Commission staff working document on evaluating the Member States' replies to the questionnaire relating the application of Council Regulation (EC) no 1798/2003 concerning administrative cooperation in the field of value added tax accompanying the Report from the Commission to the Council and the European Parliament on the application of Council Regulation (EC) no 1798/2003 concerning administrative cooperation in the field of value added tax [COM (2009) 428 final]
Date: 2009-08-18
Institutions: European Commission
Subjects: VAT, administrative cooperation, exchange of information, tax avoidance, tax evasion, tax inspection

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 18.8.2009 
SEC(2009) 1121 

COMMISSION STAFF WORKING DOCUMENT 

On evaluating the Member States' replies to the questionnaire relating the application of 
Council Regulation (EC) no 1798/2003 concerning administrative cooperation in the 
field of value added tax 

Accompanying the 

REPORT FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN 
PARLIAMENT 

on the application of Council Regulation (EC) no 1798/2003 concerning administrative 
cooperation in the field of value added tax  

[COM (2009) 428 final] 

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TABLE OF CONTENTS 

COMMISSION STAFF WORKING DOCUMENT "On evaluating the Member States' replies 
to the questionnaire relating the application of council Regulation (EC) no 1798/2003 
concerning administrative cooperation in the field of value added tax" . Error! Bookmark not 
defined. 

1. 

2. 

2.1. 

2.2. 

2.3. 

Introduction .................................................................................................................. 3 

Analysis of the responses to the questionnaire ............................................................ 3 

Decentralisation of administrative cooperation (article 3) .......................................... 3 

Interference with criminal proceedings (article 4)....................................................... 4 

Request for information and for administrative enquiries (article 5) .......................... 4 

2.3.1.  Time limit for providing information (article 8 and 9) ................................................ 5 

2.3.2.  Presence in administrative offices and participation to administrative enquiries 

(article 11) .................................................................................................................... 6 

2.3.3.  Simultaneous controls (article 12 and 13).................................................................... 7 

2.4. 

2.5. 

Request for administrative notification........................................................................ 8 

Exchange of information without prior request ........................................................... 8 

2.5.1.  Automatic or structured automatic exchange of information (article 17 and 18) ........ 8 

2.5.2.  Spontaneous exchange of information (article 19) .................................................... 10 

2.6. 

2.7. 

2.8. 

2.9. 

Storage and exchange of information specific to IC transactions (article 22-27)...... 10 

Provisions concerning the special scheme for e-commerce (articles 28-34) ............. 11 

Relations with the commission (article 35)................................................................ 12 

Relations with third countries (article 36).................................................................. 12 

2.10.  General conditions governing the exchange of information ...................................... 13 

3. 

General appreciation of the functioning of administrative cooperation..................... 13 

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1. 

INTRODUCTION 

According  to  Article  45  of  Council  Regulation  No.  1798/2003  on  administrative 
cooperation  in  the  field  of  VAT,  the  Commission  shall  present  every  three  years  a 
report  to  the  European  Parliament  and  the  Council  on  the  application  of  this 
Regulation.  

Since  the  practical  use  of  the  different  instruments  of  administrative  cooperation  is 
made by the national tax authorities, evidently this evaluation can only be done on 
the basis of substantial input from the Member State. 

Therefore,  the  Commission  was  of  the  opinion  that  the  information  for  making  a 
comprehensive  assessment  of  administrative  cooperation  under  the  new  Regulation 
had to be collected by way of a questionnaire launched to the Member States.  

The  current  commission  staff  working  document  analyses  and  summarizes  the 
replies  given  by  the  Member  States;  it  basically  describes  how  Member  States 
themselves assess the functioning of the Regulation (EC) 1798/2003.  

This  document  has  been  an  important  source  of  information  for  the  Commission's 
report on the application of Council Regulation 1798/2003 concerning administrative 
cooperation in the field of VAT but it was not the only one. 

Indeed, other sources of information, like existing reports, discussions with Member 
States  on  a  bilateral  basis  or  during  meetings  have  been  used  when  drafting  the 
Commission's report in order to complement the results of this questionnaire. 

2. 

ANALYSIS OF THE RESPONSES TO THE QUESTIONNAIRE 

25  Member  States  replied  to  the  questionnaire  which  was  sent  to  all  of  them.  The 
questionnaire  covered  all  aspects  of  the  Regulation  on  VAT  administrative 
cooperation in the field of VAT; the analysis of the responses follows the structure of 
that Regulation.  

However, it must be pointed out that the quality of the replies from Member States 
was  very  different.  While  some  Member  States  provided  detailed  and  well  argued 
responses, other formulated only very brief replies without further explanations.  

2.1. 

