Special Report No 24 // 2015#Tackling intra-Community VAT fraud: More action needed #(pursuant to Article 287(4), second subparagraph, TFEU)
Date: 2015-12-15
Institutions: European Court of Auditors
Subjects: European tax cooperation, VAT, administrative cooperation, audit, border control, fight against crime, fraud, fraud against the EU, organised crime, tax offence

EN 

2015 

NO 24

Special Report  Tackling intra-Community 

VAT fraud: More action 
needed

EUROPEAN
COURT
OF AUDITORS

 
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Luxembourg: Publications Office of the European Union, 2016

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EN 

2015 

NO 24

Special Report

Tackling intra-Community 
VAT fraud: More action 
needed

(pursuant to Article 287(4), second subparagraph, TFEU)

Audit team

02

The ECA’s special reports set out the results of its performance and compliance audits of specific budgetary areas or 
management topics. The ECA selects and designs these audit tasks to be of maximum impact by considering the risks 
to performance or compliance, the level of income or spending involved, forthcoming developments and political and 
public interest.

This performance audit was produced by Audit Chamber IV — headed by ECA Member Milan Martin Cvikl — which spe-
cialises in auditing revenue, research and internal policies, financial and economic governance and the European Union’s 
institutions and bodies. The audit was led by ECA Member Neven Mates, supported by the head of his private office, 
Georgios Karakatsanis; Angela McCann, Head of Unit; Carlos Soler Ruiz, Team Leader; Dan Danielescu, Josef Edelmann, 
Maria Echanove, Maria Isabel Quintela, Timothy Upton, Wolfgang Hinnenkamp and Marko Mrkalj, auditors.

From left to right: D. Danielescu, A. McCann, J. Edelmann, N. Mates, G. Karakatsanis, 
M. I. Quintela, W. Hinnenkamp, C. Soler Ruiz.

Contents

03

Paragraph

Abbreviations

Glossary

I–VII 

Executive summary

V–VII 

Our main recommendations

1–13 

Introduction

1–4 

How intra-Community transactions are taxed

5–10 

How payment of VAT on intra-Community transactions is evaded

11–13 

How administrative cooperation to fight against intra-Community VAT fraud works

14–18  Audit scope and approach

19–111  Observations

19–25 

Lack of comparable data and indicators on intra-Community VAT fraud

20–22 

Lack of estimates of intra-Community VAT fraud at EU level

23 – 25 

Lack of performance indicators on intra-Community VAT fraud

26–70 

The administrative cooperation framework in place allows Member States’ tax authorities to share 
VAT information

27–36  Member States considered information exchanges using electronic standard forms to be the most effective 

tool but the timeliness of replies is poor

37–44 

VIES provides information on intra-Community transactions with occasional reliability problems

45–47  Multilateral controls are an effective tool but are being carried out less frequently

48–55 

Eurofisc: a promising tool that needs improvement

 
 
Contents

04

56–59 

The Commission provides valuable assistance to the Member States but does not carry out visits to 
Member States

60–62 

Information received from non-EU countries is not being exchanged between Member States

63–70 

Fiscalis is an important EU instrument for strengthening administrative cooperation

71–92 

VAT legislation has been adapted to tackle VAT fraud

73–75 

The reporting period of VAT recapitulative statements and their transmission times have been reduced

76–85 

Customs procedure 42: Most of the ECA recommendations have been accepted by the Commission but they 
have not been implemented by Member States

86–89 

Reverse charge: a useful tool to fight against MTIC fraud that is not consistently applied

90–92 

Legislation on e-commerce follows international best practice but it is difficult to enforce

93–111 

Lack of cooperation and overlapping competences of administrative, judicial and law enforcement 
authorities to fight against VAT fraud

95–100 

Lack of exchange of data between customs and tax, police and prosecuting authorities

101–103  Europol and OLAF have no access to VIES and Eurofisc data

104–109  Empact: a good initiative but its sustainability is at risk

110–111  Member States are against the proposals to include VAT within the scope of the protection of financial 

interests directive and European Public Prosecutor’s Office regulation

112–122  Conclusions and recommendations

113 

114 

115 

Measuring the effectiveness of the system

Cross-checking customs with VAT data is crucial

Improving the Eurofisc early-warning system to better target high-risk traders

116–117 

Improving the existing legal framework

118–119 

Improving the administrative cooperation arrangements

120–122 

Improving cooperation between administrative, judicial and law enforcement authorities

Contents

05

Annex I  —  Audit approach at the level of the Commission

Annex II  —  Audit approach at the level of customs and tax authorities in Member States

Annex III  —  ECA control model on customs procedure 42

Reply of the Commission

 
 
 
 
Abbreviations

06

B2C: Business to consumer

CCIP: Customs Code Implementing Provisions

CCWP: Customs Cooperation Working Party

CP 42: Customs procedure 42

DG Taxation and Customs Union: Directorate-General for Taxation and Customs Union

EU: European Union

Empact: European Multidisciplinary Platform Against Crime Threats

EPPO: European Public Prosecutor’s Office

FATF: Financial Action Task Force

IC: Intra-Community

JCO: Joint customs operation

MLCs: Multilateral controls

MTIC: Missing trader intra-community fraud

OAPs: Operational action plans

OECD: The Organisation for Economic Cooperation and Development

OCG: Organised crime groups

OLAF: European Commission European Anti-Fraud Office

PIF: Protection of the financial interests of the Union

SAD: Single administrative document

SCAC: The Standing Committee on Administrative Cooperation

VAT: Value added tax

VIES: VAT Information Exchange System

WF: Eurofisc Working Field

Glossary

07

Administrative cooperation: Exchange of information between Member States whereby tax authorities assist each 
other and cooperate with the Commission pursuant to Council Regulation (EU) No 904/2010 of 7 October 2010 to 
ensure the proper application of VAT on supplies of goods and services, intra-Community acquisition of goods and 
importation of goods. Exchanges of information between Member States cover all information that may lead to 
a correct assessment of VAT, including on specific cases.

Conduit company: A company which makes real or fictitious intra-Community supplies to missing or defaulting 
traders. It voluntarily takes part in the fraudulent scheme.

Customs declaration: The act whereby a person indicates a wish to place goods under a given customs procedure.

Customs procedure 42: The regime an importer uses in order to obtain a VAT exemption when the imported goods 
will be transported to another Member State. The VAT is due in the Member State of destination.

Eurofisc: A decentralised network of officials from the Member States’ tax and customs administrations, who swiftly 
exchange targeted information about possible fraudulent companies and transactions.

Eurojust: The European Union’s judicial cooperation agency, set up to strengthen the fight against serious 
organised crime. It is composed of national prosecutors, magistrates, or police officers of equivalent competence, 
detached from Member States according to their own legal systems.

Europol: The European Union’s law enforcement agency which assists law enforcement bodies in Member States in 
the fight against serious organised crime.

Fiscalis: An EU action programme to finance initiatives from tax administrations to improve the operation of the 
taxation systems in the internal market through communication and information-exchange systems, multilateral 
controls, seminars and project groups, working visits, training activities and other similar activities required to 
achieve the objectives of the programme.

Free circulation: The status of goods imported from third countries which have undergone all import formalities in 
order to be able to be sold or consumed on the EU market.

Intra-Community supply of goods: Supply of goods dispatched or transported to a destination outside their 
territory of origin but within the EU, by or on behalf of a vendor or a person acquiring the goods, for another 
taxable person, or for a non-taxable legal person acting as such in a Member State other than that in which dispatch 
or transport of the goods has begun.

Intra-Community acquisition of goods: The acquisition of right to dispose as owner of movable tangible property 
dispatched or transported to the person acquiring the goods, by or on behalf of the vendor or the person acquiring 
the goods, in a Member State other than that in which dispatch or transport of the goods began.

O_MCTL: A VIES control message generated upon reception of a VIES message and listing all inactive VAT numbers 
it contains.

Glossary

08

Member State of acquisition: Member State where the intra-Community acquisition takes place.

Member State of importation: Member State where the goods are physically imported into the EU and released 
for free circulation.

Member State of supply: Member State from which intra-Community supply takes place.

Member State of destination: The Member State to which the goods are dispatched or transported other than 
that in which the supply takes place.

Missing trader: A trader registered for VAT purposes who, potentially with a fraudulent intent, acquires or purports 
to acquire goods or services without paying VAT and supplies these goods or services with VAT, but does not remit 
the VAT collected to the national tax authority.

Recapitulative statement: A statement to be submitted by every taxable person identified for VAT purposes 
providing intra-Community supplies. The recapitulative statement shall be submitted, as a general rule, each 
month, recording the total value of goods or services supplied to each acquirer in other Member States, listed by its 
VAT identification number.

Release of goods: The act whereby the customs authorities make goods available for the purposes stipulated in the 
customs procedure.

SCAC: The Standing Committee on Administrative Cooperation is a regulatory committee pursuant to Article 58 
of Council Regulation (EU) No 904/2010 assisting the Commission in matters as laid down in that regulation. It is 
composed of the representatives of Member States and chaired by a representative of the Commission.

Transfer: The dispatch or transport of goods by or on behalf of the supplier for the purposes of his business to 
a destination outside the territory of the Member State in which the supply takes place, but within the Community.

VAT identification number (VAT ID No): An individual number given to each taxable person intending to make 
supplies of goods or services, or to make acquisitions of goods for business purposes. Each number has a prefix of 
two letters by which the Member State of issue is identified.

VIES: The VAT Information Exchange System is an electronic network for transmitting information both on valid 
VAT identification numbers of companies registered in the Member States, and on tax-exempt intra-Community 
supplies. National tax administrations are responsible for feeding both types of information into the network.

Executive  
summary

I
The single market, established on 1 January 1993, 
abolished border controls for intra-Community trade. 
As exports of goods and services to another Member 
State continued to be VAT-exempt, this has created 
a risk that these goods and services remain untaxed 
in both the supplying state and in the state of con-
sumption. In addition to the revenue loss for Member 
States, uncollected VAT has an effect on the European 
Union’s Own Resources.

II
This audit addressed the question of whether the EU 
is tackling intra-Community VAT fraud effectively. 
The Court found that the EU system is not sufficiently 
effective and that is adversely affected by the lack of 
comparable data and indicators on intra-Community 
VAT fraud at EU level.

III
VAT fraud is often linked with organised crime. Accord-
ing to Europol’s representatives, it is estimated that 
40-60 billion euro of the annual VAT revenue losses of 
Member States are caused by organised crime groups 
and that 2 % of those groups are behind 80 % of the 
missing trader intra-community (MTIC) fraud.

IV
The EU has put in place a battery of tools that Member 
States may use to fight against intra-Community VAT 
fraud but some of them need to be strengthened or 
more consistently applied. Namely:

(a)  there are no effective cross-checks between cus-
toms and tax data in most of the Member States 
visited;

09

(b)  the administrative cooperation framework allows 
sharing of VAT information between Member 
States’ tax authorities but there are problems with 
the accuracy, completeness and timeliness of data; 
and

(c)  there is a lack of cooperation and overlapping 

competences of administrative, judicial and law 
enforcement authorities.

Our main recommendations

V
While the authority to approve new legal measures 
and to implement them lies primarily with Member 
States, the Commission should:

(a)  initiate a coordinated effort by Member States to 
establish a common system of collecting statistics 
on intra-Community VAT fraud;

(b)  propose legislative amendments enabling effec-
tive cross-checks between customs and VAT data;

(c)  provide initiative and encourage Member States to 

address weaknesses in Eurofisc;

(d)  encourage Member States to better coordinate 

their policies on reverse charges;

(e)  focus, in the context of its evaluation of the 

administrative cooperation arrangements, on im-
proving the timeliness of Member States’ replies to 
information requests, the reliability of VIES and the 
follow-up of the findings of its previous reports on 
administrative cooperation; and

(f)  remove, together with Member States, legal 

obstacles preventing the exchange of information 
between administrative, judicial and law enforce-
ment authorities at national and EU level. In par-
ticular, OLAF and Europol should have access to 
VIES and Eurofisc data and Member States should 
benefit from information supplied by them.

Executive summary 

10

VI
Member States should counter illegal activities affect-
ing the financial interests of the European Union with 
effective deterrent measures, including legislative 
measures. In particular, the Council should:

(a)  approve the Commission’s proposal on joint and 

several liability;

(b)  authorise the Commission to negotiate mutual 

assistance arrangements with the countries where 
most of the digital service providers are estab-
lished and sign these arrangements; and

VII
In order to effectively protect the financial interests of 
the European Union, the European Parliament and the 
Council should:

(a)  include VAT within the scope of the directive on 
the fight against fraud (the PIF directive) and the 
European Public Prosecutor’s Office regulation;

(b)  grant OLAF clear competences and tools to inves-

tigate intra-Community VAT fraud.

Introduction

11

How intra-Community 
transactions are taxed

01 
The single market, established on  
1 January 1993, has abolished border 
controls for intra-Community trade. 
VAT-registered suppliers are entitled to 
apply a zero VAT rate on their sales to 
VAT-registered buyers in other Mem-
ber States. In principle, the VAT should 
be paid in the Member State where the 
goods are consumed.

03 
For intra-Community VAT purposes 
suppliers must be identified with 
a specific VAT identification (ID) and 
must regularly report their intra-com-
munity supplies or transfers in a reca-
pitulative statement2 submitted to the 
tax authorities of the supplying Mem-
ber State. The EU has set up an elec-
tronic system (VIES)3, through which 
Member States exchange information 
on traders registered for VAT purposes 
and on intra-Community supplies.

02 
Tax authorities in the supplying Mem-
ber State are obliged to grant the VAT 
exemption on the intra-Community 
supply of goods, under condition that 
goods are either supplied to a custom-
er or directly transferred1 to the sup-
plier in another Member State. The VAT 
exemption becomes applicable only 
when the supplier can demonstrate 
that the goods have physically left the 
supplying Member State.

