WRITTEN QUESTION P-1726/02 by Carles-Alfred Gasòliba i Böhm (ELDR) to the Commission. VAT tax fraud in the metal-recovery industry.
Date: 2002-06-07
Institutions: European Parliament, Provisional data
Subjects: Spain, VAT, complaint to the Commission, metal waste, restriction on competition, tax avoidance, tax evasion, tax harmonisation, waste management

C 192 E/12

Official Journal of the European Union

EN

14.8.2003

Will the Commission provide the European Parliament with Member States’ comments as soon as they
have been received?

Does the Commission feel that the creation of the European Public Prosecutor is inevitable and when does
the Commission foresee its creation and implementation?

Answer given by Mrs Schreyer on behalf of the Commission

(26 July 2002)

The Commission on 11 December 2001 adopted the Green Paper on the European Public Prosecutor, and
over 11 000 copies of the Green Paper have been distributed. It has promoted national and international
debates (16 events have taken place; about six others are planned), and a public hearing organised by the
Commission is scheduled for 16/17 September 2002 in Brussels.

The end of the consultation period was 1 June 2002. However, additional answers are expected after the
deadline. Germany, Ireland, the Netherlands and Sweden have sent an official opinion to the Commission.
Other Member States are also preparing an opinion on this matter. Comments can be reviewed on the
Europa Web-site, under OLAF and the Green Paper: http://europa.eu.int/comm/anti_fraud/green_paper/
contributions/date.html.

The Commission has given substantive reasons why the European Public Prosecutor is needed both in its
proposal to the Intergovernmental conference at Nice and in its Green Paper. Under the EC Treaty, the
Commission is responsible, before the Budgetary Authority, for implementing the budget (Articles 274 and
276 of the EC Treaty). Protection of the Community’s financial interests must be effective, dissuasive and
equivalent in all Member States (Article 280 of the EC Treaty). The Community must guarantee to Member
States and to Europe’s taxpayers that offences of fraud and corruption are effectively prosecuted in the
courts. In order to create the European Public Prosecutor, the EC Treaty must be amended and secondary
law must be adopted. The Commission will publish a Communication in End 2002/early 2003 on the
basis of the results of the debate on the Green Paper.

(2003/C 192 E/012)

WRITTEN QUESTION P-1726/02

by Carles-Alfred Gasòliba i Böhm (ELDR) to the Commission

Subject: VAT tax fraud in the metal-recovery industry

(7 June 2002)

The introduction of VAT in Spain has,
in the metal-recovery industry, enabled specific businesses to
develop a wide range of VAT fraud techniques. Illegal metal-recovery businesses, by acquiring the materials
in question, use base companies to avoid the relevant VAT charges. When selling to steelworks and
foundries, their bills include a 16 % VAT charge, but this VAT is not then paid into the Treasury.

This constitutes not only unfair competition against businesses which abide by current legislation. Fraud of
this kind is infecting trade with other Community countries, such as France, Portugal or Germany, which
means that the situation is creating severe distortions in metal-recovery industrial trade between Member
States.

When these practices came to its attention, the Commission proposed that the Council adopt a Decision (1)
authorising Spain to apply a measure derogating from the Sixth Directive 77/388/EEC (2), so as to
eliminate the tax fraud. However, the industry itself believes that this authorisation, which expires on
31 December 2003, has failed to curtail tax fraud at all, which has actually increased in recent years. For
that reason, various European business groups working in the metal-recovery industry have repeatedly
alerted the Commission to the situation, without obtaining any satisfactory answer so far.

14.8.2003

EN

Official Journal of the European Union

C 192 E/13

Why has the Commission not adopted any emergency measure in this connection, even though it is aware
of the seriousness of the problem? What measures does the Commission intend to take to put an end to
these practices in the immediate future, and at
the very least, by 31 December 2003? Does the
Commission agree that these practices could be curtailed by introducing a new provision reversing liability
for VAT with regard to the supply of used, waste and other recovery materials consisting of ferrous and
non-ferrous metals and their alloys and waste, glass, paper and board, and selection, cutting, fragmentation
and pressing operations carried out on such products?

(1) Council Decision 2001/243/EC (cid:1) OJ L 88, 28.3.2001, p. 15.
(2) OJ L 145, 13.6.1977, p. 1.

Answer given by Mr Bolkestein on behalf of the Commission

(12 July 2002)

The Council has indeed authorised Spain, by Decision 1999/81/EC of 18 January 1999 (1), to apply a
special tax measure in the metal recovery and recycling sector. This decision is based on Article 27 of the
Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonization of the laws of the Member
States relating to turnover taxes (cid:1) common system of value added tax: uniform basis of assessment (2),
which allows for special measures to simplify the procedure for charging the tax or to prevent certain
types of tax fraud and evasion. Apart from Spain, four other Member States apply special tax measures in
the sector concerned; the other Member States apply the normal VAT system.

Contacts the Commission has had with national administrations and representatives of the sector in
question have revealed that the special measures are not working satisfactorily in some Member States.
Generally speaking, they would like to see them extended.

However, any legislative initiative by the Commission must respect the Community legal framework laid
down notably in the case law of the Court of Justice on the proportionality of special measures to combat
fraud or tax evasion based on Article 27.

The Commission feels that this Community legal framework does not enable the scope of the special
arrangements to be extended on the basis of a derogation pursuant to Article 27 of the Sixth VAT
Directive.

In its communication to the Council and Parliament of 17 June 2000 (3) on a strategy to improve the
operation of the VAT system within the context of the internal market, the Commission therefore
this
undertook to rationalise the many derogations currently in force. However,
rationalisation might entail extending to all Member States certain derogations which have proven to be
particularly effective.

in certain cases,

The Commission has already said that in conducting this rationalisation it would examine the possibility of
introducing, in the Sixth Directive itself, special measures for the sector concerned which go beyond what
the Council can authorise on the basis of Article 27 of the Sixth Directive. The Commission will start the
preparatory work in principle before the end of this year so that the Council can take a decision before the
expiry on 31 December 2003 of the authorisation granted to Spain.

The Commission would assure the Honourable Member
it has already fully informed the
representatives of the sector and national administrations concerned of its intentions and it will continue
to involve them in the discussions that will take place on the subject.

that

(1) OJ L 27, 2.2.1999.
(2) OJ L 145, 13.6.1977.
(3) COM(2000) 348 final.