Decentralisation of administrative cooperation (article 3) 

The competence in the framework of administrative cooperation can be delegated to 
different  liaison  departments,  since  the  Regulation  introduced  the  principle  of 
decentralisation.  Nevertheless,  the  practice  of  decentralisation  has  not  been 
established  in  all  Member  States.  Reasons  to  decentralise  the  administrative 
cooperation are efficiency, speed, quality and reliability. There seems to be a trend, 
however, that tax administrations in larger Member States encourage decentralisation 
–  or  deconcentration  -  more  than  smaller  Member  States.  The  principle  of 
decentralisation  is  based  on  functionality  criteria  (e.g.,  anti-fraud  unit,  customs 
services,  qualification  based  allocation…),  territorial  criteria  (local  /  regional  / 
borderline tax offices) or a mixture of both. Some Member States have decentralised 
the competence on the basis of bilateral agreements with the neighbouring countries, 
if they considered that such decentralisation has added value in the taxation matters.  

The problems  encountered by Member  States are technical, such as the availability 
and accessibility of CCN-mail (lack of secured direct lines for auditors).  

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Member  States  consider  CIRCA  a  reliable  and  useful  tool  for  identifying  contact 
points/ liaison departments in other Member States. A few Member States reported 
difficulties in indentifying the liaison department having the appropriate competence 
for a certain request. This on the other hand presumes that information on CIRCA is 
constantly  kept  up 
liaison 
departments/contact persons to the list on CIRCA would be an improvement.  

the  competencies  of 

to  date.  Adding 

the 

Most  Member  States,  however,  follow  the  approach  of  appointing  their  Central 
liaison Officer (CLO) as main contact point and all information has to pass via the 
CLO  who  is  assigned  a  CCNmailbox.  In  general,  liaison  departments  cannot  be 
contacted directly. 

Decentralisation  has  been  beneficial  in  specific  areas.  Member  States  where 
decentralisation  has  taken  place  seem  to  agree  that  this  resulted  in  a  better  use  of 
resources including human resources (specialists) and the reduction of time frames. 
The fact that all Member States who followed this practice reported positive results 
could inspire other Member States to reflect on the advantages gained. 

Conclusion:  the  principle  of  decentralisation  provided  in  the  Regulation  has  been 
welcomed by the Member States who set up a decentralised system, because it leads 
to  better  use  of  resources  and  time  management.  Improvements  could  be  made  as 
regards  the  identification  of  the  contact  points  in  the  liaison  departments,  the 
description of the competencies of each liaison department, and the availability and 
accessibility of CCNmail and CIRCA.  

2.2. 

Interference with criminal proceedings (article 4) 

The  request  for  information  could  relate  to  (fraud)  cases  which  are  subject  of 
criminal  investigations  or  judicial  procedures.  If  a  request  is  blocked  due  to  an 
ongoing criminal investigation, it is answered as far as the investigation makes this 
possible.  If  the  judicial  authorities  do  not  release  information,  then  the  requesting 
Member State is informed of the delay.  

A majority of the Member States have not encountered or are not aware of delays in 
the  exchange  of  information  for  cases  that  are  subject  of  a  criminal  investigation. 
Delays in the exchange of information may arise if the national legislation restricts 
the  exchange  for  confidentiality  and  secrecy  reasons.  Another  reason  is  that 
interference  with  criminal  proceedings  could  endanger  the  judicial  process 
(procedural errors). Consequently, delays appear to be unavoidable. 

A possibility is to exchange the information spontaneously, once the judicial process 
has been finalised. 

2.3. 

Request for information and for administrative enquiries (article 5) 

For  the  purpose  of  forwarding  requested  information,  the  requested  authority  shall 
conduct an administrative enquiry if necessary to obtain the information 

In general, requests for information do not require an administrative enquiry, if the 
necessary  information  is  available  in  digital  form.  Such  enquiries  can  cause  a 
considerable delay in responding to the request due to manpower shortage and other 
circumstances,  such  as  the  difficulty  in  obtaining  the  information  (missing  taxable 
person,  criminal  investigation)  or  the  need  of  an  in-depth  analysis  of  the  case. 
Nevertheless,  many  Member  States  do  not  experience  problems  as  concerns  these 
inquiries.  Only  very  few  requests  are  refused  and  such  refusals  should  usually  be 
explained in necessary detail. 

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Most Member States agree that the use of standard forms contributes to an efficient 
exchange  of  information  and  avoids  translation  problems.  Uniform  language  used, 
clear layout, standardised questions, easier and faster exchange of information are the 
advantages, while frequent use of the free text box could be a disadvantage (as it isn't 
possible to cover all possible issues) of using standard forms. 

There is no unanimous position whether the use of the forms should be obligatory or 
not.  There  is  a  concern  that  the  mandatory  use  of  the  standard  form  would  be  less 
efficient  in  certain  circumstances  (e.g.  cross  border  actions  without  linguistic 
problems),  because  information  can  be  gathered  by  more  flexible  and  efficient 
means. 

