky exempt importation. Therefore, tax administrations are not aware that such risky transactions have taken place and cannot check if goods have been actually dispatched to another Member State and if VAT has been paid by the recipient. Recommendations in relation to these procedures were made again by the ECA in its more recent report released in 2015 where it is stressed that there are no effective cross-checks between customs and tax data in most of the Member States visited during the course of the audit. It is then very easy for fraudulent stakeholders to use the weaknesses of the system to introduce VAT free goods onto the market. In addition, lengthy procedures to carry-out all necessary checks in all Member States concerned once the fraud took place allow the fraudster to be active for a long time before it can be identified and deregistered by tax authorities. And even in that case, the fact that customs authorities will not, in all instances, check VAT numbers upon importation will not make sure that fraudsters will be eliminated. Figure 7: Flowchart showing implementation flaws that may take place in a CP42 transaction chain of control

2.6. Evolution of the problem without action at EU level As mentioned in this report, the level of VAT fraud remains significant within the EU . The recent legislative proposal submitted by the Commission to the Council , which echoes the request from certain Member States to be allowed to apply a generalised reverse charge mechanism (GRCM) as an urgent measure to combat MTIC and carrousel fraud, reveals how the shortcomings of the current transitional VAT system can severely affect certain Member States. It also reveals the limits of conventional measures to combat such fraud. This is corroborated by recent reforms implemented in several Member States (e.g. split payment introduced in Italy in respect of certain transactions, compulsory electronic invoicing transiting via the tax administration in Portugal) with a view to improving VAT collection. In the longer term, it is expected that the definitive VAT system based on the taxation of intra-EU transactions will efficiently curb MTIC and carousel fraud across the EU by addressing the root of the problem. Such a reform has the potential according to a recent study to increase tax revenues by about EUR 40 billion per year. This proposal is being tabled in 2017 but will take several years to be agreed upon and fully implemented. Without immediate action at EU level, the weakness of the current transitional VAT system will continue to be exploited by fraudsters to commit MTIC and carousel fraud. Fraud levels might be stable but this will be to the detriment of compliant businesses that will pay the price either through stable compliance costs (compliance costs associated with cross-border VAT obligations are already 11% higher than for domestic trade) or even extra compliance costs (with additional reporting obligations or audits or the management of a dual VAT system with the introduction of the generalised reverse charge in certain Member States). The complexity of the current transitional VAT system without physical borders will continue to negatively impact the functioning of the single market by failing to capture new business models, new markets and technologies and by translating into losses of competitiveness for honest EU businesses and efficiency losses for Member State tax administrations. At the same time, with a VAT system organised at EU level, administrative cooperation between Member States remains necessary to ensure that VAT legislation can correctly be implemented and enforced in each Member State. It is also important to make sure that unreliable stakeholders do not take advantage of cross-border situations and do not gain from the fact that weaknesses in streams of information between Member States create risks in domestic situations. Only administrative cooperation between Member States organised at EU level can establish the necessary conditions to make the VAT system robust and efficient.