04 
The tax authorities of the supplying 
Member State are obliged to enter 
the information from the recapitula-
tive statements in the VIES database, 
making this data available to the tax 
authorities in the Member State of des-
tination. The customer must declare 
an intra-Community acquisition to the 
tax authorities in the Member State 
of destination, a taxable event that 
makes the VAT chargeable in the Mem-
ber State of final destination. Chart 1 
shows how intra-Community supplies 
of goods are reported and controlled 
using VIES.

1 

Transfer in this context means 
the dispatch or transport of 
goods by or on behalf of the 
supplier for the purposes of 
his business to a destination 
outside the territory of the 
Member State in which the 
supply takes place, but within 
the EU, pursuant to Article 
17(1) of Council Directive 
2006/112/EC of 28 November 
2006 on the common system 
of value added tax (VAT 
Directive) (OJ L 347, 11.12.2006, 
p. 1).

2  A statement to be submitted 
by every taxable person 
identified for VAT purposes 
who makes intra-Community 
supplies. The recapitulative 
statement shall be drawn up 
each month and record the 
total value of goods supplied 
to each acquirer in other 
Member States, listed by VAT 
identification number. 
Member States may allow this 
statement to be submitted 
quarterly when the value of 
the goods supplied does not 
exceed 50 000 euro.

3  VAT Information Exchange 

System, pursuant to Article 17 
of Council Regulation (EU) 
No 904/2010 of 7 October 
2010 on administrative 
cooperation and combating 
fraud in the field of value 
added tax (recast) (OJ L 268, 
12.10.2010, p. 1).

Introduction

1 How VIES works

t
r
a
h
C

12

Member State 1

Member State 2

Trader’s tax obligations

Supplier lodges a VAT
 recapitulative statement for an 
Intra-Community (IC) supply

Acquirer declares an intra-Community
acquisition in its VAT return

EU administrative cooperation

Tax authorities’ controls

Tax authorities input  data in VIES

VIES

Tax authorities extract data from 
VIES and compare it with VAT return

Movement of goods

Goods are shipped to Member State 2

IC supply

IC acquisition

Goods arrive in Member State 2

Source: ECA.

How payment of VAT on 
intra-Community 
transactions is evaded

05 
The intra-Community VAT system has 
frequently been abused under the so-
called missing trader intra-community 
fraud (MTIC). Under this fraud scheme 
a supplier established in Member 
State 1, the so-called conduit com-
pany, supplies goods (VAT exempted) 
to a second company established in 
Member State 2, the so-called missing 

trader. This trader then takes advan-
tage of the VAT-exempted intra-Com-
munity supply of goods and resells the 
same goods in the domestic market of 
Member State 2, offering very com-
petitive prices. It can do this because, 
although the trader charges VAT to 
its customer, it does not remit this to 
the tax authorities, thereby increas-
ing its profit margins. Subsequently, 
the missing trader disappears without 
trace, which makes the tax collection 
impossible in the state in which goods 
or services are consumed.

 
13

4  Customs procedure 42 is the 

regime an importer uses in 
order to obtain a VAT 
exemption when the 
imported goods will be 
transported to another 
Member State. The VAT is due 
in the Member State of 
destination.

Introduction

06 
Under a variant of this scheme, a cus-
tomer of the missing trader (the bro-
ker) sells or pretends to sell the goods 
abroad, sometimes back to the conduit 
company, and claims back from its tax 
authorities the VAT that it paid to the 
missing trader. The same transaction 
can be repeated in a circular manner, 
and is thus known as ‘carousel fraud’.

07 
Sometimes goods do not even move, 
or exist only on paper. The fraud 
can be further complicated when 
the missing trader sells the goods to 
buffer traders, some of whom could 
be honest, to make it more difficult 
for tax authorities to trace the fraudu-
lent scheme. When the circular flow 
includes a third country, customs pro-
cedure 424 can also be used to hamper 
the traceability of transactions.

08 
Chart 2 shows a basic carousel fraud 
scheme assuming a VAT rate of 20 %. 
In the first step, the conduit company 
sells the goods to the missing trader 
for 1 000 000 euro without charg-
ing VAT as intra-Community supplies 
are VAT exempt. In the second step, 
the missing trader sells the goods to 
the buffer trader 1 at 1 080 000 euro 
(900 000 plus 180 000 euro of VAT). 
The missing trader does not remit this 
180 000 euro of VAT to its tax authority 
and disappears. In the third step, the 
buffer trader 1, who may not be aware 
that it is taking part in a fraudulent 
chain, sells the goods to buffer trader 
2 with a profit of 20 000 and pays to 
the tax authority 20 % of this profit as 
VAT (4 000 euro). Buffer trader 2 sells 
the goods to the broker with a profit 
of 30 000 euro and pays VAT of 20 % 
of this profit (6 000 euro). The broker, 
completes the fraudulent chain by 
selling back the goods to the conduit 
company with a profit of 20 000 euro. 
It does not charge VAT to the conduit 
company because intra-Community 
supplies are VAT exempt but it claims 
back the VAT it paid to buffer trader 2 
(190 000 euro). Thus, the tax authori-
ties of Member State 2 suffer a tax loss 
of 180 000 euro because they collect 
10 000 from buffer traders 1 and 2, but 
refund 190 000 euro to the broker. The 
total profit obtained by the carousel 
is also 180 000 euro which is shared 
between the different parties to the 
fraud.

Introduction

14

2 A carousel fraud scheme

t
r
a
h
C

Member State 1

IC supply €970 000 + 0 VAT
€20 000 proﬁt

Supplier - Conduit 
Company

IC supply €1 000 000 + 0 VAT
€30 000 proﬁt

Broker

Missing Trader

Tax loss
€180 000

€950 000 + 20 % VAT (paid)
€30 000 proﬁt

€900 000 + 20 % VAT (not paid)
€80 000 proﬁt

Buﬀer trader 2

€920 000 + 20 % VAT (paid)
€20 000 proﬁt

Buﬀer trader 1

Member State 2

Source: ECA, based on an example by the Financial Action Task Force.

 
15

5  House of Lords, European 

Union Committee’s 12th 
Report of Session 2012–13 ‘The 
Fight Against Fraud on the 
EU’s Finances’, box 4, p. 22.

6  House of Commons, 

Committee of Public Accounts 
‘Standard Report on the 
Accounts of HM Revenue and 
Customs: VAT Missing Trader 
Fraud’, Forty-fifth Report of 
Session 2006-07, Summary, 
p. 3. See also COM(2014) 
71 final of 12 February 2014 
‘Report from the Commission 
to the Council and the 
European Parliament on the 
application of Council 
Regulation (EU) No 904/2010 
concerning administrative 
cooperation and combating 
fraud in the field of value 
added tax’.

7  Council Regulation (EU) 

No 904/2010.

Introduction

09 
Missing trader and carousel fraud usu-
ally focus on high-value products such 
as mobile phones, computer chips and 
precious metals, but also include in-
tangible items such as carbon credits, 
gas and electricity and green energy 
certificates5.

10 
As a result of the above, individual 
Member States cannot tackle intra-
Community VAT fraud on their own, 
they have to work closely with the tax 
authorities of other EU Member States 
and non-EU countries6.

How administrative 
cooperation to fight 
against intra-Community 
VAT fraud works

11 
The single market abolished border 
controls on intra-Community trade. 
Since then, Member States depend 
on information received from other 
Member States concerning intra-
Community trade to be able to collect 
VAT in their territory. Member States 
exchange this information using the 
administrative cooperation arrange-
ments provided for in the EU legisla-
tion7. This legislation lays down the 
following administrative cooperation 
tools:

(a)  exchanges of information on 

request and exchanges of informa-
tion without prior request using 
the standard forms approved by 
the Standing Committee on Ad-
ministrative Cooperation (SCAC);

(b)  exchanges of information through 

the VIES electronic database (see 
paragraphs 3 and 4 above);

(c)  controls conducted simultaneously 
in two or more Member States 
(multilateral controls — MLCs) 
and the presence of tax officials 
in other Member States allowing 
them to obtain access to docu-
mentation held there or to attend 
ongoing enquiries; and

(d)  a decentralised network called Eu-
rofisc for the swift exchange of tar-
geted information between Mem-
ber States about suspicious traders 
and similar issues. Its purpose is to 
promote and facilitate multilateral 
cooperation in the fight against 
VAT fraud. The network functions 
as a cooperation framework with-
out legal personality.

12 
Fiscalis is an EU action programme 
that finances activities such as com-
munication and information-exchange 
systems, multilateral controls, seminars 
and project groups, working visits, 
training activities and other similar 
activities. Its purpose is to improve the 
proper functioning of the taxation sys-
tems in the internal market by increas-
ing cooperation between participating 
countries, their administrations and 
officials.

Introduction

16

13 
Chart 3 below shows how the differ-
ent administrative cooperation tools 
work and Chart 4 the ranking of them 
in terms of speed and level of detail of 
information provided.

3 Administrative cooperation tools

t
r
a
h
C

Input

Interrogation

VIES

Information request

Reply

Information without prior request

Member State
receiving
information

Fraud signals

Fraud signals

Centralised feedback

Euroﬁsc
 Working Field
coordinator

Centralised information

Feedback to fraud signals

Information

Multilateral
controls

Information

1)

2)

3)

4)

5)

Member State
providing
information

Source: ECA.

 
Introduction

17

4 Ranking of administrative cooperation tools in terms of speed and level of detail of 

information supplied

t
r
a
h
C

 Level of detail of information

Speed of information

-

n
o
i
t
a
m
r
o
f
n

i

f
o

l
i
a
t
e
D

--

Source: ECA based on information from Euroﬁsc.

VIES

IC trade information

Euroﬁsc

Fraud signals

SCAC

MCL

Information exchanges

Coordinated audits

--

S
p
e
e
d

-

 
 
 
18

Audit scope  
and approach

14 
The objective of the audit was to 
answer the question ‘is the EU tackling 
intra-Community VAT fraud effective-
ly?’ This was done by addressing the 
following sub-questions:

(a)  Is the Commission effectively 

using the tools at its disposal to 
tackle intra-Community VAT fraud 
and are these tools sufficient? To 
answer this question, we examined 
whether:

(i) 

the Commission had made 
a reliable estimate of the 
volume of fraud in this area, 
and whether it had set relevant 
performance indicators, so that 
the magnitude of the problem 
and the effectiveness of the 
regulatory and control meas-
ures adopted to overcome it 
can be assessed;

(ii)  the Commission had put in 
place effective administra-
tive cooperation arrange-
ments between Member 
States so that VAT information 
could be shared between tax 
authorities;

(iii)  the Commission had contrib-
uted to setting up a sound 
regulatory framework by put-
ting forward pertinent legisla-
tive proposals likely to lead 
to a reduction in VAT fraud in 
Member States.

(b)  Are Member States cooperat-
ing effectively to tackle intra-
Community VAT fraud? In order to 
answer this question, we examined 
whether there were proper mecha-
nisms in place ensuring effective 
communication of the necessary 
information and administrative 
cooperation between the authori-
ties of different Member States 
and within Member States.

15 
We carried out the audit at both the 
Commission and Member State level. 
At the Commission level we exam-
ined whether the specific regulatory 
and control framework set up by the 
Commission follows international best 
practice on cross-border taxation. 
In addition, we conducted informa-
tion visits to OECD, Europol, Eurojust, 
and to the chair of Eurofisc. See more 
details about the audit approach in the 
Commission in Annex I.

16 
We sent a survey to all Member States’ 
tax authorities on the effectiveness 
of the administrative cooperation 
arrangements in the fight against 
intra-community VAT fraud. In addi-
tion, we carried out audit visits to the 
relevant authorities in five Member 
States (Germany, Italy, Hungary, Latvia 
and the United Kingdom). These were 
selected based upon a risk analysis 
taking into account the importance of 
their VAT base and their vulnerability 
to VAT fraud.

Audit scope and approach 

19

8 

Special Report No 13/2011 
‘Does the control of customs 
procedure 42 prevent and 
detect VAT evasion?’  
(http://eca.europa.eu).

17 
In the selected Member States atten-
tion was paid to the flow of informa-
tion between the tax authorities of the 
supplying Member States and those 
of the Member State of final consump-
tion with a view to ensuring that tax 
authorities are aware of the intra-Com-
munity transactions.

18 
In each Member State we have audited 
a sample of administrative cooperation 
tools: 20 exchanges of information on 
request, 10 new VIES registrations, 20 
VIES error messages, 10 MLCs and 20 
messages about risky traders (fraud 
signals) exchanged through Eurofisc 
working field 1. In the case of cus-
toms procedure 42 transactions, we 
analysed the exchange of information 
between customs and tax authori-
ties of the supplying Member State in 
respect of a sample of 30 imports. In 
addition, we followed up the status 
of the implementation of the recom-
mendations of our report on customs 
procedure 428. See more details about 
the audit approach in Member States 
in Annex II.

Observations

20

9  Paragraph 110 of Special 

Report No 8/2007 concerning 
administrative cooperation in 
the field of value added tax 
(OJ C 20, 25.1.2008, p. 1).

10  The studies have not included 
estimates for Croatia and 
Cyprus, due to as-yet-
incomplete national account 
statistics for the two countries.

11  European Commission, ‘Study 
to quantify and analyse the 
VAT Gap in the EU Member 
States. 2015 Report’  
(http://ec.europa.eu/
taxation_customs/common/
publications/studies/
index_en.htm).

Lack of comparable data 
and indicators on intra-
Community VAT fraud

19 
To fight effectively against VAT fraud, 
tax authorities need to establish 
systems to estimate it and then set 
operational targets to reduce it. As 
the Court pointed out in 2008, ‘Having 
comparable data on intra-Community 
VAT fraud would contribute to a better 
targeted cooperation between Mem-
ber States. A common approach needs 
to be developed by the Commission 
together with the Member States to 
quantifying and analysing VAT fraud’9.

