COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT Accompanying the document Proposal for a Council Directive amending Directive 2006/112/EC as regards introducing certain requirements for payment service providers and Proposal for a Council Regulation amending Regulation (EU) No 904/2010 as regards measures to strengthen administrative cooperation in order to combat VAT fraud
Date: 2018-12-12
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: European tax cooperation, VAT, administrative cooperation, data processing, electronic banking, electronic commerce, exchange of information, information system, payment system, tax offence

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 12.12.2018  SWD(2018) 488 final  COMMISSION STAFF WORKING DOCUMENT  IMPACT ASSESSMENT  Accompanying the document Proposal for a Council Directive amending Directive 2006/112/EC as regards introducing certain requirements for payment service providers  and  Proposal for a Council Regulation amending Regulation (EU) No 904/2010 as regards measures to strengthen administrative cooperation in order to combat VAT fraud   {COM(2018) 812 final} - {COM(2018) 813 final} - {SEC(2018) 495 final} - {SWD(2018) 487 final}  
 
 
Contents 

LIST OF FIGURES ........................................................................................................................................ 4 

1. 

INTRODUCTION: POLITICAL AND LEGAL CONTEXT ............................................................... 5 

1.1.  The modernisation of the VAT system on B2C cross-border supplies ............. 5 
1.2.  Administrative cooperation ............................................................................... 7 
1.3.  Enforcement ...................................................................................................... 8 

2. 

PROBLEM DEFINITION .................................................................................................................... 9 

2.1.  E-commerce VAT fraud .................................................................................... 9 
2.1.1.  VAT fraud on cross-border supplies of services ........................................ 10 
2.1.2.  VAT fraud on intra-EU distance sales of goods ......................................... 11 
2.1.3.  VAT fraud on imports of goods ................................................................. 11 
2.2.  Size of the problem .......................................................................................... 12 
2.3.  Problem tree ..................................................................................................... 15 
2.4.  What are the problem drivers? ........................................................................ 15 
2.4.1.  No physical presence of the suppliers ........................................................ 15 
2.4.2.  Relevant VAT information held by third parties ........................................ 16 
2.4.3.  Tax administration tools and capacities ..................................................... 17 
2.4.4.  Other Drivers influencing e-commerce VAT fraud (and addressed by other 
initiatives) .................................................................................................................. 18 
2.5.  How will the problem evolve? ........................................................................ 18 

3.  WHY SHOULD THE EU ACT? ........................................................................................................ 18 

4.  OBJECTIVES: WHAT IS TO BE ACHIEVED? ............................................................................... 19 

4.1.  General objectives ........................................................................................... 19 
4.2.  Specific objectives ........................................................................................... 19 
4.3.  Operational objectives ..................................................................................... 20 
4.4.  Consistency  with  other  EU  policies  and  with  the  Charter  for 

fundamental rights ........................................................................................... 20 

5.  WHAT ARE THE AVAILABLE POLICY OPTIONS? .................................................................... 21 

5.1.  Measures  with  a  positive  impact  on  reducing  the  e-commerce  VAT 

loss introduced with the VAT e-commerce package) ..................................... 21 
5.1.1.  Abolition of the distance sale thresholds and extension of the MOSS....... 21 
5.1.2.  Abolition of the small consignments exemption ........................................ 21 
5.1.3. 
Import One Stop Shop (IOSS) .................................................................... 21 
5.1.4.  Deemed supplier ......................................................................................... 22 
5.2.  Policy options .................................................................................................. 22 
Payment services and payment service providers ...................................... 24 
5.2.1. 
Payment data .............................................................................................. 24 
5.2.2. 
5.2.3. 
Structure of the policy options ................................................................... 25 
5.3.  What is the baseline from which options are assessed? .................................. 26 
5.3.1. 
Policy option 1 – Baseline scenario............................................................ 26 
5.4.  Description of the policy options .................................................................... 27 
Policy  option  2  (non-regulatory):  Investing  in  administrative  capacity  and 
5.4.1. 
providing EU guideline + standard forms ................................................................. 27 

1 

 
 
Policy  option  3  (Regulatory  option):  Collection  and  exchange  of  payment 
28 

5.4.2. 
data 
5.5.  Discarded option .............................................................................................. 31 
5.5.1.  VAT split payment ..................................................................................... 31 
5.5.2.  Direct  access  of  Member  States'  tax  authorities  to  Payment  Service 
Providers' databases .................................................................................................. 31 