The  migration  towards  a  new  XML  format  is  not  entirely  a  success.  Although 
Member  States  agreed  unanimously  on  the  improvements  which  contribute  to  the 
smooth functioning of mutual assistance and exchange of information, some Member 
States  also  expressed  their  dissatisfaction  and  concerns  which  are  due  to  technical 
reasons (e.g. the heavy system requirements on end-users computers, incompatibility 
with version Adobe). Furthermore, the fact that the XML format is not implemented 
yet by all Member States during 2008 led to a parallel use of Word and XML files in 
data exchange.  

Conclusion 

Required administrative enquiries following a request for information increase the workload 
of (local) auditors, which causes delays in the exchange of information. The standard forms 
contribute  to  more  structure  and  clarity  and  to  a  more  harmonised  and  coherent 
approach  in  the  administrative  cooperation  In  general,  it  seems  that  although  most 
Member  States  would  advocate  mandatory  use  of  the  standard  forms,  there  are 
concerns  that  this  would  reduce  the  efficiency  of  cooperation  in  certain  cases. 
Member  States  complain  that  the  XML-format  is  not  applied  by  everybody. 
Nevertheless,  once  the  "teething  problems"  of  the  installation  of  the  new  XML-
format are dealt with and all the Member States will start to use it, it will be a better 
tool for exchanging information.  

2.3.1.  Time limit for providing information (article 8 and 9) 

The  requested  information  must  be  provided  as  soon  as  possible  and  no  later  than 
three months after receipt of the request for information. All Member States declare 
to have a monitoring system using their intranet or other specific software in order to 
follow up the treatment of the request and it is usually the CLO that keeps an eye on 
the  process.  Internal  deadlines  are  usually  set  at  2  months,  which  leaves  the  CLO 
enough time to send the requested information to the requesting Member States. The 
bottlenecks are encountered at the lower tax levels (local offices). 

The reasons for not being able to meet the deadlines are mainly of an internal nature: 
the lack of (human) resources, the workload of field teams, translation problems, the 
exchange of information not being considered as a priority, especially in cases where 
there  is  no  fiscal  interest  in  the  requested  Member  State.  The  complexity  and 
cumbersome  use  of  SCAC  383  forms,  especially  in  complex  carrousel  fraud 
investigations, further add to this problem.  

The  Regulation  leaves  the  possibility  to  the  Member  States  to  agree  different  time 
limits  on  a  bilateral  basis  in  certain  special  categories  of  cases  (article  9).  The 
majority  of  Member  States  have  no  or  little  experience  with  the  application  of  this 
provision. Anyway, the Member States who make limited use of this provision on a 

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bi-  or  trilateral  basis,  have  agreed  on  stricter deadlines  (even limited to  5  days) for 
fraud related cases and generally consider it useful. Some Member States prefer rapid 
exchange even if the information is inaccurate while others prefer quality over speed.  

When Member States are unable to respond within the deadline, then the requesting 
Member States are rarely informed on the reasons for the failure to do so. Again the 
problem is internal for the same reasons as mentioned above. Furthermore, there are 
no means for a CLO to urge the responsible field office to explain the reasons for not 
responding. However, delayed answers can cause problems in Member States if there 
is  a  legal  time  limit  for  audits,  if  the  information  requested  is  required  as  soon  as 
possible in e.g. fraud cases or when there is a time limit for taxation. Additionally, if 
there are systematic delays in replying, staff could be less motivated to make future 
requests and use of other tools of the Regulation in future. Sending reminders to the 
requested  Member  State  without  real  consequences  is  considered  an  additional 
burden for the requesting administration. 

Analysis  of  the  statistics  sent  by  the  Member  States  gave  the  following  indications 
for 2006: 

–  Late replies: 49.6% of the requests 

–  Notifications  of  reasons  of  non  compliance  (article  10):  in  5,  06%  of  the  late 

replies. 

However the situation for 2007 appears to be improved: 

–  Late replies: 36.2% of the requests 

–  Notifications  of  reasons  of  non  compliance  (article  10):  in  5,  9%  of  the  late 

replies. 

Conclusion 

It  is  obvious  that  the  delays  in  responding  to  requests  for  information  and  for 
informing  the  requesting  Member  States  about  the  failure  to  meet  the  deadlines,  is 
due to internal factors. The problems must be addressed at management level in the 
Member  States.  Suggestions  to  address  these  deficiencies  are  for  example,  giving 
direct access to certain data contained in national databases, raising the awareness of 
local officials to prioritise the requests in their planning, taking direct contacts with 
the contact points in other Member States to solve problems, making it mandatory to 
inform the requesting Member State in case it is not possible to respond within the 
deadline and to give a new deadline to the request.  