Lack of estimates of intra-
Community VAT fraud at EU 
level

20 
As only two Member States, Belgium 
and the United Kingdom, publish esti-
mates about VAT losses due to intra-
Community fraud, the Commission 
does not have estimates for the EU as 
a whole. (see Box 1)

21 
In the absence of direct information 
about VAT fraud, the Commission 
has regularly contracted studies to 
estimate the difference between the 
amount of VAT actually collected and 
the VAT total tax liability, known as the 
compliance VAT gap. The latest study 
estimated a VAT gap of 168 billion euro 
in the EU-2610, or 15.2 % of the total tax 
liability in 201311.

22 
The compliance VAT gap is not a reli-
able estimate of intra-Community VAT 
fraud, because apart from the fact that 
it includes both domestic and cross-
border VAT fraud, it also includes other 
revenue losses, including those due to 
legal tax avoidance, traders’ insolvency 
and tax administrations’ practices of 
tolerating tax arrears by companies in 
difficulties. Moreover, the VAT gap is 
very sensitive to estimates of the grey 
economy that are included in GDP 
data.

1 Available estimates of MTIC fraud
x
o
B

The United Kingdom on 22 October 2015 quantified intra-Community VAT fraud at between GBP 0.5-GBP 
1 billion for 2013-1412. The published figures show a decline of GBP 0.5 billion over the past 5 years.

The latest estimate published by the Belgian Supreme Audit Institution quantified missing trader fraud of 
94 million euro for 2009, 29 million euro for 2010, and 28 million euro for 2011 13.

12  https://www.gov.uk/government/statistics/measuring-tax-gaps 

In the United Kingdom the financial year runs from 1 April to 31 March for the purposes of government financial statements.

13 

‘Fraude intracommunautaire à la TVA. Audit de suivi réalisé en collaboration avec les cours des comptes des Pays-Bas et d’Allemagne. Rapport de la Cour 
des comptes transmis à la Chambre des représentants Bruxelles, septembre 2012’.

 
21

14  Judgment of the Court of 
6 July 2006 in Joint Cases 
C- 439/04 and C-440/04 Kittel 
and Recolta Recycling [2006] 
ECR I -6177, paragraphs 60 
and 61.

15  Judgment of the Court of 
6 September 2012 in Case 
C- 273/11 Mecsek-Gabona, 
paragraph 55.

Observations

Lack of performance 
indicators on intra-
Community VAT fraud

23 
The Commission does not set per-
formance indicators or operational 
targets relating to the reduction of 
intra-Community VAT fraud and, with 
the exception of the United King-
dom, neither do Member States’ tax 
administrations.

24 
The United Kingdom regularly sets 
performance indicators in terms of 
accumulated additional revenue aris-
ing from VAT information exchanges, 
number of assessments and number of 
fraud cases.

25 
The absence of EU-wide estimates 
of intra-Community VAT fraud and 
performance indicators to monitor 
progress, creates obstacles for assess-
ing whether the EU’s efforts to tackle 
VAT fraud are effective.

The administrative 
cooperation framework in 
place allows Member 
States’ tax authorities to 
share VAT information

26 
To collect VAT in their territory Mem-
ber States depend on information 
received from other Member States 
concerning intra-Community trade. 
The survey we conducted has shown 
that 26 out of 28 Member States’ tax 
authorities consider that the current 
framework for administrative coopera-
tion is sufficient to fight against intra-
Community VAT fraud effectively.

Member States considered 
information exchanges using 
electronic standard forms 
to be the most effective tool 
but the timeliness of replies 
is poor

27 
The results of our survey show that 
these exchanges of information are 
the most powerful tool to fight against 
fraud, since replies can be used as 
evidence before a Court. The e-forms 
for these exchanges, introduced in July 
2013, are functioning in a satisfactory 
manner, leading to speedier process-
ing of requests. Collecting evidence 
of the involvement of a trader in fraud 
improves VAT recovery. Moreover, tax 
authorities are using this information 
for refusing traders either the right to 
deduct the VAT paid for their pur-
chases14 or the right to exempt VAT on 
intra-Community supplies15 (i.e. apply 
the zero rate) on the basis that the 
trader knew or ought to have known 
that its transactions were connected 
with fraudulent tax losses.

Observations

22

28 
There are two types of information 
exchange using standard forms: 
Exchanges of information on request 
and exchanges of information without 
prior request.

Exchanges of information on 
request

29 
Member State authorities are sup-
posed to provide the information 
requested as quickly as possible but no 
later than 3 months following the date 
of receipt of the request. Where the 
requested authority is already in pos-
session of that information, the time 
limit is reduced to a maximum period 
of 1 month.

30 
However, the timeliness of replies was 
unsatisfactory. Statistics sent by Mem-
ber States to the Commission show 
that, in total, Member States replied 
late to 41 % of the requests received in 
2013. Moreover, six Member States re-
plied late more than 50 % of the time. 
An analysis of the number of requests 
received per Member State shows that 
the delays were not always propor-
tionate to the workload caused by the 
number of requests.

31 
Except for the United Kingdom, none 
of the audited Member States’ tax au-
thorities have set operational targets 
for reducing the percentage of late 
replies, collecting additional revenue 
arising from VAT information exchang-
es or for the number of assessments/
fraud cases. Moreover, the impact of 
this administrative cooperation tool 
in terms of VAT collection is largely 
unknown.

32 
However, the survey showed that all 
but one respondent was happy with 
the quality of replies. The Commission 
set performance indicators regarding 
the number of exchanges of informa-
tion and the target it set of increasing 
the baseline figure of exchanges of 
information on request by 13 % was 
achieved in 2013.

33 
The electronic exchange of informa-
tion on request is a useful tool appreci-
ated by the Member States. However, 
there is a lack of information regarding 
its effectiveness in terms of VAT collec-
tion. In addition, late replies hinder the 
effectiveness of the collection of VAT.

23

16  Article 13(1) of Council 

Regulation (EU) No 904/2010.

Observations

Exchanges of information 
without prior request

34 
Under EU law, ‘the competent author-
ity of each Member State shall, without 
prior request, forward… information… 
to the competent authority of any 
other Member State concerned, in the 
following cases:

(a)  where taxation is deemed to take 
place in the Member State of 
destination and the information 
provided by the Member State of 
origin is necessary for the effec-
tiveness of the control system of 
the Member State of destination;

(b)  where a Member State has 

grounds to believe that a breach of 
VAT legislation has been commit-
ted or is likely to have been com-
mitted in the other Member State; 
and

(c)  where there is a risk of tax loss in 

the other Member State16’.

35 
The Commission set performance 
indicators regarding the number of 
exchanges of information between 
Member States and its target of in-
creasing the baseline figure by 10 % 
was achieved in 2013.

36 
The survey showed that Member 
States clearly found the tool useful. 
They provided many examples (ad-
ditional VAT assessments, information 
about missing traders, corrections in 
VIES) in which the exchange of infor-
mation without prior request had been 
valuable to them.

VIES provides information 
on intra-Community 
transactions with occasional 
reliability problems

37 
The EU has set up an electronic system 
(VIES), under which Member States 
exchange information on traders 
registered for VAT purposes and on 
intra-Community supplies. Member 
States are responsible for ensuring the 
quality and reliability of the informa-
tion included in VIES and they should 
implement procedures for checking 
this data following their risk assess-
ment. These checks should be carried 
out, in principle, prior to issuing iden-
tification numbers for VAT purposes 
or, where only preliminary checks are 
conducted before such identifica-
tion, no later than 6 months from such 
identification.

24

17  According to the ‘Compliance 

Risk Management Guide For 
Tax Administrations’ produced 
by the Fiscalis Project Group 
No 32, if the reason for traders’ 
non-compliance is the 
complexity of a specific part of 
the tax legislation, the 
possible treatment could be 
that tax authorities provide 
free advice to traders or 
suggest a change of the 
legislation to remove the 
complexity.

18  When a Member State sends 

a VAT recapitulative statement 
through VIES, the Member 
State receiving the 
information sends back an 
error message listing all the 
incorrect VAT ID Nos detected.

19 

Italy (10 out of 10), Hungary 
(7 out of 10 cases), Latvia (1 out 
of 10) and the United Kingdom 
(10 out of 10).

20  The period after which VAT 
collection is impossible, as 
defined by Member States’ tax 
legislation.

41 
We selected a sample of VIES error 
messages about incorrect VAT num-
bers18 and found that tax authorities 
in most of the visited Member States19 
did not react to these messages. This 
increases the risk that some sup-
plies remain untaxed. In addition, the 
Member State receiving the reca-
pitulative statements must inform 
the sender within two working days if 
VAT numbers are incorrect. However, 
in one case, a Member State sent the 
error message more than 2 years and 
5 months late. If the error message is 
received after the time barring20 pe-
riod, VAT collection is impossible.

42 
In carousel fraud, conduit companies 
make fictitious or real intra-Commu-
nity supplies to missing or defaulting 
traders. This is why their trade partners 
in other Member States need to be 
identified, monitored and, if necessary, 
deregistered without delay. However, 
legislation in some Member States 
does not allow the deregistration of 
a conduit company just because it 
has business relations with missing or 
defaulting traders.

Observations

38 
Although our survey only indicated oc-
casional problems with the reliability 
of the system (four respondents out of 
28), (i) 17 problems concerning unavail-
ability and late availability of data were 
mentioned; (ii) responses to the survey 
also highlighted difficulties in access-
ing the data of 11 Member States; (iii) 
problems with timely cancellation of 
VAT ID Numbers were reported by the 
respondents in respect of 10 Member 
States; and (iv) data on VAT ID Num-
bers was also not up-to-date in seven 
Member States.

39 
These findings were confirmed by the 
audit tests we carried out in the five 
visited Member States. In addition, our 
tests showed that new VAT ID numbers 
are allocated in VIES without triggering 
risk-based checks and ‘proper educa-
tion’17 of traders already registered for 
tax purposes. For Member States’ risk 
management systems to be effective 
and reduce the problem of missing 
traders, it is important that high-risk 
traders are checked immediately upon 
VIES registration.

40 
On the positive side, a two-tier VAT 
number system, i.e. a separate VAT 
ID number for domestic activity and 
another VAT ID number used for 
intra-Community supplies has been 
set up in Portugal. In addition, some 
Member States such as Spain, Portugal 
and Croatia have additional controls in 
place to check taxable persons seeking 
to make intra-Community supplies.

25

21  Article 22 of Council 

Regulation (EU) No 904/2010.

Observations

43 
The Commission does not carry out 
monitoring visits to Member States to 
assess whether they have adopted ‘the 
measures necessary to ensure that the 
data provided for VAT identification 
purposes is complete and accurate’21. 
Without such visits it is difficult for the 
Commission to monitor any improve-
ments in such measures.

44 
VIES is a very useful tool for exchang-
ing data on intra-Community supplies 
between Member States. However, 
there are weaknesses in its use by 
Member States which occasionally af-
fect the reliability, accuracy, complete-
ness and timeliness of VIES data and 
therefore its effectiveness in tackling 
fraud.

Multilateral controls are an 
effective tool but are being 
carried out less frequently

45 
Two or more Member States can agree 
to conduct coordinated controls of 
the tax liability of one or more related 
traders if they consider such controls 
to be more effective than controls car-
ried out by only one Member State.

46 
The survey showed that 27 Member 
States consider multilateral controls 
(MLCs) a useful tool for combating VAT 
fraud. However, the tool is not fully 
exploited and its use is decreasing. 
Commission statistics show that MLCs 
initiated by Member States have de-
creased from 52 in 2011, to 42 in 2012 
and only 33 in 2013. MLCs are often 
slow: our audit showed that they were 
in most cases not finished within the 
intended period of 1 year. Moreover, 
the Commission’s target of increasing 
the baseline figure of initiated MLCs 
by 7 %, i.e. up to 46, was not achieved 
in 2013. This shows that the recom-
mendation made by the Commission 
of increasing the number of MLCs initi-
ated by Member States to around 75 in 
2014 was not realistic.

47 
The tax authorities of the visited Mem-
ber States do not have performance 
indicators with the exception of the 
United Kingdom, which has set an 
operational target for VAT collections 
arising from participation in MLCs. 
Other Member States do not follow up 
the recovery of the VAT assessments 
made as a result of the MLCs in which 
they participate, which reduces incen-
tives for them to increase their partici-
pation in MLCs.

Observations

26

Eurofisc: a promising tool 
that needs improvement

48 
Eurofisc is a decentralised network of 
officials from the Member States’ tax 
and customs administrations, who 
swiftly exchange targeted information 
about possible fraudulent companies 
and transactions. There are four work-
ing fields (WF) currently operating 
within Eurofisc (see Box 2).

49 
The Commission provides Eurofisc 
with technical and logistical support 
but it does not participate in the daily 
operation of Eurofisc and it has no 
access to the information exchanged 
over Eurofisc. The liaison officials of 
the Member States participating in 
a particular Eurofisc WF have experi-
ence in the fight against VAT fraud. 
They designate a Eurofisc working field 
coordinator among them. This coor-
dinator collates and disseminates the 
information received from the partici-
pating Eurofisc liaison officials.

50 
Once a Member State has categorised 
a company as a conduit, making ficti-
tious or real intra-Community sup-
plies to missing or defaulting traders, 
the information related to its current 
and intended partners should be sent 
through Eurofisc without delay so that 
they can be identified, monitored and, 
if necessary, deregistered promptly. 
Otherwise, Member States’ ability to 
tackle MTIC fraud before it takes place 
is restricted. Without a quick feedback 
mechanism on the usefulness of the 
fraud signals received Member States 
cannot improve the quality of their risk 
analysis.

51 
Our survey showed that 27 Member 
States consider Eurofisc to be an ef-
ficient early warning system for fraud 
prevention, but they still pointed out 
the following weaknesses, which were 
also confirmed by the audit tests in 
Member States: (i) feedback was not 
frequent enough; (ii) data exchanged 
was not always well targeted; (iii) not 
all Member States participate in all Eu-
rofisc working fields; (iv) exchanges of 
information are not user friendly; and 
(v) data exchanges are too slow.