3. Why should the EU act? As demonstrated under the problem analysis, the root causes behind the three types of fraud partly lie within the VAT framework. It explains why the Commission has tabled proposals to change the system itself. Instruments already available to Member States to resolve or at least overcome weaknesses inherent to the VAT system – amongst others through administrative cooperation within and between tax administrations – are not powerful enough to prevent the EU-wide fraud. However as mentioned earlier on, to prepare the implementation of the definitive regime and, pending its implementation, to contain cross-border fraud, in the VAT Action Plan of April 2016 the Commission proposed actions on three fronts, one of them being achieving better administrative cooperation. Already the ECA in its 2015 report on the VAT fraud recognised that tools for administrative cooperation available to tax administrations were not being sufficiently exploited, or ambitious enough. Views from the Member States, expressed over the course of the evaluation report presented in annex 3 have confirmed the need to improve the current administrative cooperation instruments by removing their shortcomings, but also to reinforce them by making for instance a better access and use of already existing information. It all led the Commission to commit to endeavour shifting from the existing cooperation models based on Member States exchanging information, to new models of sharing and jointly analysing information and acting together, allowing Member States benefiting from a risk management capacity at EU level, as well as enabling them to rapidly and more effectively identify and dismantle fraudulent networks. In addition, new and always more sophisticated fraud schemes require innovative solutions. In the field of VAT, with fraud being cross-border in the most severe instances, it tends to belong to no-one while affecting everybody. Having this in mind and recalling the earlier described swiftness with which fraud takes place, any solution can be better implemented, effective and efficient when done jointly at EU level. The Commission identified altogether 20 measures to tackle the VAT gap. The present initiative will fit under a considerable number of them, including: ·the possibility of extending the use of automated access to data and exploring with Member States the possibility to develop an automated mechanism that would allow a cross-matching between the data reported by each party of every single transaction. That would allow detecting fraud in early stages and ultimately prevent a missing trader fraud, be it domestic or intra-EU; ·reinforcing the role and impact of Eurofisc on tackling intra-EU VAT fraud, including making better use of the information available within the network; ·evaluating Regulation (EU) 904/2010 and proposing legal and operational solutions to address the weaknesses of the current legislation, including by introducing joint audits; ·supporting deeper cooperation between different authorities.

The management, collection and control of VAT are first and foremost a national competence of the Member States. However, VAT fraud is often linked to cross-border transactions within the single market or involves traders established in other Member States than the one where the tax is due. Moreover, VAT fraud has a negative impact on the functioning of the single market and causes serious losses to Member States’ revenues and consequently to the EU budget. Therefore pursuant to Article 113 of the TFEU the EU has implemented cooperation tools organising in particular an exchange of information between tax administrations and supporting common audit activities and the Eurofisc network. Improving the efficiency of these tools, in particular strengthening Eurofisc, would offer value over and above what could be achieved at Member State level. 4. What should be achieved? The objective of the initiative is to reduce the level of cross-border VAT fraud that takes place within the EU. To this end, the initiative will provide tax administrations with more efficient and effective instruments to fight the three main sources of VAT fraud taking place in cross-border situations i.e. MTIC fraud, fraud on sale of second-hand cars and fraud in relation to Customs procedures No 42/63. A better use and sharing of information between authorities and the reinforcement of Eurofisc will enable Member States' tax administrations to better target fraudsters, to put an end to fraudulent schemes at an earlier stage and ultimately to ensure a level playing field for businesses. 4.1. General objectives The general objectives of the initiative are: ·to contribute to fiscal consolidation within the EU by ensuring that taxes due are collected to feed national and EU budgets ; ·to contribute to fighting organised crime; and ·to contribute to a closer cooperation between Member States in the EU VAT area, moving away from exchange of information only to a model based on data sharing and joint actions. 4.2. Specific objectives The specific objectives of the initiative are: ·to better exploit the existing administrative cooperation instruments in the field of fighting VAT-related fraud; ·to contribute to fighting organised crime through rapid and more effective identification and dismantling of fraudulent networks related to VAT; and ·to improve the multidisciplinary approach to fighting and preventing VAT-related fraud through swifter and more coordinated reaction capacity. 4.3. Operational ·Faster information exchange and joint processing of data related to VAT by Eurofisc officials; ·Improve identification and targeting of potential fraudsters; ·Provide for new/improved channels for access to and sharing of VAT–related information between tax administrations and other authorities or institutions; ·Improve effectiveness of checks and the sharing of VAT-related information in the context of imports; and