2.3.2.  Presence  in  administrative  offices  and  participation  to  administrative  enquiries 

(article 11) 

Member States that use this instrument deem that the presence of officials in foreign 
tax offices and their participation in administrative enquiries is a useful tool because 
it  allows  a  quicker  conclusion  of  the  audits  and  a  better  exchange  of  information. 
Speaking  directly  with  foreign  colleagues  allows  a  more  practical  approach  to  the 
case and facilitates a closer relation with other tax administrations.  

However,  the  statistics  that  Member  States  need  to  submit  annually  show  that  the 
tool  mentioned  in  article  11  is  used  very  rarely  (some  Member  States  even  never 
used it). The most important and recurrent reasons for this are: language knowledge, 
budgetary  reasons,  lack  of  a  national  legal  basis  to  allow  participation  in  national 
enquiries,  interpretation  of  the  article  11  that  generates  doubts  regarding  the 

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difference between this instrument and the multilateral control instrument mentioned 
in  articles  12  and  13  (Use  of  article  11  as  the  legal  base  for  the  start  of  an  MLC), 
practical problems linked to the identification of the competent official, and the fact 
that  questions  can  be  discussed  and  clarified  during  intermediate  discussions.  One 
Member State considers that the benefit of this tool is unclear, when the information 
is already provided on the basis of an article 5-request.  

Some Member States require information to be exchanged on the basis of article 5, as 
a condition for other Member States officials to be present in their offices. This slows 
down the article 11 procedures.  

Other  Member  States  have  specific  national  provisions/requirements  to  start  an 
article 11 procedure, for example: 

–  evidence (suspicion) of a significant evasion; 

–  the effectiveness of the reply is linked to a deadline; 

–  the complexity of the case requires the presence of the foreign official to speed up 

the fiscal audit (the administrative enquiry); 

It  was  pointed  out  that  an  interpretation  at  European  level  about  the  application  of 
article 11 would be useful and that no further international agreements or domestic 
legislation would be required (which limit the use of the instrument). 

Conclusion 

Raising the awareness of the officials to use this instrument is needed. Developping 
the  language  skills  could  be  solved  at  national  level.  Furthermore  specific  national 
conditions should not hamper the use of this instrument. The application of article 11 
appears  to  be  a  good  instrument  for  cooperation  between  auditors,  especially  in 
border regions.  

2.3.3. 

Simultaneous controls (article 12 and 13) 

The  creation  of  the  multilateral  control  (MLC)  platform  under  the  subsequent 
Fiscalis  2003-2007  and  Fiscalis  2013  programmes  is  overall  considered  as  a  very 
good  initiative  that  increased  the  use  of  the  MLC  tool.  The  number  of  MLC's 
initiated in 2005 was 12, in 2006 16 and in 2007 33 (more than the double of the year 
before!).  Although  the  Fiscalis  programmes  already  lead  to  an  increase  of  the 
exchange of information resulting from MLC's, many Member States believe that the 
use of this instrument can still be further encouraged, for example by dissemination 
of  good  practices  in  a  methodological  guide,  by  organising  small  border  projects 
between  neighbouring  countries,  by  training  local  officials,  creating  a  national  and 
international  network  of  auditors  and  reducing  bureaucracy  (shorter  reports). 
Furthermore, a cultural change may need to happen for Member States to take part in 
MLC's where the tax benefit lies in other Member States. 

In the majority of the Member States, the CLO designates as competent authority one 
or  more  tax  auditors  responsible  for  the  direct  exchange  of  information  within  a 
specific MLC. The MLC coordinator participates only for organisational issues and 
not in all meetings of the MLC.  

Certain Member States do not delegate the competent authority to the responsible tax 
auditor. All exchange of information must pass via the MLC coordinator, who is in 
principle  also  member  of  the  CLO.  Furthermore,  the  designated  local  tax  officials 
have  no  possibility  to  send  information  via  a  secured  mail  (CCN  mail  is  managed 

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within the CLO). In fact a number of Member States deem that the step through the 
CLO  (that  is  the  only  one  at  national  level  to  have  the  access  to  CCN  mail)  slows 
down the exchange and makes void the tool of MLC. 

In practice, local tax auditors seek solutions to overcome the problem, for example 
they  agree  a  code  to  exchange  information  via  ordinary  mail  without  mentioning 
confidential data. 

Besides the lack of access to CCNmail for the auditors involved in the MLC, other 
bottlenecks that have been pinpointed were: lack of motivation, time and resources, 
language  knowledge,  lack  of  experience,  and  proposed  cases  that  appear  to  be  too 
vaguely described. Different administrative organisation and different interpretation 
of certain legal provisions make it difficult to organise combined MLC's (VAT and 
Direct Taxes).  