2 Eurofisc working fields
x
o
B

 ο WF 1: Missing Trader Intra Community fraud (MTIC).

 ο WF2: Fraud concerning means of transport (cars, boats and airplanes).

 ο WF 3: Fraud connected to the abuse of customs procedure 42.

 ο WF 4: VAT fraud observatory for trends and developments.

 
27

22  For the period 2011-2014, 

a total of 30 493 signals were 
uploaded in WF1 for 
monitored companies. Out of 
the total uploaded signals, 
11 028 (36 %) feedback was 
not provided by the requested 
Member States. Of the 
remaining 19 465 signals, 
11 127 companies (57 %) were 
qualified as normal traders 
without any fraud risk. In WF 3, 
83 301 signals were uploaded 
in 2013, an 80 % increase 
compared with 2012. 
Although the number of 
information exchanges 
increased significantly, the 
targeting of the information 
decreased: almost 83 % of the 
traders uploaded in 2013 were 
qualified as not dubious, 
compared with 70 % in 2012.

23  COM(2014) 71 final of 
12 February 2014.

Observations

52 
In all the visited Member States the 
processing and upload of fraud sig-
nals was a lengthy and cumbersome 
process. The examination of a sample 
of 20 fraud signals per visited Mem-
ber State confirmed that the infor-
mation exchange is to some extent 
rudimentary, slow, not user-friendly 
and takes place using Excel spread-
sheets. The Eurofisc WF coordinator 
manually compiles and disseminates 
these spreadsheets among the liaison 
officers of each Member State partici-
pating in Eurofisc. This runs the risk 
of transmitting incomplete or wrong 
information.

53 
Our audit has shown that each Mem-
ber State carries out its own risk analy-
sis. There are no common criteria or 
sources of information to perform this 
risk analysis. Furthermore, feedback on 
the usefulness of the data exchanged 
is scarce. As a result, Member States 
participating in different working 
fields often exchange information that 
includes non-dubious traders, thereby 
wasting resources22.

54 
There are no quality indicators for 
the feedback provided/received or 
for timeliness. Although statistics are 
provided regarding the number of 
companies reported through the net-
work and their classification in various 
categories, no other performance in-
dicators have been established by the 
Member States to assess the effective-
ness of the different Eurofisc working 
fields. In addition, there are no global 
statistics available on the timeliness of 
the supplied feedback.

55 
The results of the sample tests car-
ried out in the visited Member States 
show that most of them take longer 
than 3 months to supply feedback 
to incoming fraud signals. In many 
cases the information provided is not 
complete and, in some, is not provided 
in a standard format, leading to further 
delays in processing.

The Commission provides 
valuable assistance to the 
Member States but does not 
carry out visits to Member 
States

56 
The Member States and the Commis-
sion examine and evaluate how the 
administrative cooperation arrange-
ments work. The Commission pools 
the Member States’ experience with 
the aim of improving the operation of 
those arrangements.

57 
Our survey indicates that 25 respond-
ents out of 28 consider that the Com-
mission provides valuable assistance 
to the Member States. On 12 February 
2014 the Commission published its 
report evaluating administrative coop-
eration23. The Commission emphasised 
that Member States can only address 
tax fraud and tax evasion effectively if 
they work together and that improving 
administrative cooperation between 
Member States’ tax administrations 
was therefore a key objective.

28

24  Article 50(1) of Council 

Regulation (EU) no 904/2010.

61 
Only 13 respondents consider that the 
Member States are using this possibili-
ty for exchanging information received 
from non-EU countries. At the same 
time, nine respondents suggested 
signing a mutual assistance arrange-
ment on VAT with the United States 
and eight respondents suggested 
agreements with Turkey and China, 
which confirms the importance of such 
information.

62 
Information from non-EU countries 
is particularly relevant to enforce 
VAT collection on digital services and 
intangibles supplied from remote loca-
tions to European consumers without 
any direct or indirect physical pres-
ence of the supplier in the consumer’s 
jurisdiction (see paragraphs 90 to 92).

Observations

58 
The Commission’s report highlighted 
areas where administrative coopera-
tion can still be intensified. ‘Overall, 
there must be a quicker reply to re-
quests for information, since the late-
ness of the replies is a critical issue… 
feedback, provided spontaneously or 
on request, is an approach that must 
be encouraged in the context of good 
cooperation and best practices, as it is 
the best way to inform tax officials that 
their work was (to a certain extent) 
beneficial’.

59 
The Commission’s report was based 
inter alia on a questionnaire it sent 
to Member States. However, since its 
publication up to the time of the audit 
no visits have been made to Member 
States. Without on-the-spot visits to 
Member States’ tax authorities, the 
Commission cannot be fully aware of 
how the administrative cooperation ar-
rangements actually work and thus be 
effective in improving their operation.

Information received from 
non-EU countries is not being 
exchanged between Member 
States

60 
Under EU law, when the competent 
authority of a Member State receives 
information from a non-EU country, 
it may pass the information on to the 
competent authorities of Member 
States which might be interested in it 
and, in any event, to all those which 
request it24.

29

25  Decision No 1482/2007/EC of 
the European Parliament and 
of the Council of 11 December 
2007 establishing 
a Community programme to 
improve the operation of 
taxation systems in the 
internal market (Fiscalis 2013) 
and repealing Decision 
No 2235/2002/EC (OJ L 330, 
15.12.2007, p. 1). Activities 
include communication and 
information-exchange 
systems, MLCs, seminars and 
project groups, working visits, 
training activities and other 
similar activities.

26  Regulation (EU) No 1286/2013 
of the European Parliament 
and of the Council of 
11 December 2013 
establishing an action 
programme to improve the 
operation of taxation systems 
in the European Union for the 
period 2014-2020 (Fiscalis 
2020) and repealing Decision 
No 1482/2007/EC (OJ L 347, 
20.12.2013, p. 25).

27  http://ec.europa.eu/

taxation_customs/resources/
documents/common/
publications/studies/
fiscalis2013_mid_term_
report_en.pdf.

28  http://ec.europa.eu/

taxation_customs/resources/
documents/common/
publications/studies/
fiscalis2013_final_evaluation.
pdf.

Observations

Fiscalis is an important EU 
instrument for strengthening 
administrative cooperation

63 
The EU established a multiannual EU 
action programme, Fiscalis 2013, to 
finance initiatives by tax administra-
tions to improve the operation of the 
taxation systems in the internal mar-
ket. It has recently been extended to 
202025. Fiscalis 2013 covered the period 
2008-13 with an allocation of 156.9 mil-
lion euros, while the financial envelope 
devoted to Fiscalis 2020 amounts to 
223.4 million euro. The regulation 
setting up Fiscalis 2020 redefines the 
specific objective, putting more clearly 
the emphasis on supporting the fight 
against tax fraud, tax evasion and ag-
gressive tax planning26.

64 
We have examined the mid-term27 and 
final evaluations28 of the Fiscalis 2013 
Programme, the output of certain Fis-
calis Project Groups, and interviewed 
Member States’ officers in charge of 
Fiscalis. In each Member State audited, 
we selected a sample of administra-
tive cooperation tools financed by 
Fiscalis: 20 exchanges of information 
on request, 20 VIES error messages, 10 
MLCs and 20 fraud signals exchanged 
through Eurofisc working field 1.

65 
Although the decision establishing 
Fiscalis 2013 stated that ‘the work 
programme shall contain indicators 
for the specific objectives of the Pro-
gramme’, by the time of the mid-term 
evaluation no indicators had been 
set by the Commission. Indeed, the 
mid-term evaluation recommended 
that the Commission and Member 
States should set up a results-based 
monitoring and evaluation system, 
including a set of key output and out-
come indicators and where possible, 
baselines and targets against which 
progress could be measured annually. 
The Commission did set up a perfor-
mance monitoring system but it only 
became operational in April 2014 and 
the same criticism was repeated in the 
final evaluation of June 2014.

66 
In the absence of baseline figures and 
indicators, it was not possible to quan-
tify the effectiveness of the Fiscalis 
2013 programme. On the other hand 
the qualitative evidence reported in 
the evaluations or by practitioners in 
the visited Member States is largely 
positive. For example, according to the 
mid-term evaluation of Fiscalis 2013 
‘survey participants and interviewees 
consider that Fiscalis contributes to 
a more effective fight against fraud in 
terms of reduced incidence of fraud, 
increased detection of fraud and 
increased amount of tax collected 
following the detection of fraud (tax 
recovery)’. However, none of the five 
tax authorities of the visited Member 
States measure the outcome of its par-
ticipation in Fiscalis in these terms.

30

29  The Good Practice Guide is 

published on Member States’ 
websites.

30  Fiscalis Project Group No 29 
on the abuse of the VAT rules 
upon importation.

Observations

Funding administrative 
cooperation tools

Fostering expertise through 
Fiscalis project groups

67 
About 22 % of the budget went to-
wards joint actions, consisting of MLCs, 
working visits, seminars and project 
groups and the final evaluation judged 
the costs to be ‘very reasonable’. The 
mid-term evaluation found that at the 
level of specific objectives the Pro-
gramme had contributed ‘to a large 
extent’ to improving administrative 
cooperation between participating 
national tax administrations.

Ensuring an adequate IT 
infrastructure

68 
Almost 75 % of the budget was devot-
ed to communication and information 
exchange systems. The final evaluation 
looked specifically at IT systems, as 
they accounted for such a high share 
of the Fiscalis 2013 expenditure. These 
costs were considered justified due to 
their high levels of usage. Moreover 
stakeholders appeared ‘widely con-
vinced’ of their value. In the Member 
States audited, users were generally 
positive about the IT systems.

69 
Fiscalis project groups are made up 
of experts from Member States. They 
worked inter alia on updating the 
Good Practice Guide to tackle intra-
Community VAT fraud29. Member 
States’ tax authorities are satisfied with 
their participation in these groups and 
believe that they have contributed to 
the dissemination of good administra-
tive practice and increased the knowl-
edge of EU tax law among tax officers. 
We consider the recommendations of 
best practice produced by the Fiscalis 
project group No 2930 to be sound and 
used them as the basis of our control 
model for customs procedure 42 (see 
Annex III).

70 
According to the mid-term evaluation, 
the Fiscalis Programme has contrib-
uted ‘to a high extent’ to enabling tax 
officials to achieve a high standard 
of understanding of the Union’s laws 
and its implementation, particularly in 
the areas of VAT and excise. The Pro-
gramme has also contributed ‘to a very 
high extent’ to the development of 
good administrative practice.

Observations

VAT legislation has been 
adapted to tackle VAT 
fraud

71 
An effective anti-VAT fraud strategy 
calls for the adoption of pertinent leg-
islative measures to tackle intra-Com-
munity VAT fraud. In its Communica-
tion in 2008 the Commission set out an 
action plan on a coordinated strategy 
to improve the fight against VAT fraud 
in the European Union, which included 
11 legislative proposals31 aiming at en-
hancing the prevention of VAT fraud32, 
detection of VAT fraud33 and capacity 
of tax administration to collect and 
recover taxes34.

72 
Most of these proposals were ac-
cepted by the Council, except for joint 
and several responsibility and shared 
responsibility for the protection of all 
Member States’ revenues.

The reporting period of VAT 
recapitulative statements 
and their transmission times 
have been reduced

73 
One of the accepted proposals35 intro-
duced mandatory monthly submission 
of information on intra-Community 
supplies of goods if total transactions 
exceed the threshold of 50 000 euro, 
with a view to allow faster detection 
of fraud. However, Member States are 
allowed to maintain quarterly report-
ing for supplies of goods below the 
threshold and for supplies of services.

74 
The Commission asked an external 
contractor to assess the impact on 
businesses of changing recapitulative 
statements from quarterly to monthly 
and of the options for thresholds and 
derogations. The study36 showed that 
implementation was not uniform37 
which leads to extra costs for business. 
Submitting recapitulative statements 
more frequently leads to extra costs 
for businesses, both one-off and recur-
ring. One source of costs is the lack of 
harmonisation by tax authorities in 
the various Member States in which 
a company operates. Recurring costs 
arise from going through the proce-
dure every month instead of quarterly. 
Where differing deadlines apply for 
submitting VAT returns and recapitu-
lative statements, extra controls are 
needed. In addition, different report-
ing requirements mean that there is 
not a level playing field among traders 
operating in the internal market.

75 
All Member States have adapted their 
VAT legislation to the VAT directive. 
However, in Germany, the results of 
the audit showed that even though 
the VAT legislation aligns with the 
VAT directive, traders are still submit-
ting quarterly or annual recapitulative 
statements despite exceeding the 
50 000 euro threshold for compulsory 
monthly recapitulative statements.

31

31  COM(2008) 807 final of 

1 December 2008 on 
a coordinated strategy to 
improve the fight against VAT 
fraud in the European Union.

32  Chapters V and IX of Council 
Regulation (EU) No 904/2010, 
concerning VIES, Chapter 3 of 
Title XI of VAT directive, 
namely Article 226, 
concerning invoicing rules, 
and Title VI of the VAT 
Directive, concerning 
chargeability of intra-
Community transactions.

33  Council Directive 2008/117/EC 

of 16 December 2008 
amending Directive 
2006/112/EC on the common 
system of value added tax to 
combat tax evasion connected 
with intra-Community 
transactions (OJ L 14, 
20.1.2009, p. 7) amending 
Article 263(1) of the VAT 
Directive and Article 20 of 
Council Regulation (EU) 
No 904/2010 to reduce time 
frames for submitting and 
exchanging information on 
recapitulative statements, 
Council Directive 2009/69/EC 
of 25 June 2009 amending 
Directive 2006/112/EC on the 
common system of value 
added tax as regards tax 
evasion linked to imports 
(OJ L 175, 4.7.2009, p. 12) 
amending Article 143 of the 
VAT Directive, Chapter V of 
Regulation (EU) No 904/2010, 
concerning automated access 
to data, Chapter X of 
Regulation EU) No 904/2010, 
concerning Eurofisc.