·To facilitate joint audits. Linking the objectives to the problems Specific objectives General objectives Link to the problem to better exploit the existing administrative cooperation instruments in the field of fighting VAT-related fraud; to contribute to the creation of single EU VAT area supporting a deeper and fairer single market to contribute to fiscal consolidation within the EU by ensuring that taxes due are collected to feed national and EU budgets to contribute to fighting organised crime to contribute to a closer cooperation between Member States in the EU VAT area, moving away from exchange of information only to a model based on data sharing and joint actions Help Member States more heavily affected by carousel fraud to be in a position to quickly react to improve the multidisciplinary approach to fighting and preventing VAT-related fraud through swifter and more coordinated reaction capacity. New and improved administrative cooperation relationships are needed to better target fraudsters and fraudulent schemes to contribute to fighting organised crime through rapid and more effective identification and dismantling of fraudulent networks related to VAT Help Member States to react in the most efficient manner before fraud is perpetrated 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 has been amongst top Commission priorities for the last few years. 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. These priorities were directly reflected in the already mentioned 2016 VAT Action Plan. More recently, the creation of a simple, modern and fraud-proof VAT system was one of the fiscal priorities set out by the Commission for 2017 (Annual Growth Survey 2017). This initiative goes hand in hand with other initiatives in the VAT area and plays an important role in securing the success of the most ambitious proposals, which is the introduction of the definitive VAT regime. These several initiatives were already discussed before in this impact assessment. Additionally, MTIC fraud is also one of the nine EMPACT priorities , the European Union’s priority crime areas, under the 2014-2017 EU Policy Cycle of Europol. The same approach has been followed for the next policy cycle. The impacts on fundamental rights of the different options that are considered in this impact assessment are further detailed under Chapter 6. In short, it is expected that this proposal will trigger new exchange and joint processing of VAT information which could include personal data. Nevertheless, these new developments will ultimately be subject to Article 8 of the Charter for Fundamental Rights and, once introduced in Regulation (EU) 904/2010, Paragraph 5 of Article 55 of that Regulation that mirrors Directive 95/46/EC on the protection of individuals with regard to the processing of personal data and on the free movement of such data. 5. What are the various options to achieve the objectives? 5.1. Links between Problems/Drivers/Options/Sub-options As detailed under section 2 of this impact assessment, there are three main areas where cross-border VAT fraud schemes are developed. These three distinct problems, and their underlying factors, need to be addressed in different ways. Improving the instruments of Regulation (EU) 904/2010 may be the solution to resolve some of them. For others, the solution may be found in pieces of legislation that are out of the scope of the proposal this impact assessment relates to. They nevertheless needed to be mentioned to give a precise overview of the problems and provide better understanding of the issue at stake. When designing the different options presented in this impact assessment, diverse views were gathered. Most of them result from discussions between the Commission and tax administrations in fora where VAT fraud issues and administrative cooperation matters are regularly discussed, such as the Eurofisc network meetings, the Anti-Tax Fraud Strategy Group, the Standing Committee on Administrative cooperation or Fiscalis 2020 activities. The ECA 2015 report on VAT fraud also suggested different ways to improve administrative cooperation, in particular by involving law enforcement authorities to better combat the most severe types of fraud. Finally, over the course of the evaluation of Regulation (EU) 904/2010, opinions of the Member States and of other stakeholders on these options were also sought. All this is further detailed below. The links between the problems and their drivers previously described, on the one hand, the solutions and options that could be developed to address them, on the other hand, are detailed in figure 6 below. The baseline scenario has not been reported in this figure although it is further described under section 5.2 and constitutes the framework against which all options will be assessed. Figure 6: links between Problems / Drivers / Options/ and Sub-options 5.2. Baseline scenario The baseline reflects the current legal framework inclunding all ongoing initiatives which have a sufficient degree of certainty to be in a position to weight and assess them against all options that will be developed in this impact assessment. There are on the current agenda of the Commission several legislative proposals whose objectives are to improve the functioning of the EU VAT system, to make it stronger and remove some of the weaknesses described in this impact assessment. However, the precise characteristics of some proposals are yet unknown, some others envisage a progressive implementation and all of them would need to be agreed upon unanimously by all Member States after including possible far-reaching amendments. Hence, the baseline scenario that will serve as the benchmark against which the other options will be assessed will not include these legislative initiatives. They are nevertheless presented to give a complete overview of the current situation (section 5.2.1. of this impact assessment). In parallel, the Member States and the Commission have been working on the implementation of the Transaction Network Analysis on a voluntary basis. Since this instrument will be implemented whichever the results of the Council discussions on amending Regulation (EU) 904/2010, it has been considered as part of the baseline scenario. 5.2.1. Legislative proposals with likely positive impacts on fight against VAT fraud