As  concerns  fraud  cases,  there  is  still  room  for  improving  the  cooperation  and  the 
communication  between  the  MLC  coordination  and  the  Anti  Fraud  units'  platform. 
The nature of Carousel fraud is such, that a quick and flexible cooperation between 
experts in this field is essential.  

Conclusion 

The Member States recognize the added value of the instrument. They are satisfied 
with  the  set  up  of  the  MLC  platform  and  the  MLC  guide.  They  consider  that  their 
internal  procedures  are  flexible  enough  to  react  swiftly  in  cases  of  fraud. 
Nevertheless, at EU level it appears that the communication between the Anti Fraud 
Unit and the MLC coordination could still be improved, eventually by adapting the 
existing  MLC  procedures  in  order  to  allow  for  a  quicker  and  less  bureaucratic 
reaction in specific fraud related cases. 

The exchange of information should always be direct between tax auditors. The step 
through the CLO seems to slow down the procedure. The MLC coordinators should 
have the possibility to communicate more quickly through a system similar to CCN 
mail.  However,  the  functionality  of  communication  between  local  tax  authorities 
already exists within CCN mail phase IIbis. 

2.4. 

Request for administrative notification 

Statistics show that this instrument is only used by a very limited number of Member 
States.  The  Member  States  confirm  that  this  tool  is  very  rarely  used  or,  in  some 
cases,  it  is  not  used  at  all,  because  the  local  officials  rarely  need  it.  Another 
explanation given was the existing national legal system (procedural law).  

Conclusion: 

It  appears  that  the  request  for  administrative  notification  is  seldom  used  because 
other national procedures are used instead. 

2.5. 

Exchange of information without prior request 

2.5.1.  Automatic or structured automatic exchange of information (article 17 and 18) 

Article  17  of  the  Regulation  provides  for  Member  States  to  exchange  information 
without  prior  request.  It  specifies  that  each  Member  State  should  forward 
information to any other Member State concerned in three situations, which represent 
a very broad obligation. 

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Article 18, however, limits the obligation provided for in Article 17, stating that the 
Member  States  may  determine  by  choice  whether  they  will  exchange  certain 
categories  of  information  without  prior  request.  Articles  3  and  4  of  Commission 
Regulation  1925/04  define  the  (sub)  categories  for  which  the  Member  States  will 
exchange information in an automatic or structured automatic way.  

The  replies  to  the  questionnaire  made  clear  that  the  Member  States  apply  and 
understand  the  interaction  between  articles  17  and  18  in  different  ways.  A  small 
minority  of  the  Member  States  participate  in  all  categories.  This  leads  to 
inconsistency  in  the  exchange  of  information  between  the  Member  States.  Some 
Member  States  also  fear  problems  when  the  new  legal  text  introducing  new 
mandatory  information  exchange  categories  will  come  into  force  (1  January  2015). 
The definition of "automatic" and "structured automatic" exchange causes confusion 
also.  

Between Member States there are differences in the internal procedures to collect the 
information: depending on the category, it could be electronically or manually. Also 
the internal sources to obtain the data can differ from one Member State to another 
(car dealers, databases, invoices, other competent authorities).  

For the majority of Member States the received information is useful and of benefit 
in  practice,  but  remarks  were  made  that  the  quality  of  information  could  be  better 
(forms  should  be  filled  in  properly).  Although  the  defined  categories  are  still 
considered  to  be  appropriate,  it  appears that  only  few  Member  States  participate  in 
the  exchange  of  information  on  all  categories  listed.  Member  States  do  not 
participate, when they have no proper interest in the category or when they have no 
data  available  .  The  reason  for  not  participating  in  a  certain  category  is  mainly  the 
lack in those Member States of systematic collection of data and a centralized storage 
this: 
the  data.  Several  arguments  are  brought  forward  for  not  doing 
of 
disproportionate effort for businesses and tax administrations, the categories do not 
exist  (a  Member  State  without  distance  sales),  difficulty  to  obtain  the  information, 
difficulty  to  transfer  data  or  integrate  files  (wrong  format)  in  a  database,  the 
information  is  not  centralized  by  a  single  service  or  other  ministries  are  competent 
(e.g. car registration), lack of human resources.  

In  particular  regarding  the  information  exchange  for  distance  selling,  it  is  striking 
that there is hardly any exchange of information. According to the statistical data for 
2007, there were only 5 (structured) automatic exchanges of information carried out 
by 2 Member States for distance sales. 

The Member States forward the received information to the competent authorities or 
store  the  received  information  in  databases  for  the  risk  analysis  purposes  or  for 
consultation by the auditors.  

However,  feedback  on  how  the  information  was  used  (results)  and  if  it  was  really 
useful is in the majority of the Member States not compulsory. 