34  Proposal for a Council 

Directive amending Directive 
2006/112/EC on the common 
system of value added tax as 
regards tax evasion linked to 
import and other cross-border 
transactions, concerning the 
proposal for joint and several 
liability (not adopted), Council 
Directive 2010/24/EU of 
16 March 2010 concerning 
mutual assistance for the 
recovery of claims relating to 
taxes, duties and other 
measures (OJ L 84, 31.3.2010, 
p. 1) entering into force on 
1 January 2012, and the 
proposal for a shared 
responsibility for the 
protection of all Member 
States' revenues not adopted 
in the administrative 
cooperation Regulation.

35  Directive 2008/117/EC 

amending Article 263(1) of 
the VAT Directive.

Observations

Customs procedure 42: Most 
of the ECA recommendations 
have been accepted by the 
Commission but they have 
not been implemented by 
Member States

76 
Customs procedure 42 (CP42) is the 
regime an importer uses in order to 
obtain a VAT exemption when the 
imported goods will be transported to 
another Member State. The VAT is due 
in the Member State of destination. 
Getting customs procedure 42 right 
depends on:

(a)  the importer providing complete 
and valid VAT information38 in the 
import declaration;

(b)  customs authorities checking this 
information before releasing the 
goods and then sending the infor-
mation to the tax authorities;

(c)  tax authorities comparing this 

information with that included in 
the VAT recapitulative statement 
submitted by the importer;

(d)  the information therein being 

made available to other Member 
States’ tax authorities using VIES; 
and

(e)  tax authorities in the Member 

State of destination ensuring that 
VAT is charged there by compar-
ing the acquirer’s VAT return with 
the information available in VIES. 
See ECA control model on customs 
procedure 42 in Annex III.

77 
As a follow-up of our previous audit 
on customs procedure 4239 and to 
test how customs and tax authorities 
are cooperating with each other and 
with other Member States’ authorities, 
e.g. by using, when needed, Eurofisc 
WF3 (see Box 2), and to check the 
completeness of VIES data, we have 
selected a risk-based sample of 30 im-
ports under CP 42 per visited Member 
State. We also followed up the status 
of the implementation by the Commis-
sion of our recommendations made in 
Special Report No 13/2011.

Cross-checks between customs 
and VAT data are not effective 
in most of the visited Member 
States

78 
Missing information related to goods 
imported under the CP 42 procedure 
may lead to abuses of the procedure 
and, consequently, to underpayments 
of the Member States’ VAT. Our cur-
rent audit in Member States showed 
a lack of completeness of VIES data 
concerning imports under CP 42. We 
found that the customs authorities of 
Germany and the United Kingdom do 
not send data on imports under CP 42 
to tax authorities. We also found that 
traders do not report separately in the 
VAT recapitulative statement the on-
ward intra-Community supplies follow-
ing imports under CP 42 in Germany, 
Italy and the United Kingdom.

32

36 

‘Expert study on the issues 
arising from a reduced time 
frame and the options allowed 
for submitting recapitulative 
statements. Final report, 
28 October 2011’  
(http://ec.europa.eu/
taxation_customs/common/
publications/studies/
index_en.htm).

37  17 Member States have 

implemented the derogation 
to file recapitulative 
statements quarterly and 10 
have chosen not to implement 
the derogation; 5 Member 
States have made the 
application for the derogation 
mandatory and 12 have made 
it optional; 2 Member States 
have a separate recapitulative 
statement for goods and 
services and the other 25 have 
a recapitulative statement 
combining goods and 
services; 22 Member States 
require electronic filing (with, 
however, 10 exceptions). 
5 provide for optional 
electronic filing.

38  Articles 143(2) and 85 to 89 of 

Council Directive 2006/112/EC, 
and Annexes II and III of 
Commission Implementing 
Regulation (EU) No 756/2012 
of 20 August 2012 amending 
Regulation (EEC) No 2454/93 
laying down provisions for the 
implementation of Council 
Regulation (EEC) No 2913/92 
establishing the Community 
Customs Code (OJ L 223, 
21.8.2012, p. 8).

39  ECA Special Report 

No 13/2011.

33

40  A Fiscalis project group is 
tackling the cooperation 
between customs and tax 
authorities and the 
Commission has agreed to 
reconsider the issue of 
cross- checks between 
customs declarations and 
recapitulative statements in 
the light of the recommen-
dations made by the Fiscalis 
project group.

41  24 in Germany, 30 in Latvia 

and 20 in the United Kingdom.

42  13 in Germany, 23 in Italy, 29 in 
Latvia, and 20 in the United 
Kingdom.

43 

‘L’action de La Douane dans la 
lutte contre les fraudes et trafics. 
Communication au Président de 
l’Assemblée nationale pour le 
Comité d’évaluation et de 
contrôle des politiques 
publiques. Janvier 2015’.

44  Provided for in the Naples II 

Convention drawn up on the 
basis of Article K.3 of the EU 
Treaty, on mutual assistance 
and cooperation between 
customs administrations.

82 
The French Supreme Audit Institution 
considers43 that the lack of a swift elec-
tronic system allowing verification that 
the exemption at the Customs in the 
Member State of import is compen-
sated by taxation in the Member State 
of acquisition is the main cause of VAT 
fraud in Europe.

83 
Another important cause of fraud is 
the undervaluation and misclassifica-
tion of imported goods. OLAF has co-
ordinated a joint customs operation44 
(JCO) concerning the undervaluation 
of goods of textiles and shoes from 
China. It found that 40 % of the goods 
released into free circulation under 
CP 42 were undervalued. We found in 
the United Kingdom two cases of un-
dervalued imports under CP 42, which 
had been already identified by HMRC 
as a result of OLAF’s JCO. HRMC esti-
mated the impact on VAT collection 
in the United Kingdom to be GBP 0.5 
million and GBP 10.6 million in other 
Member States. The estimated impact 
on customs collection in the United 
Kingdom amounts to GBP 81 million. 
These impacts have been estimated 
by HMRC for all items imported by the 
two traders identified in the sample in 
a 3-year period.

Observations

79 
Therefore tax authorities are not 
able to cross-check customs data on 
imports under CP 42 and the VAT re-
capitulative statements submitted by 
the importer. These cross-checks are 
the key for ensuring that tax authori-
ties of other Member States are aware 
of the respective onward supplies of 
goods, so they do not remain untaxed 
in the territory of the Member State of 
consumption of the goods. In Latvia, 
automatic cross-checks were available 
but did not prevent a case of under-
reporting in the VAT recapitulative 
statement40.

80 
The result of the audit tests we car-
ried out in the selected Member States 
showed cases of undervaluation, non-
submission of VAT recapitulative state-
ments, inclusion of invalid VAT ID Nos 
in the import declaration and unre-
ported triangular transactions. Only 22 
Member States exchange information 
through Eurofisc working field 3.

81 
Except in Italy, no automatic checking 
of the VAT numbers was available in 
the customs electronic clearance sys-
tems of the visited Member States. We 
found no evidence that the customs 
officers had verified the validity of 
the VAT ID Nos before the release of 
goods for free circulation41. We found 
no evidence of transport of goods to 
the Member State of destination42. In 
one case the goods supplied were not 
identical to the goods imported. Only 
in Hungary did the customs authorities 
verify ex post that the importer had 
fulfilled all the VAT exemption condi-
tions in respect of all the 30 imports of 
the sample selected.

Observations

34

84 
The Commission accepted and imple-
mented five of the seven recommen-
dations we made in our 2011 report. 
However, the Council has not taken on 
board the recommendation concern-
ing the holding of the importer jointly 
and severally liable for the VAT loss in 
the Member State of destination (see 
paragraph 72).

87 
The reverse charge rule is a temporary 
measure that can be applied until 
December 201845. It is applied only in 
specific circumstances to certain sec-
tors vulnerable to carousel fraud and 
does not have a general application. 
Box 3 shows some examples of sectors 
to which Member States can apply the 
reverse charge.

45  Council Directive 2013/43/EU 
of 22 July 2013 amending 
Directive 2006/112/EC on the 
common system of value 
added tax, as regards an 
optional and temporary 
application of the reverse 
charge mechanism in relation 
to supplies of certain goods 
and services susceptible to 
fraud (OJ L 201, 26.7.2013, p. 4).

85 
The legislative improvements made by 
the Commission relating to CP 42 and 
the follow-up of our recommendations 
in Special Report No 13/2011 is positive 
but the fight against fraud is hindered 
by poor implementation and cases of 
non-compliance detected in the Mem-
ber States during the current audit.

Reverse charge: a useful 
tool to fight against MTIC 
fraud that is not consistently 
applied

86 
The principle of the reverse charge 
rule is that it shifts the liability to ac-
count for the VAT from the supplier 
to the customer. This means that the 
customer, when identified as a tax-
able person, would be liable to pay the 
VAT to tax authorities instead of to the 
supplier. In this case a missing trader 
cannot default on payment to the 
Treasury as it does not collect VAT from 
its customer.

88 
We consider that the reverse charge 
is a useful tool to fight against fraud 
when it is applied consistently by all 
Member States to these risky sectors. 
Otherwise, fraudsters move to the 
Member State in which the reverse 
charge is not applied thereby limit-
ing the capacity to tackle VAT fraud 
at EU level (See ECA Special Report 
No 6/2015 on the integrity and imple-
mentation of the EU Emissions Trading 
Scheme).

89 
At this stage, the Commission does 
not consider that a generalised reverse 
charge, i.e. extending the reverse 
charge to all sectors of the economy, 
would be effective in fighting fraud as 
it will shift fraud to the retailing phase 
where VAT evasion risks are higher. The 
results of our survey corroborate this 
as only one of the survey’s respond-
ents suggested such a generalised 
application of the reverse charge.

Observations

35

3 Examples of sectors where reverse charge can be applied
x
o
B

 ο Construction including repair, cleaning, maintenance, alteration and demolition services.

 ο Transfer of allowances to emit greenhouse gases.

 ο Supply of integrated circuit devices such as microprocessors and central processing units in a state prior to 

integration into end user products.

 ο Supplies of gas and electricity to a taxable dealer.

 ο Supply of gas and electricity certificates.

 ο Supply of telecommunication services.

 ο Supplies of game consoles, tablet PC's and laptops.

 ο Supply of cereals and industrial crops including oil seeds and sugar beet.

 ο Supply of raw and semi-finished metals, including precious metals.

 ο Supply of mobile telephones.

 ο Certain types of timber (logs, planks, girders).

91 
The destination principle means 
that the place of consumption for 
cross-border supplies of services and 
intangible property that are capable of 
delivery from a remote location made 
to a non-resident private recipient 
should be the jurisdiction in which the 
recipient has their usual residence46.

46  OECD ’Consumption Taxation 
of Cross-Border Services and 
Intangible Property in the 
Context of E-Commerce’, 2001.

Legislation on e-commerce 
follows international best 
practice but it is difficult to 
enforce

90 
Remote supplies of services and 
intangibles present challenges to VAT 
systems, as they often result in no, or 
an inappropriately low amount, of col-
lected VAT. The EU applies the destina-
tion principle to cross-border supplies 
of electronically supplied services and 
intangibles to final customers, Busi-
ness to consumer (B2C), in accordance 
with the international best practices 
identified by the OECD.

 
Observations

36

94 
The European Council has often 
pointed out the lack of cooperation 
between administrative authorities, 
judicial and law enforcement authori-
ties49. This is a challenge for effectively 
fighting against tax fraud.

Lack of exchange of data 
between customs and tax, 
police and prosecuting 
authorities

95 
There is no integrated policy or strat-
egy at EU level for investigating and 
prosecuting fraud. Many times the law 
enforcement and judicial authorities 
work independently and very often 
they do not involve all affected Mem-
ber States50.

47  Bundesrechnungshof, 2013 

Bemerkungen — Weitere 
Prüfungsergebnisse Nr. 11 
‘Ausländische Internetanbieter 
zutreffend besteuern’.

48  Statement of Mr Van 

Heuckelom at the Conference 
on VAT Fraud hosted by MEP 
Ingeborg Grässle and MEP 
Benedek Javor on 4 February 
2015 in the European 
Parliament in Brussels  
(http://antikorrupcio.hu/en/
vat-fraud-in-the-eu-member-
states/).

49  European Council documents 

12623/5/13 of 16 September 
2013; 16071/1/14 of 
20 March 2015; and 9368/15 
of 1 June 2015.

50  Strategic meeting on VAT 
fraud held by Eurojust in 
March 2011, Cfr. Council 
document 11570/11 of 
17 June 2011.

92 
The enforcement of the rules on 
e-commerce is difficult and VAT col-
lection is at risk if Member States 
lack information on B2C services and 
intangibles supplied from third coun-
tries via the internet. According to the 
German Court of Auditors47, in Ger-
many VAT collected due to the supply 
of B2C e-services from a third country 
amounted to only 23.7 million euro 
in 2011 and decreased to 22.8 mil-
lion euro in 2012, whereas e-commerce 
is in a rapid expansion phase. There-
fore the German SAI concluded that 
there are many unregistered traders.

Lack of cooperation and 
overlapping competences 
of administrative, judicial 
and law enforcement 
authorities to fight 
against VAT fraud

93 
VAT fraud is often linked with organ-
ised crime. The proceeds of MTIC fraud 
are usually reinvested in other criminal 
activities. This calls for the adoption 
of a common and multidisciplinary 
approach to tackle intra-Community 
VAT fraud. According to Europol’s 
representatives48, it is estimated that 
40-60 billion euro of the annual VAT 
revenue losses are caused by organ-
ised crime groups and that 2 % of 
those groups are behind 80 % of the 
MTIC fraud.

37

51  Council Document 12978/14 
of 22 September 2014.

52  A report of the CCWP 

recommends that customs 
authorities take a more active 
role in Eurofisc WF 3. See 
Council document 16071/1/14 
of 20 March 2015.