The Action Plan adopted in April 2016 by the Commission sets out the objectives and measures envisaged by the Commission to modernise the EU VAT system. The creation of a robust single European VAT area is one of the key actions announced in the Action Plan. It will require the setting up of the definitive VAT system for B2B cross-border trade, moving away from the origin-based system towards a destination-based system with the taxation of intra-EU trade in the country of destination (please see Annex 9 for better understanding of the transitional system). The 'destination principle' has been agreed by the European Parliament and the Council. After having examined in detail the possible options for implementing the destination principle, the Commission announced its intention (see Action plan), and the Council took note of it, to present a proposal for the definitive VAT system that consists in taxing all intra-EU transactions (while still tracking the flow of the goods), just like it would be the case for domestic transactions. This option was assessed as the best solution to tackle MTIC fraud as well as decrease the complexity of the system and thus the compliance costs for all stakeholders. Although the preliminary results on the above-mentioned taxation option are very promising, preparing and adopting such a major change is likely to take some time. Indeed, the Commission envisages three successive legislative steps to implement it fully. Each step will require an unanimous agreement in Council. Therefore the final features of the definitive system are unknown at this stage and it is a long-term project. In addition, the definitive regime will not completely address frauds in relation to second-hand cars and customs procedures 42 and 63. Actually, transactions taking place under these regimes will still be subject to specific VAT regimes that could be exploited by fraudsters to evade VAT. In this context, administrative cooperation measures to combat these frauds will still be needed whether the definitive regime is implemented or not. New types of frauds could also take place once the definitive VAT regime is implemented. For instance, fraudsters could exploit differences in VAT rates between Member States to create new forms of missing trader frauds. If this were the case, Member States could use the cooperation instruments which are considered here to combat these new fraud schemes. Considering the urgency to take robust measures to improve the current situation when it relates to VAT fraud, the Commission has tabled four proposals that are currently being discussed at the Council level: ·a proposal for a temporary Generalised Reverse Charge Mechanism. The current VAT system is based on fractioned payment ensuring that the VAT is collected at each stage of the production and distribution chain. Under this system, the supplier is the person liable for payment of VAT to the tax authorities. Under a reverse charge mechanism, the person liable for payment of the VAT to the tax authority is the acquirer. The proposal under consideration aims at, under certain conditions, extending the reverse charge mechanism to all B2B supplies of goods and services above a certain threshold that take place on a domestic market to prevent missing trader VAT fraud to take place; ·a proposal for a Directive modernising VAT for cross-border B2C e-commerce.

E-commerce has become a key part of the economy and an important driver of economic growth. The proposal aims at solving several concerns in relation to e-commerce, in particular losses in VAT revenues for Member States. It is expected that a change in the small consignments exception rule for imports and the distance sales thresholds, along with an extension of the Mini One Stop Shop, may be solutions to tackle these increasing VAT losses; ·the future entry into force of the Directive on the fight against fraud to the Union's financial interests by means of criminal law which will cover serious EU-wide VAT fraud; and ·the new legislation establishing the European Public Prosecutor's Office. On 8 June 2017, 20 Member States reached a political agreement on its establishment under enhanced cooperation. It will be an independent and decentralised prosecution office of the European Union with competence for investigating, prosecuting and bringing to justice crimes against the EU budget, such as fraud, corruption, or cross-border VAT fraud above EUR 10 million damage. All these initiatives along with the new instruments that could be implemented by amending Regulation (EU) 904/2010 would constitute ways to immediately improve the situation with regard to VAT fraud. It would also bring tools that could be further used and reinforced to combat new fraud schemes. Nevertheless, even though all these initiatives are successfully implemented, the defintive regime will remain necessary to put an end to the current endemic weaknesses of the transitional arrangements and reduce compliance costs for businesses engaged in intra-EU trade within the single market. 