Conclusion:  

The  automatic  and  structured  automatic  exchange  of  information,  which  were  new 
concepts  introduced  in  Regulation  1798/2003,  does  seem  to  cause  a  number  of 
problems. The Commission has already found out by analysing the statistics that the 
exchange of information for some categories listed in articles 3 and 4 of Regulation 
1925/2004 is seldom applied. Member States consider some categories more relevant 
than  others,  but  not  all  reasons  given  justify  the  non-participation  in  a  certain  sub 

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category1. Member States should implement efficient procedures to collect the data 
in the different categories to be exchanged. 

Most Member States have no feedback system and therefore cannot say whether the 
received information is used effectively. They indicated this as a weakness. It should 
be pointed out that a Fiscalis 2013 Project Group reflected on a feedback system that 
provides information on the usefulness and use made of the information exchanged. 
Another  Fiscalis  2013  Project  Group  worked  on  the  improvement  of  the  quality  of 
the information exchanged. 

2.5.2. 

Spontaneous exchange of information (article 19) 

The  national  tax  officials  are  made  aware  of  the  possibility  to  send  spontaneously 
information  they  find  useful  for  their  colleagues  in  other  Member  States  through 
training, internal publications and instructions.  

In  view  of  half  of  the  Member  States  this  instrument  is  not  sufficiently  used. 
Suggestions for improvement are: 

–  Member  States  make  it  obligatory  for  their  local  offices  to  send  spontaneous 
information to other Member States whenever it becomes available and it could be 
of significant importance for their counterparts. 

–  Work  in  an  established  structure  and  on  a  well-defined  topic  (e.g.  Eurocanet-

project)  

–  The implementation of a harmonized feedback system (to motivate management 

and tax auditors).  

Auditors  who  collect  the  information  for  spontaneous  exchange  should  have  more 
awareness  of  the  importance  of  this  information  for  other  Member  States  and  be 
more motivated. 

Conclusion: 

Greater  awareness  of  the  auditors  of  the  importance  that  spontaneously  exchanged 
information has for other Member States is an essential element for the development 
of  this  instrument.  A  feedback  mechanism  and  the  improvement  of  the  quality  of 
information exchanged would be helpful to motivate tax auditors to increase the use 
of  this  instrument.  Eurocanet2  is  considered  to  be  a  good  approach  for  the 
spontaneous  exchange  of  information,  because  it  creates  direct  contacts  between 
officials  specialized  on  a  certain  topic  and  it  exchanges  rapidly  well  targeted 
information  on  fraudulent  traders.  In  this way  local  staff  could  be  motivated  to  put 
more attention to information that spontaneously can be exchanged.  

2.6. 

Storage and exchange of information specific to IC transactions (article 22-27) 

The invalidity of VAT-numbers and delays in corrections of the data are often quoted 
as  problems  identified  in  relation  to  the  quality  of  the  information  contained  in  the 
database.  It  was  noted  that  Member  States'  different  registration  and  deregistration 
rules (for example relating dormant traders) causes for different quality of data. 

Member  States  have  different  views  on  how  detailed  the  information  available 
through  VIES  should  be.  In  general,  it  is  considered  that  the  information  available 

1 
2  

See the Commission's reply to chapter 51, ECA's Special Report 08/2007, OJ C20, 25.1.2008, 
Eurocanet  is  an  informal  network  for  rapid  exchange  of  information  relating  potential  missing  trader 
fraud 

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through  VIES  is  sufficiently  detailed,  but  there  is  still  room  for  improvement, 
especially  to  avoid  mismatching  in  the  confirmation  of  the  validity  of  the  VAT 
identification number. Some Member States say that the reliability and the speed of 
availability should have priority to more details. Other Member States suggest more 
detailed information in the recapitulative statements (e.g. transaction per transaction 
level)  or  details  relating  the  taxpayer  (e.g.  insolvency,  reasons  for  deregistration, 
dormant trader, number of VAT group next to number of individual members of the 
group) but at the same time they emphasise that the burden to obtain this information 
should not be too big for businesses. The extension of VIES to cover services as well 
is considered as positive, however, for some Member States it will take some time to 
implement the corresponding changes to the IT system. 

Conclusion: 

The invalidity of VAT-numbers and delays in corrections of the data are often quoted 
as  problems  identified  in  relation  to  the  quality  of  the  information  contained  in  the 
database.  

Frequent updating, which should be done on a daily basis, enhances the quality of the 
information contained in the database. The implementation of logical and conclusive 
IT checks before storing data ensures their quality. Furthermore data quality should 
in first instance be covering reliability and speediness of availability (VIES appears 
not the cover the most recent transactions)  

2.7. 