53  From 1.1 billion in 2001 to 
159 million euro in 2003. 
Source: Ondersteuningscel 
(BTW fraude) — Cellule de 
soutien (Fraude TVA). See 
‘Rapport annuel des Finances 
2003’. See also ‘Fraude 
intracommunautaire à la TVA. 
Audit de suivi réalisé en 
collaboration avec les cours 
des comptes des Pays-Bas et 
d’Allemagne. Rapport de la 
Cour des comptes transmis 
à la Chambre des 
représentants’. Brussels, 
September 2012.

Observations

96 
The European Council has set up 
a Customs Cooperation Working Party 
(CCWP). This expert group handles 
work regarding operational coopera-
tion among national customs admin-
istrations with a view to increasing 
their enforcement capabilities, and in 
particular to identify the need for new 
models of cooperation between cus-
toms and other agencies/joint customs 
operations51.

99 
Our audit has also shown that the 
customs authorities of Germany and 
the United Kingdom do not send data 
on imports under CP 42 to tax authori-
ties, and that traders do not report 
separately in the VAT recapitulative 
statement the onward intra-Commu-
nity supplies following imports under 
CP 42 in Germany, Italy and the United 
Kingdom (see paragraph 78).

100 
The lack of exchange of data between 
customs and tax, police and prosecut-
ing authorities reduces the effective-
ness of the fight against fraud. Bel-
gium succeeded in reducing the losses 
related to fraud by 85 % in only 2 years 
by adopting a ‘joined up’ approach 
with better cooperation between au-
thorities which allowed a focus on the 
disruption of organisers rather than 
targeting missing traders53.

97 
This working party concluded that 
cooperation between Customs and 
Police and between Customs and tax 
authorities is quite good, but that 
some obstacles to cooperation remain. 
The most important are restrictions on 
sharing information, lack of structured 
systems and connected databases, 
information being not timely or of 
a poor quality, and a lack of proper 
feedback. The report also highlights 
that there is a recurring risk of overlap-
ping and duplication.

98 
Not all Member States participate in all 
the Eurofisc Working Fields (see para-
graph 51). Working Field 3 is devoted 
to MTIC fraud connected to imports 
under CP 42. Twenty-two Member 
States are involved but it is the tax 
authorities rather than the customs au-
thorities that participate52. Out of the 
five Member States visited, only the 
Hungarian and Italian customs authori-
ties participate in Working Field 3.

38

54  House of Lords, European 

Union Committee’s 12th 
Report of Session 2012–13 The 
Fight Against Fraud on the 
EU’s Finances.

55  Draft Council Conclusions on 

the creation and 
implementation of an EU 
policy cycle for organised and 
serious international crime, 
doc. 15358/10 COSI 69 
ENFOPOL 298 CRIMORG 185 
ENFOCUSTOM 94.

56  Serious and Organised Crime 

Threat Assessment (SOCTA) 
carried out in 2013.

Observations

Europol and OLAF have no 
access to VIES and Eurofisc 
data

Empact: a good initiative but 
its sustainability is at risk

101 
Neither Europol nor OLAF has ac-
cess to Eurofisc data. Member States 
invoke Articles 35 and 55 of Regula-
tion No 904/2010 and national tax 
secrecy rules to deny such access. 
Eurofisc Working Fields 1-3 involve the 
exchange of data. This is not the case 
for Eurofisc Working Field 4, which is 
a fraud observatory where trends in 
fraud are looked at. Even though there 
is no exchange of data, Europol and 
OLAF are not allowed access to this 
information. They also do not have ac-
cess to VIES.

102 
Although this is in accordance with 
the regulation, it reduces Europol 
and OLAF’s ability to tackle VAT fraud 
through the identification and disrup-
tion of organised crime groups behind 
the carousels and even their ability to 
assess the real impact of intra-Commu-
nity VAT fraud.

104 
The EU set up a multiannual policy 
cycle in 2010 to fight against serious 
international and organised crime55, 
aiming at:

(a)  effective cooperation between 

Member States’ law enforcement 
agencies, EU institutions, EU agen-
cies and others; and

(b)  coherent and robust operational 

action targeting the most pressing 
criminal threats facing the EU.

105 
Based on a threat assessment prepared 
by Europol56 representatives of Mem-
ber States defined nine priority areas 
including Excise and MTIC fraud. For 
each priority area the Council drew up 
a multiannual strategic plan, covering 
the years 2014 to 2017. The plan’s goal 
is to disrupt the capacity of organised 
crime groups (OCG) and specialists in-
volved in excise fraud and MTIC fraud.

103 
The overlapping competences and lack 
of efficient cooperation and exchange 
of information between the adminis-
trative, judicial and law enforcement 
authorities at national as well as at 
international level hamper the fight 
against intra-Community VAT fraud. In 
2013 the situation between Europol, 
Eurojust, and OLAF was described as 
a ‘tangled web’ which contributes to 
the lack of a coordinated response to 
fraud54.

106 
The 2014 to 2017 plan mentioned 10 
potential vulnerabilities. Apart from 
emphasising the high level of exper-
tise and flexibility of OCGs, it pin-
pointed a lack of systemic cooperation 
between law enforcement authorities 
and tax authorities at national and 
EU level. It also noted legal obstacles 
blocking the exchange of information 
between Europol and Member States 
represented in Eurofisc.

39

57  Strategic meeting on VAT 
fraud held by Eurojust in 
March 2011, Cfr. Council of the 
EU document 11570/11 of 
17 June 2011.

58  COM(2012) 363 final of 

11 July 2012 ‘Proposal for 
a Directive of the European 
Parliament and of the Council 
on the fight against fraud to 
the Union’s financial interests 
by means of criminal law’.

59  Convention of 26 July 1995 on 

the protection of the 
European Communities’ 
financial interests and its two 
protocols (Council Act of 
19 June 1997 and Council Act 
of 27 September 1996).

Observations

107 
The plan contained six strategic goals. 
One of these goals concerns the shar-
ing of available intelligence at EU level 
on the most threatening OCGs. These 
actions overlap with information be-
ing shared on risky companies under 
Eurofisc WF 1. In addition, at a SCAC 
meeting some Member States op-
posed the use of the full Good Practice 
Guide to tackling Intra-Community VAT 
fraud drafted by Fiscalis Project Group 
No 82 by law enforcement authorities 
because most of the chapters would 
be relevant for tax administrations and 
not for law enforcement authorities.

108 
For the purpose of measuring the 
achievement of each goal certain 
operational action plans (OAPs) were 
developed under the umbrella of the 
European Multidisciplinary Platform 
against Criminal Threats (Empact). 
Member States had to fund activities 
of the OAP 2014 from their national 
budgets. Progress reports on the OAP 
2014 show that 2 out of 11 operational 
actions were not finalised and were 
postponed to 2015 due to lack of fund-
ing. This lack of funding puts at risk the 
achievement of Empact’s goals and the 
sustainability of the OAPs.

109 
In 2015, the Commission allocated 
seven million euro to Europol to fund 
operational actions in 2015 and 2016. 
However, given the fact that this 
envelope covers nine priority areas, 
it remains to be seen whether it will 
ensure the financial sustainability of 
Empact concerning the priority area of 
MTIC fraud.

Member States are against 
the proposals to include 
VAT within the scope of 
the protection of financial 
interests directive and 
European Public Prosecutor’s 
Office regulation

110 
In March 2011 experts from all Mem-
ber States in a meeting organised by 
Eurojust called for a more efficient co-
operation between the administrative, 
judicial and law enforcement authori-
ties at the national and international 
level57. They recommended drawing up 
rules of exclusive jurisdiction for intra 
community VAT fraud or entrusting the 
investigation and prosecution of such 
offences to a European Public Prosecu-
tor’s Office (EPPO).

111 
However, a majority of Member States 
are against the proposal of the Com-
mission to include VAT within the 
scope of the directive on the fight 
against fraud (the PIF directive)58 or in 
the regulation establishing an EPPO. 
Excluding VAT from the scope of these 
proposals would represent a major 
step backwards, since as recently 
recalled by the European Court of 
Justice (case C-105/14 of 8 September 
2015, Taricco), VAT fraud is covered by 
the current legal framework, namely, 
the PIF Convention59 which the PIF 
directive should replace. In addition, 
no secondary legislation has provided 
OLAF with investigative powers in the 
field of VAT.

40

60  For example, the Commission 
proposal of 20.7.2004 for 
a regulation of the European 
Parliament and of the Council 
on mutual administrative 
assistance for the protection 
of the financial interests of the 
Community against fraud and 
any other illegal activities 
(proposal COM(2004) 509 
amended by proposal 
COM(2006) 473 final).

Conclusions and 
recommendations

112 
This audit addressed the question of 
whether the EU is tackling intra-Com-
munity VAT fraud effectively. A large 
majority of Member States, who are 
the main beneficiaries of VAT revenue, 
have expressed satisfaction with how 
the current system has been set up 
and they appreciate benefits from 
mutual cooperation. However, Mem-
ber States have indicated areas of the 
system that require further improve-
ment. Moreover, the audit has found 
important weaknesses which indicate 
that the system is insufficiently ef-
fective. These weaknesses need to 
be addressed. The Commission has in 
the past proposed several legislative 
measures allowing Member States to 
improve the framework for exchanging 
information between their tax authori-
ties to fight against intra-Community 
VAT fraud60, but Member States have 
not yet accepted all of them. There is 
therefore a need for new legislative 
and other initiatives as suggested in 
the following recommendations:

Measuring the 
effectiveness of the 
system

113 
The lack of comparable data and 
the lack of adequate relevant indi-
cators to measure Member States’ 
performance adversely affects the 
effectiveness of the EU system to 
tackle intra-Community VAT fraud (see 
paragraphs 19 to 25).

Recommendation 1

The Commission should initiate a co-
ordinated effort of Member States to 
establish a common system of estimat-
ing the size of intra-Community VAT 
fraud, which would allow Member 
States to evaluate their performance 
in terms of reducing the incidence of 
intra-Community VAT fraud, increas-
ing detection of fraud and increasing 
tax recovery following the detection 
of fraud. This system could build upon 
the already-used practices in some 
Member States.

Cross-checking customs 
with VAT data is crucial

114 
The audit showed that cross-checks 
between imports under CP 42 and 
VAT recapitulative statements is not 
possible because customs authorities 
do not send this data to tax authorities 
and traders are not obliged to report 
separately the intra-Community sup-
plies following these imports in the 
VAT recapitulative statements. In addi-
tion not all Member States exchange 
data on risky imports under CP 42 
through Eurofisc working field 3. (See 
paragraphs 76 to 85).

Recommendation 2

Member States’ customs authorities 
should send data on imports under 
customs procedure 42 to tax authori-
ties and implement other measures of 
our control model on customs proce-
dure 42 (see Annex III).

Conclusions and recommendations

41

(c)  use a reliable and user-friendly IT 

environment for these information 
exchanges;

(d)  set up relevant indicators and tar-
gets to measure the performance 
of the different working fields; and

(e)  participate in all Eurofisc working 

fields.

Improving the existing 
legal framework

116 
The proposal of the Commission about 
joint and several liability in cases 
of cross-border trade has not been 
adopted by the Council. This reduces 
the deterrence against doing business 
with fraudulent traders. The imple-
mentation of the VAT directive con-
cerning the period of submission of re-
capitulative statements is not uniform 
among Member States, thus increasing 
the administrative burden on traders 
operating in more than one Member 
State (see paragraphs 73 to 75).

Recommendation 5

The Council should approve the Com-
mission’s proposal on joint and several 
liability.

Recommendation 3

The Commission should propose legis-
lative amendments enabling effective 
cross-checks between customs and tax 
data.

Improving the Eurofisc 
early-warning system to 
better target high-risk 
traders

115 
Member States consider Eurofisc to be 
an efficient early-warning system, but 
complained that exchange of informa-
tion is not user friendly, data ex-
changes are slow, and not always well 
targeted. The audit in selected Mem-
ber States also found that data pro-
cessing and access to information was 
a lengthy and cumbersome process, 
relying on Excel spreadsheets which 
are distributed to liaison officers of 
Member States, with risks of transmit-
ting incomplete or wrong information. 
The feedback is often provided to the 
originating country with substantial 
delays (see paragraphs 48 to 55).

Recommendation 4

The Commission should recommend 
to Member States to:

(a)  introduce a common risk analysis 

including the use of social network 
analysis to ensure that the informa-
tion exchanged through Eurofisc is 
well targeted to fraud;

(b)  improve the speed and frequency 
of these information exchanges;

Conclusions and recommendations

42

Recommendation 6

Recommendation 8

The Commission should propose to 
amend the VAT directive with a view 
to achieving further harmonisation of 
Member States’ VAT reporting require-
ments for intra-Community supplies of 
goods and services.

117 
Evidence shows that upon introduc-
tion of reverse charge in one or more 
Member States, fraudsters move to 
the Member State in which the reverse 
charge is not applied. (See paragraphs 
86 to 89).

Recommendation 7

The Commission should encourage 
Member States to better coordinate 
their policies on reverse charges, as 
already done, for example, in the emis-
sions trading scheme.

The Commission in the context of its 
evaluation of the administrative co-
operation arrangements should carry 
out monitoring visits to Member States 
selected on a risk basis. These moni-
toring visits should focus on improv-
ing the timeliness of Member States’ 
replies to information requests, the 
reliability of VIES, the speed of multi-
lateral controls, and the follow-up of 
the findings of its previous reports on 
administrative cooperation.

Recommendation 9

Member States which have not  
already done so, should implement 
a two-tier VAT ID No (VAT ID No allo-
cated to traders wishing to take part 
on intra-Community trade which is 
different than domestic VAT ID No) and 
conduct the checks foreseen in Article 
22 of Regulation No 904/2010 while 
providing free advice to traders.

Improving the 
administrative 
cooperation 
arrangements

118 
The Commission has proposed sev-
eral legislative measures allowing 
Member States to set up an adequate 
framework for exchanging information 
between their tax authorities to fight 
against intra-Community VAT fraud 
but their use among Member States 
is still poor and some of them need to 
be strengthened or more consistently 
applied (see paragraphs 26 to 47 and 
56 to 70).