5.2.2. Implementation of TNA on a voluntary basis Member States, on a voluntary basis,on the basis of the positive outcomes of a pilot project led by Benelux countries, have decided to develop a tool for information exchange and joint processing of VAT data for Eurofisc officials called Transaction Network Analysis (hereinafter ‘TNA’). TNA is being implemented so it is considered as part of the baseline scenario. TNA is highly targeted to how Eurofisc officials already exchange information. It will not substantially change the "what", but improve the "how" by addressing the following points: ·automating the collection of targeted information, e.g. VIES; ·improving the detection by introducing advanced data analytics; ·being able to visualize suspicious networks without manual intervention. In the future Member States will be monitoring the whole chains with the same information being available to all participating Member States; ·improving Member States ability to share data and qualify traders identified by Eurofisc by making them less dependent upon manual uploads of spreadsheets, resulting in a more structured and fluid way of information exchange; ·improving the quality of information shared by enhancing IT facilities for collecting and sharing the information. That would allow Member States to better allocate resources on which cases to investigate As with Eurofisc, participation in TNA is voluntary for Member States as this is merely a tool to facilitate the exchange of information. Most of the Member States so far supported the development of TNA and 25 countries have joined the project as full members, two countries being observers. This means that TNA will be able to access their data to identify potential fraudsters and their Eurofisc officials will have direct access to TNA to investigate identified traders and provide feedback. However it is envisaged that Member States not joining TNA will also benefit from the development as they will receive an extract of the results of TNA analysis through usual Eurofisc channels.

It is expected that this new instrument hosted by the Commission will provide a new framework allowing Member States to better and in a very efficient fashion target fraudsters so that tax authorities can quickly react to put an end to VAT fraud schemes. This voluntary TNA will be implemented in 2018. In the answers to the public consultation, 47 respondents reported that a joint processing of data would be helpful to fight VAT fraud and 36 considered that Eurofisc would be the right structure to coordinate this new instrument. In order for TNA to reach its full potential and bring all its positive effects, all Member States should join the project and grant TNA access to their VIES data. Nevertheless, one Member State requires a clearer legal framework in order to participate. 5.3. Option 1: Implementation of Transaction Network Analysis Two alternative options can be drawn up. The introduction of an explicit legal base for TNA is envisaged under each of them. The only difference between them relates to the access by TNA to the VIES data which is necessary to identify potential fraudsters. 5.3.1. Option 1.a: TNA without mandatory provision of data by all Member States In contrast with the baseline scenario this option would introduce an explicit legal base for TNA in Regulation (EU) 904/2010. However, this option would not require that the Member States which would not participate in TNA would have to grant it access to their VIES data. 5.3.2. Option 1.b: TNA with mandatory provision of data by all Member States Under the baseline scenario and option 1.a, non-participating Member States would not be required to grant TNA access to their VIES databases. As a consequence, TNA would not be able to track network ramifications and relationships in all Member States. This would hamper the performance of the tool. Under option 1.b, as under option 1.a, an explicit legal base would be introduced in Regulation (EU) 904/2010. However, all Member States, regardless of their participation in TNA, would be required to grant TNA access to their VIES data on intra-EU transactions in order for the application to identify potential fraudsters established in all Member States. 5.4. Option2: Improving the operational framework with regard to coordinated actions of control between Member States Two sub-options or variants that can be implemented separately or combined with each other have been identified: the implementation of joint audits and the coordination of Member States' multilateral actions by Eurofisc. When asked about the usefulness of joint audits, Member States reported that there would be an added value in implementing this new instrument: 15 strongly agree or agree that it would be a useful means to audit cross-border activities, 14 that it would be cost effective for tax administrations and 15 for businesses, and 15 that it would provide legal certainty to businesses. At the same time, their replies also showed that at the moment, the administrative cooperation instruments that score the best are coordinated actions of control under the form of simultaneous controls or presence during administrative enquiries. Stakeholders other than Member States are balanced when it comes to the added-value of joint audits with 19 agreeing that an active participation of foreign tax officials would be valuable, 17 disagreeing and 19 without any position. At the same time, 40 of them recognise the added value of having a single report audit to provide taxpayers with more legal certainty. In addition, 43 respondents reported a benefit from having cross-border administrative enquiries of fraudulent network being coordinated at Eurofisc level.