Provisions concerning the special scheme for e-commerce (articles 28-34) 

Overall, the Member States' experience with the special scheme for non-established 
taxable  persons  (NETP)  supplying  electronic  services  to  non-taxable  persons  is 
positive. The number of NETP and the amount of payments is not significantly high. 
Only two Member States have a significant higher number of NETP's.  

However, Member States would prefer that the application allows for an automated 
(retroactive) correction of previous declarations, in particular now that the number of 
traders  using  the  application  will  increase  from  2015  onwards  (cfr  mini  one  stop 
shop). In the current system, adjustments can only be introduced manually.  

Furthermore,  the  messaging  (which  is  currently  done  via  CCN-mail2)  from  one 
Member State to another could be done automatically between national applications, 
although some Member States mentioned that the development of such a programme 
will require a lot of resources. This would avoid manual feeding of the data into the 
application. 

The most recurrent problems, causing mismatching between de declared amount of 
VAT and the payment, are the bank transfer charges and exchange rate differences. 
Member  States  had  to  communicate  additional  information  to  succeed  with  the 
matching. It was suggested to link an origin country code to the payment so that the 
recipient Member State- could easily identify the payments. Another suggestion was 
to  think  about  alternative  options  for  publishing  the  correct  exchange  rate  and 
conversion  procedures  for  businesses,  e.g.  pop  up  messages,  automated  emails,  to 
encourage compliance.  

Only  a  few  Member  States  conducted  audits  in  the  field  of  NETP's.  Generally, 
Member States consider it quite difficult to carry out audits of NETP's. It might be a 
good  idea  that  Member  States  that  carried  out  successful  audits  share  there 
experience  and  practices  (for  example,  addressing  perceived  risks,  identifying 

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compliance  and  revenue  errors,  providing  confidence  that  remote  and  outside  EU 
base businesses can be audited).  

Conclusion: 

There  are  no  major  problems  in  managing  the  special  scheme.  The  current 
application  needs  to  be  updated  to  make  automated  corrections  in  the  declarations 
possible. Difficulties concerning matching of payments should be solved. Alternative 
options  for  publishing  the  correct  exchange  rate  and  conversion  procedures  for 
businesses, e.g. pop up messages, automated emails, to encourage compliance could 
be envisaged. 

As concerns audits in the field of e-commerce, the necessary attention should be paid 
to  the  realisation  of  audits,  because  only  by  controls  can  it  be  identified  that 
businesses apply the provisions of the special scheme correctly. Member States could 
share their audit experience and audit practices in the framework of NETP's.  

2.8. 

Relations with the commission (article 35) 

Most  of  the  Member  States  have  never  systematically  evaluated  the  functioning  of 
the administrative cooperation procedures internally.  

Where  an  independent  body  (National  Audit  Office  or  other  body)  audited  the 
administrative  cooperation  procedures  and  issued  a  report,  the  Member  States  took 
the recommendations made into account for improving the mutual assistance and the 
exchange of information.  

As  concerns  the  statistics,  the  majority  of  the  Member  States  considered  that  the 
statistical  data  as  required  are  sufficient,  although  some  mentioned  that  the  figures 
relating  to  sent  and  received  requests  differ  considerably  between  Member  States. 
Member  States  are  more  interested  in  the  tendencies  revealed  than  in  a  simple 
arithmetical collation of statistics or the mismatching between the figures relating to 
sent and received requests. Furthermore they had no difficulties to retrieve the data. 

Some  Member  States  expressed  the  need  to  improve  the  quality  of  the  data  or  the 
detail  of  the  statistics,  for  example  setting  ranges  of  delay,  giving  feedback  on 
results, distinction between requests made with form SCAC2004 and made by form 
SCAC383  or  a  continuous  cross  check  mechanism  among  Member  States  before 
disclosure of data to the Commission.  

Conclusion: 

The  statistics  are  mainly  considered  to  be  a  good  tool  to  indicate  and  reveal 
tendencies. The majority of the Member States considered that the statistical data as 
required  are  sufficient.  Furthermore  they  had  no  difficulties  to  retrieve  the  data. 
Some Member States proposed to improve the quality of the data or the detail of the 
statistics. 

2.9. 

Relations with third countries (article 36) 

The majority of the Member States had no or little experience with the exchange of 
information  from  third  countries.  Nevertheless,  the  Member  States  considered  that 
information  coming  from  third  countries  could  be  very  useful  to  facilitate  tax 
assessment or fraud detection, but strict rules need to be applied (secrecy).  

As already foreseen in the provisions of the article, exchange of information should 
be  arranged  through  a  bilateral  agreement,  which  permits  the  passing  on  of  the 

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information.  Not  all  Member  States  have  concluded  tax  treaties  including  VAT 
matters and thus it is not possible to pass on the information from third countries. 

Conclusion 

The provision of article 36 appears not to be applied frequently. The majority of the 
Member States are not opposed to make the passing of information coming of third 
countries to other interested Member States obligatory. 