Recommendation 10

Member States should send letters of 
formal notice to traders involved in 
fraudulent chains to facilitate the ap-
plication of the case-law of the Court 
of Justice of the EU (CJEU) in Cases Kit-
tel/Mecsek and refuse either the right 
to deduct input tax or the right to sup-
ply with zero rate on the basis that the 
trader knew or ought to have known 
its transactions were connected with 
fraudulent tax losses.

Conclusions and recommendations

43

119 
Member States need information from 
non-EU countries to enforce VAT col-
lection of e-commerce B2C services 
and intangibles supplied via internet. 
(See paragraphs 90 to 92).

Recommendation 11

To strengthen cooperation with non-
EU countries and enforce VAT col-
lection on e-commerce B2C services 
and intangibles supplied from them, 
Member States should:

(a)  authorise the Commission to ne-

gotiate mutual assistance arrange-
ments with the countries where 
most of the digital service provid-
ers are established and sign these 
arrangements; and

(b)  for those Member States which be-
long to the OECD, sign and imple-
ment the OECD’s Convention on 
Mutual Administrative Assistance 
in Tax Matters in order to exchange 
information on digital services 
providers with third countries.

Improving cooperation 
between administrative, 
judicial and law 
enforcement authorities

120 
Intra-Community VAT fraud is often 
linked with organised criminal struc-
tures. This calls for the adoption of 
a better common and multidisciplinary 
approach to tackle intra-Community 
VAT fraud. However, there are a num-
ber of authorities and bodies with 
overlapping competences to fight 
against intra-Community VAT fraud 
who are not fully cooperating and 
exchanging information with each 
other due to legal constraints (see 
paragraphs 93 to 102).

Recommendation 12

The Commission and Member States 
should remove legal obstacles pre-
venting the exchange of information 
between administrative, judicial and 
law enforcement authorities at na-
tional and EU level. In particular, OLAF 
and Europol should have access to 
VIES and Eurofisc data and Member 
States should benefit from intelligence 
information supplied by them.

Conclusions and recommendations

44

Recommendation 14

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-Commu-
nity VAT fraud.

121 
One of the existing elements of a mul-
tidisciplinary approach at EU level is 
the operational action plans (OAPs) set 
up by Member States and ratified by 
the Council under the umbrella of the 
Empact initiative, which cover the pe-
riod 2014-2017. However, the viability 
and sustainability of the OAPs is at risk 
because of a lack of EU funding (see 
paragraphs 104 to 109).

Recommendation 13

The Commission should ensure the 
sustainability of the OAPs under the 
Empact initiative by providing suffi-
cient financial resources.

122 
VAT fraud could go unpunished due to 
negative conflicts of jurisdiction if the 
PIF directive and the EPPO regulation 
do not include VAT within their scope 
(see paragraphs 110 to 111). VAT fraud 
can also go unpunished because of 
too short limitation periods, as em-
phasised by the Court of Justice in its 
judgment of 8 September 2015 (case 
C-105/14 Taricco). As ruled by the Court 
of Justice of the EU, VAT fraud affects 
the financial interests of the EU.

This report was adopted by Chamber IV, headed by Mr Milan Martin CVIKL,  
Member of the Court of Auditors, in Luxembourg at its meeting of 15 December 
2015.

For the Court of Auditors

Vítor Manuel da SILVA CALDEIRA
President

 
 
 
Annexes

45

I
x
e
n
n
A

Audit approach at the level of the Commission

We performed the audit at the Commission in two stages, a preparatory stage and the audit fieldwork.

1 

During the preparatory stage, we carried out information-gathering visits to DG Taxation and Customs 
Union and OLAF. We discussed the audit methodology (audit questions, criteria and standards), including 
the audit methodology in the Member States, and received the Commission’s feedback and suggestions. 
DG Taxation and Customs Union granted the auditors access to the main database on imports, the web-
surveillance 2 database. We discussed the main roles and challenges of each directorate-general in the 
fight against VAT fraud and collected relevant documents.

 We examined pertinent performance information, such as DG Taxation and Customs Union’s activity 
statement accompanying the 2013 preliminary draft budget and DG Taxation and Customs Union’s 2013 
Annual Activity Report, together with the status of the implementation of the EU anti-VAT fraud strategy 
and the 2014 Commission reports on administrative cooperation in the field of VAT and on the effective-
ness of VAT collection.

 We also carried out information-gathering visits to the chair of Eurofisc, to Europol and to Eurojust, where 
we presented the audit, discussed their respective roles, responsibilities and challenges in the fight 
against VAT fraud and collected relevant documents and information.

 We made an information-gathering visit to the OECD and discussed questions relevant to the audit, such 
as the VAT revenue ratio, mutual assistance and exchanges of information on tax matters, missing trader 
fraud, MLCs, joint audits, and taxation of digitally supplied services and intangibles (e-commerce). We 
examined the most recent OECD reports and guidelines relevant for VAT.

 We examined and discussed with representatives of the VAT Working Group of the EU Supreme Audit 
Institutions their latest and ongoing audit activities on VAT.

 
 
 
 
 
Annexes

46

2 

I
x
e
n
n
A

During the audit fieldwork we presented to the Commission the results of the survey to Member States. 
We also presented the general questionnaire addressed to the Commission. This general questionnaire 
handled the current developments and gathered evidence of the Commission’s activities in the areas of 
administrative cooperation, the follow-up of our Special Report on customs procedure 42, reverse charge, 
e-commerce and effectiveness of VAT collection, including the cooperation between administrative, judi-
cial and law enforcement authorities among Member States and European bodies. This general question-
naire was replied to by DG Budget, DG Migration and Home Affairs, DG Justice and Consumers, OLAF and 
DG Taxation and Customs Union.

 To assess the effectiveness of cooperation between administrative, judicial and law enforcement authori-
ties we addressed the Council and examined its main documents concerning Empact, OAPs and customs 
procedure 42.

 We sent a second questionnaire to DG Taxation and Customs Union to verify whether the Commission 
had duly followed up the transposition by Member States of the different amendments to the VAT direc-
tive addressing VAT fraud.

 We discussed with DG Taxation and Customs Union the methodology followed by the Commission’s 
contractor in the available studies to estimate the VAT gap. We also sent a third questionnaire to DG Taxa-
tion and Customs Union to assess this methodology and put relevant questions on this topic to the tax 
authorities of Italy, Latvia and the United Kingdom.

 At OLAF we collected audit evidence concerning the relevant JCOs and investigations on customs proce-
dure 42 and undervaluation.

 In the visited Member States we interviewed the Fiscalis liaison officers. We also examined the mid-term 
and final reports on the evaluation of Fiscalis 2013, together with the output of the Fiscalis project groups 
relevant to the fight against VAT fraud, and carried out tests in the visited Member States on a sample of 
administrative tools financed by Fiscalis (see Annex II).

 
 
 
 
 
 
Annexes

47

I
I
x
e
n
n
A

Audit approach at the level of customs and tax authorities in Member States

We also carried out the audit in Member States in two stages, a preparatory stage and the audit fieldwork.

1 

2 

During the preparatory stage we sent a survey to all 28 Member States’ Central Liaison Officers in charge 
of administrative cooperation. With this survey we learned Member States’ views on the effectiveness of 
administrative cooperation in the area of tackling VAT fraud related to intra-Community transactions.

 We also examined the available Eurofisc annual activity reports, the statistics on administrative coopera-
tion, Eurofisc fraud signals, O_MCTL messages and imports under customs procedure 42.

During the audit field work, we visited the tax and customs authorities of Germany, Hungary, Italy, Latvia 
and the United Kingdom, interviewing the Central Liaison Officers and other authorities in charge of VIES, 
Eurofisc, Fiscalis and MLCs, using a questionnaire to gather evidence on these areas.

 In each Member State we selected a sample of VIES registrations, administrative cooperation tools and 
intra-Community transactions. A total of 110 items was selected in each Member State with the following 
approach:

(a) 

to verify whether VIES meets the requirements of completeness, accuracy and timeliness laid down in 
Articles 22 and 23 of Council Regulation No 904/2010, we selected two samples:

(i)  a random sample of O_MCTL messages sent (10) and received (10) by the Member State in the 

first half of 2014; and

(ii)  a random sample of 10 files of traders newly registered in VIES in 2013;

(b)  to verify both the effectiveness of exchanges of information on request and their compliance with 
Articles 7 to 12, we selected a random sample of SCAC requests sent (10) and received (10) in 2013;

(c) 

to check both how effectively Member States are cooperating with each other and their compliance 
with Articles 29 and 30, we selected a risk-based sample of five MLCs in which the tax authorities of 
the visited Member State took the initiative and five MLCs in which the tax authorities of the visited 
Member State participated at the request of other Member States. The sample referred to the year 
2013 and, if the minimum sample size was not reached, to the previous and following years;

(d)  to check the effectiveness of Eurofisc WF1 we selected a risk-based sample of 10 fraud signals sent 

and received by each visited Member State in 2013; and

(e)  as a follow-up of our previous audit on customs procedure 42 and to test how customs and tax 

authorities are cooperating with each other and with other Member States’ authorities, e.g. by using, 
when needed, Eurofisc WF3, and to check the completeness of VIES data, we selected a risk-based 
sample of 30 imports under CP.

 Finally, we examined the available reports of audits on Eurofisc carried out by the Supreme Audit Institu-
tions of Germany, Hungary and Austria.

 
 
 
 
Annexes

48

I
I
I
x
e
n
n
A

ECA control model on customs procedure 42

This control model was adopted by the Court in its Special Report No 13/2011.

1 

2 

3 

4 

5 

6 

7 

8 

Compulsory indication in box 44 of the SAD of a valid VAT ID No of both the importer (or his tax repre-
sentative) and the customer or the importer himself in the case of transfers in the Member State of des-
tination. VIES verification of the validity of these VAT ID Nos prior to the release of goods for free circula-
tion. Otherwise, VAT is due upon importation.

A reference to the evidence of the intended transport to the Member State of destination, e.g. transport 
document No, and the country of destination code are shown, respectively, in boxes No 44 and 17(a) of 
the SAD. Otherwise the customs declaration should be corrected.

Customs authorities verify ex post using proper risk management techniques that transport to the Mem-
ber State of destination indicated in box 17(a) of the SAD was actually carried out shortly after the import, 
that the goods supplied to the Member State of destination are the same as the goods imported, that 
the importer and the supplier of goods are the same person, and that the customs valuation and the VAT 
taxable amount are correct. If the requirements above are not fulfilled VAT is recovered ex post. When 
there is an understatement of the taxable amount, tax authorities request the trader to correct the value 
of the corresponding intra-Community supplies or transfers of goods in the recapitulative statement, if 
necessary.

Automatic exchange of information between the customs and tax authorities of the Member State of 
importation concerning these imports.

Tax authorities of the Member State of importation notify as soon as possible risky imports to the Mem-
ber State of destination through Eurofisc working field three.

Tax authorities compare the information received from the customs authorities with the VAT recapitula-
tive statement lodged by the importer (or his tax representative) in order to ensure the completeness/ac-
curacy of the latter. If the amounts reported herein are less than the VAT taxable amount of the imports, 
the tax risk management system should decide whether further investigation of the difference is needed 
having regard to the risk factors arising in the case.

Where the recapitulative statement is not submitted or the information therein is not complete/accu-
rate, tax authorities in the Member State of destination are informed using administrative cooperation 
arrangements.

Tax authorities in the Member State of destination compare the information received from other Mem-
ber States with the VAT returns submitted by the customer (acquirer) or the importer itself in the case of 
transfers.

 
Reply of the  
Commission

Executive summary

IV (a)
See Commission reply to paragraph V(b).

The Commission considers that the detailed 
arrangements concerning the checks to implement 
the relevant Union legislation fall under the Mem-
ber States’ (MS’) responsibility. The Commission 
has drawn MS’ attention in a general manner to the 
importance of effective checks on the collection of 
VAT.

V (a) 
The Commission accepts this recommendation.

The Commission notes that there is very limited 
information available in Member States on the size 
of intra-Community VAT fraud. There are very few 
countries which estimate the size of intra-Commu-
nity fraud; even these countries do not publish the 
methodology used, and the estimates themselves 
are mostly confidential.

The Commission has taken specific actions in order 
to improve estimations:

—  The Commission services (Eurostat and DG 

Taxation and Customs Union) are working on 
a memorandum of understanding (MoU) to bet-
ter define the areas of future cooperation with 
the goal to explore data and methods for tax 
gap estimations and for other indicators of tax 
evasion and avoidance.

—  The Tax Gap Project Group was established 
under the Fiscalis 2020 programme to pool 
knowledge and exchange information on the 
methodologies of tax gap estimations. Hereby 
also the aspects of estimating tax fraud are 
considered.

49

V (b)
The Commission does not accept this 
recommendation.

The Commission has provided for legislation that 
ensures that the information referred to in Article 
143(2) of Directive 2006/112/EC is available in the 
customs declaration1. The Commission considers 
that Member States have sufficient information 
and competent MS authorities have access to these 
data in order to carry out the effective cross-checks 
between customs and VAT data.

For the cross-border exchange of information there 
are clear legal frameworks established for both tax 
and customs competent authorities. An additional 
layer of information exchange between customs 
and tax authorities in the context of the customs 
42 procedure is dealt with within the Eurofisc 
network.

It is the responsibility of Member States to provide 
for the implementation of Union legislation and to 
collect taxes legally due. Therefore the Commis-
sion does not recognise the need for additional 
legislation.

V (c)
The Commission accepts the recommendation. 
It already participates in the meetings of Eurofisc 
working fields and it will continue to encourage 
Member States to improve the functioning of the 
network and enhance its efficiency.

V (d)
The Commission does not accept the 
recommendation.

See reply under Recommendation 7.