5.4.1. Option 2.a: implementing joint audits Today, to coordinate their actions, Member States can engage in: ·simultaneous controls, where the tax authorities of several Member States carry out audits in their respective country and thereafter exchange the information collected by way of spontaneous exchange of information; or ·administrative enquiries where foreign tax auditors can be present in other tax administration's offices and taxpayers' premises during national audit activities. However, foreign auditors are not allowed to directly carry out these activities. The joint audit is an instrument whereby a taxable person is subject to a coordinated audit with the following features: ·two or more countries join together to form a single audit team to examine issue(s) / transaction(s) of one or more related taxable persons (both legal entities and individuals) with cross-border activities, including cross-border transactions involving related affiliated companies established in the participating countries;

·in which participating countries have a common or complementary interest; ·the taxpayer shares information with the single audit team and all participating countries at once; and ·the team includes competent officials from each country. No individual (bilateral) requests for information between the auditors are needed because the information is shared within the mandate for the joint audit between all members of the single audit team. Introducing the concept of joint audit would be a step forward in achieving closer cooperation between tax administrations in controlling cross-border supplies, by removing legal obstacles taking place in simultaneous audits and presence of foreign auditors during administrative enquiries. In a joint audit, with two or more countries joining together to form a single audit team, the joint audit team carries out a single audit i.e. the examination of books and records. To this end, tax auditors are allowed to actively participate in the audit (with powers of inspection) held in the jurisdiction of another participating Member State. 5.4.2. Option 2.b: coordination of Member States' multilateral actions by Eurofisc Antifraud units are at the forefront in fighting serious VAT fraud and within these units, the information gathered and analysed by Eurofisc officials is used by auditors carrying out cross-border audits (currently under 'simultaneous controls' and 'presence in the office/participation in the administrative enquiries'). Eurofisc officials have to transfer the relevant information to national auditors, within their tax administration. It is then up to these auditors to consider if the information is relevant enough to propose the initiation of a simultaneous control following the procedures of the MLC-platform. The audit units in the tax administrations coordinate the cross-border administrative enquiries/controls. Another domain in which Eurofisc could take a more active role is the coordination of cross-border administrative enquiries (simultaneous controls or joint audits) of possible fraudsters identified by Eurofisc officials. Taking into account that Eurofisc officials are often the first to be warned about new fraudulent networks and they have a strong expertise in serious VAT fraud, they would be the best placed to coordinate the corresponding necessary investigations and administrative enquiries in the Member States involved. This would also allow better utilising the result of the TNA and the information from the audits could be immediately processed with TNA. Such coordination would be targeted to fraudulent networks identified within Eurofisc and requiring quick reaction. That means that only a fraction of MLCs would be covered. In practice, coordination would be carried out in the working field having the relevant expertise by one or several Eurofisc officials of the Member States involved in the audits. 5.5. Option 3: Developing exchange of data between Member States' tax administrations and law enforcement authorities at EU level Member States use more and more multidisciplinary approaches against serious VAT fraudsters by involving national law enforcement bodies or participating in EMPACT. This national effort could be enhanced at EU level by involving Europol and OLAF in this multidisciplinary approach. To date, no formal exchanges of information are organised between Member States' tax authorities and these two organisations. As reported by the ECA in its 2015 report, this "reduces Europol and OLAF's ability to tackle VAT fraud through the identification and disruption of organised crime groups behind the carousels and even their ability to assess the real impact of intra-EU VAT fraud". The targeted consultation whose results are presented in annex 4 shows that Member States exchange information with law enforcement authorities in a rather limited number of instances and that the vast majority of them have no experience at all in exchanging information with Europol and OLAF (19 out of the 27 replying Member States seem to have no exchange of information with these two enforcement authorities at EU level). The vast majority of them also demonstrate a limited appetite to develop such exchanges in particular in the light of the pending questions regarding the powers of law enforcement authorities to investigate VAT fraud . Stakeholders other than Member States see more interest in these sharing of information with 34 respondents being of the view that cooperation between tax authorities and law enforcement bodies should be changed. Four sub-options or variants which can be combined with each other have been identified. 