6.  WHAT ARE THE IMPACTS OF THE POLICY OPTIONS? ........................................................... 31 

6.1.  Methodology .................................................................................................... 31 
6.2.  Analysis of the impacts ................................................................................... 31 
Impact on VAT fraud ................................................................................. 33 
6.2.1. 
Impact on distortion of competition ........................................................... 39 
6.2.2. 
Impact on administrative burden and compliance costs ............................. 42 
6.2.3. 
Sectoral impacts.......................................................................................... 45 
6.2.4. 
Impact on terms of trade, employment and environment ........................... 46 
6.2.5. 
Impact in terms of the fundamental right to protection of personal data ... 46 
6.2.6. 

7.  HOW DO THE OPTIONS COMPARE? ............................................................................................ 48 

7.1.  Summary assessment of the impact ................................................................. 48 

8. 

PREFERRED OPTION ...................................................................................................................... 50 

8.1. 
Identification of the preferred option .............................................................. 50 
8.2.  Subsidiarity of the preferred option ................................................................. 50 
8.3.  Proportionality of the preferred option ............................................................ 51 
Impact on SMEs .............................................................................................. 51 
8.4. 

9.  HOW WILL ACTUAL IMPACTS BE MONITORED AND EVALUATED? .................................. 52 

Indicators for monitoring and evaluation ........................................................ 52 
9.1. 
9.2.  Monitoring structure ........................................................................................ 52 

10.  ANNEXES .......................................................................................................................................... 53 

10.1.  Annex 1: Procedural information .................................................................... 54 
10.2.  Annex 2: Consultation synopsis report ............................................................ 56 
10.3.  Annex  3:  Evaluation  of  Regulation  (EU)  904/2010  for  cross-border 

Business to Consumer online supplies ............................................................ 67 
10.4.  Annex 4: Who is affected by the initiative and how? ..................................... 92 
10.5.  Annex 5: Methodology .................................................................................... 95 
10.6.  Annex 6: Technical feasibility of the options .................................................. 96 
10.7.  Annex 7: Case Study – pricing policy and estimation of potential VAT 

loss ................................................................................................................. 103 

10.8.  Annex  8:  Result  of  the  TAXUD  2016  survey  on  e-commerce 

compliance strategies in the EU .................................................................... 112 
10.9.  Annex 9: Payment Services framework in the EU ........................................ 114 
10.10.  Annex 10: B2B import VAT fraud ............................................................ 116 
10.11.  Annex 11: Third countries using payment data as VAT control tool ....... 118 
10.12.  Annex 12: Visual examples of the regulatory options .............................. 119 
10.13.  Annex  13:  Comparison  amongst  different  initiatives  in  terms  of 

fighting e-commerce VAT fraud ................................................................... 121 

2 

 
Term or acronym 

Meaning or definition 

GLOSSARY 

B2B 

B2C 

C2C 

EBA 

E-commerce 

E-commerce VAT fraud 

GDPR 

IOSS 

MLCs 

MOSS 

MSC 

MSE 

Business-to-business.  

Business-to-consumers.  

Consumers-to-consumers 

European Banking Authority 

The  sale  or  purchase  of  goods  or  services  through  electronic 
transactions conducted via the internet or other computer-mediated 
(online communication) networks1 

VAT fraud on B2C cross-border supplies of goods and services. It 
covers  intra-EU  distance  sales  of  goods,  imports  of  goods,  and 
cross-border supplies of services (from suppliers established in one 
Member State or in a third country) 

General Data Protection Regulation 

Import One Stop Shop 

Multilateral controls 

Mini One Stop Shop 

Member State of Consumption  

Member State of Establishment  

MTIC Fraud 

Missing Trader Intra-Community  

PSD2 

PSP 

SEPA 

TBE 

VAT 

VC 

Payment Service Directive 2  

Payment Service Providers 

Single euro payment area 

Telecommunications, broadcasting and electronic services 

Value-Added Tax 

Virtual Currencies 

1 Eurostat glossary: http://ec.europa.eu/eurostat/statistics-explained/index.php/Glossary:E-commerce  

3 

 
 
 
 
 
                                                            