1  See Commission Implementing Regulation (EU) No 756/2012 of 
20 August 2012 amending Regulation (EEC) No 2454/93 laying 
down provisions for the implementation of Council Regulation 
(EEC) No 2913/92 establishing the Community Customs Code 
(O.J. L 223 of 21 August 2012, page 8). 

Reply of the Commission 

50

V (e)
The Commission accepts the recommendation. It 
already looks at these issues during its evaluation 
reports presented in different fora, where it con-
tinuously encourages and urges Member States 
to improve the timeliness of the replies and the 
reliability of the VIES data. In the next reports the 
Commission intends to follow up on its recommen-
dations and on the recommendations following 
from the Fiscalis project groups.

V (f)
The Commission accepts the recommendation to 
the extent that it is addressed to its services.

See Commission reply to recommendation 12.

Observations

19
Upon the initiative of the Commission, the Tax Gap 
Project Group was established under the Fiscalis 
2020 programme to pool knowledge and exchange 
information on the methodologies of tax gap 
estimations. This project group also considers the 
aspects of estimating tax fraud.

20
There is limited information available in Member 
States on the size of intra-Community VAT fraud. 
The very few countries which estimate the size of 
intra-Community fraud do not usually make this 
data publicly available and the applied methodol-
ogy is mostly confidential.

22
The methodology employed in the studies is based 
on a top-down approach, as the Commission does 
not have access to any data which could be used to 
produce estimates with the bottom-up approach. 
The disadvantage of the top-down approach is that 
the results cannot be deconstructed according to 
industrial sectors or other criteria (e.g. fraud).

23
The Commission requests annually data on the ben-
efits and results of the administrative cooperation 
with the statistical model.

25
As mentioned before, the Commission has taken 
specific actions in order improve estimations:

—  The Commission services (Eurostat and DG 

Taxation and Customs Union) are working on 
a memorandum of understanding (MoU) to bet-
ter define the areas of future cooperation with 
the goal to explore data and methods for tax 
gap estimations and for other indicators of tax 
evasion and avoidance;

—  the Tax Gap Project Group was established 
under the Fiscalis 2020 programme to pool 
knowledge and exchange information on the 
methodologies of tax gap estimations. This pro-
ject group also considers the aspects of estimat-
ing tax fraud.

30
The Commission believes that there has to be a bal-
ance found between the timeliness of the replies 
and their quality. Nevertheless, the Commission has 
already raised this issue with the Member States 
and invited those with the highest record of late 
replies to improve the situation.

43
The Commission does not have access to opera-
tional data that Member States put at the disposal 
of other Member States’ competent authorities 
through VIES which limits the possibilities for the 
Commission to monitor the improvement of such 
measures.

59
The Commission is considering the opportunity 
of carrying out targeted visits to Member States 
to assess the national implementation of the EU 
administrative cooperation arrangements, in view 
of the future reports.

Reply of the Commission 

51

Common Commission reply to 
paragraphs 65 and 66
The Commission believes that the new performance 
measurement framework put in place in April 2014 
with the new iteration of the Fiscalis 2020 pro-
gramme should facilitate the monitoring of the 
programme and of its activities. As such, the data 
collected during the lifetime of the programme 
should constitute an improved basis for assessing 
and evaluating the programme’s effectiveness.

Common Commission reply to 
paragraphs 78 and 79
The Commission considers that the detailed 
arrangements concerning the checks to imple-
ment the relevant Union legislation fall under the 
MS’ responsibility. This includes the organisation 
of the cooperation between national customs and 
tax authorities. The Commission will draw Member 
States’ attention to the importance of the informa-
tion given by declarants in box 44 of the customs 
declaration being complete and correct. 81

Customs controls are based on a risk analysis2. The 
Commission will draw Member States’ attention to 
the importance of checks relating to the informa-
tion given by declarants in the customs declaration.

2  Article 13(2) of Council Regulation No 2913/92 of 12 October 

1992 establishing the Community Customs Code

83
The Commission underlines that, while undervalu-
ation causes serious problems for the collection 
of customs duties, the loss of VAT linked to such 
undervaluation at the time the goods are imported 
is definite only when the importer has no full right 
to deduct the input VAT. In other cases the VAT is 
intermediate and calculated on the subsequent 
sales price, i.e. the original customs value at impor-
tation is no longer relevant for the amount of VAT 
due. The Commission acknowledges that goods 
(e.g. textiles and shoes) can be diverted to the black 
market of the importing Member State.

85
The Commission has drawn MS’ attention in a gen-
eral manner to the importance of effective imple-
mentation of Union legislation with a view to the 
collection of VAT. Cases of possible non-compliance 
will be followed up adequately.

90
The Commission firmly believes that a simplified 
system for registration and payment of tax, such 
as the Mini-One-Stop-Shop (MOSS), is essential for 
ensuring taxation from non-resident suppliers. Such 
a system means that compliance checks can be 
focused initially on businesses who are not regis-
tered (either through the Mini-One-Stop-Shop or 
directly registered in the country of destination).

In respect of the 2015 changes, early results indi-
cate that the Mini-One-Stop-Shop, applicable since 
1/1/2015, is likely to generate EUR 3 billion in 2015; 
representing EUR 18 billion in sales. Currently more 
than 11 000 businesses are registered in MOSS 
(there could be a further 100 000 smaller businesses 
covered by the provision that market places such as 
the online application/music/movie stores account 
for the VAT on behalf of the developer/artist).

Reply of the Commission 

52

92
In advance of the 2015 changes, the Commission 
undertook an intensive communication campaign. 
It is estimated that revenues from 3rd countries will 
have at least tripled in 2015 compared to previ-
ous years (e.g. DE reported that they received EUR 
24.2 million in Q1 2015 alone from non-EU suppli-
ers). Nevertheless, the Commission recognises the 
compliance challenges and has therefore estab-
lished a Fiscalis project group (FPG38) which is cur-
rently finalising a report with recommendations to 
improve control in the field of e-commerce.

95
The Commission recalls that it has proposed to 
create a European Public Prosecutor’s Office which 
would be tasked with investigating and prosecuting 
fraud affecting the EU budget. The proposed regu-
lation for a European Public Prosecutor’s Office is 
currently under discussion in the Council of the EU.

99
See Commission’s reply to par 78.

101
The Commission supports access for Europol and 
OLAF to VIES and Eurofisc data as a vital tool to 
enable both organisations to better fulfil their task 
of supporting investigations by Member States and, 
in OLAF’s case, to conduct investigations into intra-
Community VAT fraud.

The multiannual strategic plan related to the EU 
crime priority ‘MTIC/Excise fraud’ specifically identi-
fies the ‘lack of a systemic cooperation between 
the law enforcement authorities and tax author-
ities at national and EU level’ as a potential vul-
nerability in the MTIC frauds.

103
Regarding OLAF, the problem lies in the absence of 
clear legal base and tools rather than in the lack of 
coordination with other EU bodies.

108
The problem was solved to a large extent by the 
conclusion of a delegation agreement between the 
Commission and Europol in December 2014, allocat-
ing the necessary amounts currently needed for 
the Empact initiative for the OAPs of 2015 and 2016. 
Beyond 2016, the financing of OAPs will fall within 
the statutory tasks of Europol and hence within 
the regular budget (provided the new regulation 
is adopted). The amendment of the legal financial 
statement, including this aspect, is ongoing.

109
Given the high absorption rate in 2015 the Commis-
sion is considering topping up the 7 million euros 
with an additional 2 million euros. Beyond 2016, the 
financing of OAPs will fall within the statutory tasks 
of Europol and hence within the regular budget 
(provided the new regulation is adopted). The 
amendment of the legal financial statement, includ-
ing this aspect, is ongoing.

Conclusions and recommendations

112
The Commission is constantly discussing with Mem-
ber States possible new initiatives to enhance the 
effectiveness of the administrative cooperation and 
fight against VAT fraud. It supports initiatives taken 
by Member States to enhance the Eurofisc network 
efficiency. The Commission is currently negotiat-
ing an agreement with Norway to allow for better 
and targeted cooperation and other countries with 
important commercial relations with the EU may 
follow in the future.

Recommendation 1
The Commission accepts the recommendation. 
The Commission notes that there is very limited 
information available in Member States on the size 
of intra-Community VAT fraud. There are very few 
countries which estimate the size of intra-Commu-
nity fraud; even these countries do not publish the 
methodology used, and the estimates themselves 
are mostly confidential.

Reply of the Commission 

53

However, the Commission services (Eurostat and 
DG TAXUD) are working on a memorandum of 
understanding (MoU) to better define the areas of 
future cooperation with the goal to explore data 
and methods for tax gap estimations and for other 
indicators of tax evasion and avoidance.

The Tax Gap Project Group was established under 
the Fiscalis 2020 programme to pool knowledge 
and exchange information on the methodologies 
of tax gap estimations. Hereby also the aspects of 
estimating tax fraud are considered.

Recommendation 2
The Commission notes that this recommendation is 
addressed to the Member States.

Recommendation 3
The Commission does not accept this recommenda-
tion. The Commission has provided for legislation 
that ensures that the information referred to in 
Article 143(2) of Directive 2006/112/EC is available in 
the customs declaration3. The Commission consid-
ers that Member States have sufficient information 
and competent MS authorities have access to these 
data in order to carry out the effective cross-checks 
between customs and VAT data. However, to be 
effective, these national cross-checks need to be 
combined with VIES cross-checks.

For the cross-border exchange of information there 
are clear legal frameworks established for both tax 
and customs competent authorities. An additional 
layer of information exchange between customs 
and tax authorities in the context of the customs 42 
procedure is dealt with within the Eurofisc network.

It is the responsibility of Member States to provide 
for the implementation of Union legislation and 
to collect taxes legally due. The Commission has 
drawn MSs’ attention in a general manner to the 
importance of effective checks on the collection of 
VAT.

3  See Commission Implementing Regulation (EU) No 756/2012 of 
20 August 2012 amending Regulation (EEC) No 2454/93 laying 
down provisions for the implementation of Council Regulation 
(EEC) No 2913/92 establishing the Community Customs Code 
(O.J. L 223 of 21 August 2012, page 8). 

However, the Commission will reconsider the issue 
of cross-checks between customs declarations and 
recapitulative statements in the light of the recom-
mendations to be made by the Fiscalis 2020 project 
group.

Recommendation 4 (a) 
The Commission accepts the recommendation.

The Commission concluded in its report that within 
Eurofisc, common risk analysis and an effective 
feedback mechanism would be an appropri-
ate response to the need to have more targeted 
information available and to make better use of the 
information that is already available in the network. 
It would allow the network to further enhance its 
role as a quick reaction from tax administrations 
against cross-border VAT frauds.

Recommendation 4 (b)
The Commission accepts the recommendation.

Recommendation 4 (c)
The Commission accepts the recommendation..

Recommendation 4 (d)
The Commission accepts the recommendation.

Recommendation 4 (e)
The Commission accepts the recommendation.

Recommendation 5
The Commission notes that this recommendation is 
addressed to the Council.

Recommendation 6
The Commission does not accept the 
recommendation.

As set out in the Commission work programme 
2016, a VAT action plan to be adopted in 2016 will 
aim at delivering an efficient and fraud-proof VAT 
regime.

This will include a review of reporting obligations 
such as for intra-EU trade.

Reply of the Commission 

54

Before the outcome of this exercise, the Commis-
sion does not envisage to propose an amendment 
to the VAT directive in this respect.

Recommendation 7
The Commission does not accept the 
recommendation.

The application of the reverse charge mechanism as 
an anti-fraud measure is optional as it is mainly ori-
ented towards specific fraud problems at national 
level.

However, the Commission is aware that the sectorial 
application creates problems and intends to discuss 
the issue of reverse charge in the context of the VAT 
action plan that will be adopted in 2016.

Recommendation 8
The Commission accepts the recommendation. The 
Commission is considering the opportunity of car-
rying out targeted visits to MS to assess the national 
implementation of the EU administrative coopera-
tion arrangements, in view of the future reports.

Recommendation 9
The Commission notes that this recommendation is 
addressed to the MS.

Recommendation 12
The Commission accepts the recommendation 
to the extent that it is addressed to its services. 
It notes at the same time that the recommenda-
tion is also addressed to the Member States and 
implies the mutual responsibility of the legislative 
authority.

The Commission is committed to continue its 
efforts to remove the remaining legal obstacles 
preventing the exchange of information between 
authorities at national and EU level.

121
See Commission reply to paragraph 109.

Recommendation 13
The Commission accepts this recommendation and 
it is already implementing it. A delegation agree-
ment was signed between the Commission and 
Europol at the end of 2014 allocating the necessary 
amounts currently needed for the Empact initiative 
for the OAPS of 2015 and 2016. Beyond 2016, the 
financing of OAPs will fall within the statutory tasks 
of Europol and hence within the regular budget 
(provided that the new regulation is adopted). The 
amendment of the legal financial statement, includ-
ing this aspect, is ongoing.

Recommendation 10
The Commission notes that this recommendation is 
addressed to the MS.

Recommendation 14
The Commission notes that this recommendation 
is addressed to the European Parliament and the 
Council.

Recommendation 11
The Commission notes that this part of the recom-
mendation is addressed to the MS.

Recommendation 11 (b) 
The Commission believes that such information 
exchange could be better achieved and guaran-
teed through an EU approach and the conclusion 
of bilateral agreements between the EU and third 
countries, as is being experienced with Norway.

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Every year, the European Union loses billions of its VAT 
revenues through the activities of organised crime. 
Because exports of goods and services from one EU 
Member State to another are exempt from VAT, criminals 
can fraudulently evade VAT in the Member State of 
destination. The result is lost revenue for the countries 
concerned as well as for the EU. This report examines how 
well the EU is tackling intra-Community VAT fraud. We 
found weaknesses which indicate that the current system 
is not effective enough. These weaknesses need to be 
addressed. It is time to be tough and take more decisive 
action.

EUROPEAN
COURT
OF AUDITORS