5.5.1. Option 3.a: automated access to VIES data by Europol and OLAF As recommended by the ECA, the first option would be to grant an automated access to VIES data to Europol and OLAF. The information that would be made available covers: ·recapitulative statements from businesses making intra-EU supplies. These statements list the aggregate value of supplies of goods and services made to VAT registered customers elsewhere in the EU; ·VAT numbers and details of enterprises registered for VAT purposes within the EU. This option should be analysed in conjunction with Recommendation 14 of the ECA Report 24/2015 where it is mentioned that the European Parliament and the Council should: (a) include VAT within the scope of the proposed directive on the fight against fraud to the Union’s financial interests by means of criminal law (PIF directive) and the Regulation on the establishment of the European Public Prosecutor’s Office; and (b) grant OLAF clear competences and tools to investigate intra-EU VAT fraud.

Currently, VAT-based revenue is part of the EU’s own resources. However, the definition of the notion of ‘irregularity’ provided for by Council Regulation (EC, Euratom) No 2988/95 on the protection of the European Communities financial interests only applies to infringements affecting own resources collected directly on behalf of the Communities. Therefore, there are still pending questions regarding the possibility for OLAF to conduct on-the-spot checks in the field of VAT. 5.5.2. Option 3b: Spontaneous transmission of VAT fraud cases involving at least two Member States by Member States' tax administrations to OLAF Under the second option tax authorities would spontaneously provide OLAF with information on serious VAT fraud cases involving at least two Member States. As reported under section 5.5.1., OLAF does not have the tools to conduct investigations in the field of VAT successfully on its own. However, OLAF has, in the past, when information was shared, supported multilateral investigations of serious VAT fraud by offering coordination and facilitation. The opening of such coordination cases became rare when the sharing of information was framed legally in Regulation (EU) 904/2010 and access to Eurofisc was limited to Member States administrations. 5.5.3. Option 3.c: access to Eurofisc data granted to Europol and OLAF Under this option an access to data held by tax authorities within Eurofisc would be granted to Europol and OLAF. Having regard to the remit of these two bodies, links with Eurofisc can be made since they are all involved in the fight against the most severe tax fraud threats. Hence, access to targeted Eurofisc data could be considered when it relates to organised criminality, including: ·information on carousel fraud, including Eurofisc data (traders under monitoring, qualifications, feedbacks etc.) and TNA results; ·information on CP 42 & CP 63 fraud schemes; and ·information on VAT fraud trends. Considering their scopes of intervention, it seems that Europol is more likely to be interested by information on organised crime, in particular, carousel fraud, while OLAF has probably an interest in receiving information at a broader spectrum. Nevertheless, the intention, here, is not to segregate the information that could be accessed by the two bodies based on their activities, but to allow them to receive the same level of information. In practice, this information is today exchanged by way of CIRCABC. An access to the restricted CIRCABC fields where this information is made available to Eurofisc officials could be granted to new Eurofisc officials designated at Europol's and OLAFs levels.

5.5.4. Option 3.d: enrichment by and sharing with Europol of Eurofisc data Considering its scope of activities, Europol holds information on criminal organisations that could be useful to fight serious VAT fraud in particular to Eurofisc liaison officials. Another option would be to allow Eurofisc officials to provide Europol with information so Europol could enrich Eurofisc data pieces with its own information and facilitate the analysis carried out by Eurofisc liaison officials and the administrative enquiries they could coordinate. Europol could also share the information from Eurofisc with Member States law enforcement authorities. According to Europol rules, it would be up to Eurofisc officials to decide whether the informat