LIST OF FIGURES 

Figure 1: Turnover from B2C and B2BG (Businesses and Governments) web sales, 
percentage share on total, non-financial enterprises, EU-28, 2017 .................................. 12 
Figure 2: Sectoral distribution of e-commerce, 2017 ....................................................... 12 
Figure 3: Problem tree ...................................................................................................... 14 
Figure 4: Link between drivers, options (non-regulatory and regulatory) and specific 
objective ........................................................................................................................... 25 
Figure 5: Respondents to the public consultation (number) ............................................. 57 
Figure 6: Country of residence of the respondents to the public consultation (number) . 57 
Figure 7: Perception of the negative impact of VAT fraud in e-commerce ..................... 59 
Figure 8: Proportionality of the initiative ......................................................................... 61 
Figure 9: Subsidiarity of the initiative .............................................................................. 61 
Figure 10: Public consultation: Comparison of policy options ........................................ 61 
Figure 11: Public consultation: Preferred technical choices ............................................ 62 
Figure 12: Public consultation: Exchange of data must not reveal the identity of the 
customer (buyer) ............................................................................................................... 62 
Figure 13: Tax authorities: evaluation of the administrative cooperation tools ............... 63 
Figure 14: Regulation (EU) 904/2010: intervention logic ............................................... 69 
Figure 15: Tax authorities: perceived effectiveness of the administrative cooperation 
tools .................................................................................................................................. 79 
Figure 16: Positive and negative perception on the effectiveness of different 
administrative cooperation tools....................................................................................... 80 
Figure 17: Tax authorities: perception on the administrative cooperation tools .............. 83 
Figure 18 - Public consultation: Public perception of the EU added value...................... 87 
Figure 19: Tax authorities: perception of the EU added value ......................................... 87 
Figure 20: Public consultation: perception on the e-commerce VAT fraud problem ...... 88 
Figure 21: Distributed application exchange of info ...................................................... 118 
Figure 22: Central repository of data.............................................................................. 119 
LIST OF TABLES 
Table 1: Main modalities of fraud on B2C cross-border transactions ................................ 9 
Table 2: Tax administrations' estimates of annual VAT losses, by type, EUR million ... 11 
Table 3 Fraud levels: net impacts over baseline, by option ............................................. 37 
Table 4: Total Member State + EU Commission costs for payments data IT infrastructure 
(EUR million; rounded) .................................................................................................... 42 
Table 5 Audits for which the use of payments data was important ................................. 43 
Table 6: Summary analysis of impacts ............................................................................. 47 
Table 7: Evaluation matrix ............................................................................................... 74 
Table 8: Simplified example of payment data transmitted to a Member State from the 
Payment Service Providers established in that Member State ....................................... 118 
Table 9: Comparison amongst different initiatives in terms of fighting e-commerce VAT 
fraud ................................................................................................................................ 120 

4 

 
 
1. 

INTRODUCTION: POLITICAL AND LEGAL CONTEXT 

Business-to-consumer (B2C) cross-border  supplies of goods and  services  are facilitated 
by  the  rapid  growing  of  the  e-commerce2,  which  offers  more  opportunities  to  both 
businesses  and  consumers.  However,  the  same  opportunities  are  also  exploited  by 
dishonest  traders  –  located  both  inside  and  outside  the  EU  -  to  gain  an  unfair  market 
advantage by not fulfilling the VAT obligations. As private consumers change purchase 
habits  and  suppliers  adapt  their  business  models,  tax  authorities  are  facing  new 
challenges  in  coping  with  B2C  cross-border  VAT  fraud  (hereinafter  e-commerce  VAT 
fraud).  

The  initiative  supported  by  this  impact  assessment  complements  the  current  VAT 
regulatory  framework  as  recently  modified  by  the  VAT  e-commerce  Directive3  in  the 
framework of the Commission Digital Single Market Strategy4. In December 2017, when 
the VAT e-commerce Directive was adopted, the Council stressed the need to strengthen 
cooperation  between  Member  States  in  order  to  tackle  VAT  fraud5.  The  options  taken 
into account in this initiative  have been drafted after consultation with several Member 
States and business representatives (including payment service providers and other online 
platforms) in the framework of the VAT forum6. 

In particular this impact assessment identifies areas where the administrative cooperation 
framework can be improved to better tackle fraud and restore fair competition.  