2.10.  General conditions governing the exchange of information 

The  language  is  to  some  extent  still  a  problem  in  the  process  of  administrative 
cooperation.  

Generally, the Member States have no problems with the exchange of information if 
it is sent in their own national language or in one of the working languages, but there 
is  a  preference  for  English.  Nevertheless,  even  English  could  be  a  problem  for  the 
officials working at a local level of the administration, because these people do not 
always have the appropriate language skills (e.g. during multilateral controls).  

Translation  is  mentioned  as  one  of  the  reasons  for  not  meeting  the  deadlines  for 
replying and inadeqaute translation has led to losing cases in fiscal procedures. The 
language  knowledge  could  be  an  obstacle  for  decentralisation  or  for  local  officials 
not to participate in a MLC. 

The use of standard forms already reduced the translation work, but the free text in 
box E of the SCAC-form remains a source of burdensome translation (unnecessary if 
the box only contains information already found in another box).  

Only  a  few  Member  States  had  experienced  refusals  for  outgoing  requests  for 
assistance on the basis of the article 40 and mainly the reason was that the amount 
was  not  compliant  with  the  threshold  or  due  to  an  alleged  lack  of  a  solid 
basis/justification of the fraud.  

In  order  to  limit  administrative  costs,  minimum  thresholds  were  laid  down  for 
triggering requests for assistance. The vast majority of the Member States agree that 
the thresholds are set at an appropriate level, although some Member States want to 
reduce  the  threshold  in  certain  sectors  (second  hand  trade).  It  was  also  mentioned 
that sometimes bilateral agreements with neighbouring countries exist, which do not 
include thresholds.  

Conclusion: 

It could be best practice if all Member States agree the working language in which 
they  want  to  communicate  for  CLO-purposes.  Most  of  the  Member  States  have  a 
preference  for  English.  The  language  problem  occurs  at  the  local  level  of  the 
administration.  Direct  contacts  (telephone  or  CCN-mial)  asking  for  clarification 
could avoid burdensome translation. For the MLC's, Member  States could  consider 
the  use  of  the  linguistic  support  tool  set  up  under  the  Fiscalis  programmes,  as  the 
support of interpreters could be helpful.  

3. 

GENERAL  APPRECIATION  OF  THE 
COOPERATION 

FUNCTIONING  OF  ADMINISTRATIVE 

In  their  replies  Member  States  made  a  number  of  suggestions  for  improving  the 
functioning of administrative cooperation. Moreover, at the end of the questionnaire 

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Member  States  were  specifically  asked  whether  they  had  any  suggestions  for 
improvements to make. 

The main suggestions are the following: 

•  Direct access to data would lead to quicker exchange of information, 

•  On-line  conversation  through  CCN-network  would  be  useful  for  simultaneous 

control purposes (conference calls, chat), 

•  Closer  cooperation  with  Customs  authorities  in  particular  for  the  goods  moving 

through the 4200-procedure (exempted from taxation at import), 

•  organising  annual  CLO  meetings  for  the  heads  of  CLO,  to  make  contacts  and 

cooperation easier and more efficient (due to personal contact),  

•  amend  the  Regulation  in  order  to  provide  for  a  legal  framework  for  the  project 

Eurocanet, 

•  The set up of a structure at community level to coordinate and facilitate the use of 

the existing cooperation instruments.  

•  better  relations  between  the  existing  discussion  groups  (ATFS,  SCAC,  SCIT): 
more  coherence  of  the  mission  attributed  to  the  discussion  groups  and  more 
regular and formal contacts between them , 

•  the mandatory use of XML as unique standard, 

•  Review of the SCAC 2004 form,  

•  a  computer  system  to  ensure  that  requests  are  logged  to  a  central  record  and 

statistical data could be extracted electronically from the system, 

•  harmonisation of legal terms/expressions 

•  Sanctions on Member States that do not comply with the time limits to send the 

reply to a request. 

Most of these suggestions (direct access to data, amendment of the Regulation) have 
already been discussed in the context of the Anti Tax Fraud Strategy (ATFS) expert 
group  and  are  taken  forward  within  the  short  term  action  plan  set  out  in  the 
Commission's Communication on a coordinated strategy to improve the fight against 
VAT  fraud  in  the  EU3.  Others  (e.g.  the  mandatory  use  of  XML)  are  already  dealt 
with in the Standing Committee on Administrative Cooperation (SCAC). 

As  regards  the  remaining  suggestions,  the  Commision  has  the  intention  to  provide 
Member States the opportunity to comment upon them within the appropriate fora in 
the context of the follow up to the Commission's report on the application of Council 
Regulation 1798/2003 on administrative cooperation in the field of VAT. 

3 

COM(2008)807final, 1.12.2008 

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