An evaluation of Council Regulation (EU) 904/2010, on administrative cooperation and 
fighting fraud in the field of VAT is in annex of this report7. The evaluation, based on the 
answers  of the Member  States' tax administrations to  a targeted consultation  and on an 
open  consultation,  shows  that  administrative  cooperation  is  crucial  to  combat  e-
commerce VAT fraud, but the evolution of the business models and fraud patterns in the 
e-commerce  pose  new  challenges  to  Member  States  that  must  be  addressed  with  new 
administrative cooperation tools8.  

1.1.  The modernisation of the VAT system on B2C cross-border supplies 

The  general  rule  applying  to  cross-border  B2C  supplies  of  goods  and  services  as  laid 
down  in  the  VAT  Directive9  is  the  so-called  “destination  principle”:  taxation  in  the 
Member  State  of  consumption.  In  the  EU  VAT  system,  when  applying  the  destination 
principle, in general10, the suppliers of goods and services should register in the Member 

2 In 2016, the e-commerce turnover increased by 15% in Europe and it was expected to reach over EUR 
600 billion in 2017. Source Ecommerce Europe "European B2C E-commerce Report 2017". 
3 Council Directive (EU) 2017/2455 of 5 December 2017 amending Directive 2006/112/EC and Directive 
2009/132/EC as regards certain value added tax obligations for supplies of services and distance sales of 
goods, OJ L 348, 29.12.2017, p. 7 
4 COM(2017) 228 final of 10/5/2017, Implementation of the Digital Single Market Strategy, see: 
https://ec.europa.eu/digital-single-market/en/news/digital-single-market-mid-term-review  
5 Council of the European Union, 14769/1/17 REV 1, 30 November 2017 
6 Commission Decision 2012/C 198/05 of 3 July 2012 setting up the EU VAT Forum, OJ C198 of 6 July 
2012  
7 The evaluation was carried out on the basis of a public consultation, a targeted consultation with the main 
stakeholders concerned, and desk research The evaluation was also built up on the findings of a more 
comprehensive evaluation of Regulation (EU) 904/20210 that was carried out in 2017. See Annex 3 
"Evaluation" 
8 See Annex 3 "Evaluation of Regulation (EU) 904/2010 for cross-border Business to Consumer online 
supplies" 
9 Council Directive 2006/112/EC of 28 November 2006 on the common system of value added  tax OJ L 
347, 11.12.2006, p. 1 
10 Note that here are several exceptions due to the nature of the goods or service traded. For details, see : 
http://ec.europa.eu/taxation_customs/business/vat/eu-vat-rules-topic/where-tax_en  

5 

 
                                                            
State  of  destination  where  the  customer  is  established  or  where  the  goods  arrive  and, 
thus,  comply  with  the  appropriate  set  of  rules  in  each  different  Member  State.  The 
destination principle applies also to B2C supplies from non-EU countries: the suppliers 
are generally liable for the VAT of the Member State where the customer resides. This 
represents  a  significant  complication  for  businesses  both  in  the  EU11  and  in  third 
countries;  the  compliance  burden  is  heavy  enough  to  make  it  plausible  that  part  of  the 
VAT loss generated by non-declaration is due to businesses not understanding their tax 
obligations or finding them too burdensome.  

This problem has been addressed by a recent series of initiatives introducing new rules 
that make it easier for online businesses (both from inside or outside the EU) to comply 
with VAT obligations and to facilitate the collection of VAT for tax administrations.  

In  2015,  a  simplified  electronic  and  registration  system  called  Mini  One  Stop  Shop 
(MOSS)12  entered  into  force  in  the  field  of  telecommunication,  broadcasting  and 
electronically supplied services (TBE). The suppliers that opt for the MOSS can fulfil all 
the VAT obligations (identification, declaration, payments) relating to the TBE supplies 
in  one  single  Member  State  of  their  choice  (instead  of  having  to  register  in  all  the 
Member  States  of  consumption)13.  The  MOSS  represents  a  simplification  for  the 
businesses in the TBE sector and has been a success for the EU Member States in terms 
of  VAT  collection14.  The  recently  adopted  legislation  modernising  the  VAT  system  on 
B2C  cross-border  supplies  (hereinafter  the  VAT  e-commerce  package)  will  extend  the 
MOSS to all supplies of services and goods intra-EU and from outside the EU (as from 
2021)15. 

Furthermore, the VAT e-commerce Directive abolished the thresholds on distance sales16 
and  the  threshold  on  small  consignment  exemptions  on  importation17  that  add 
complications for businesses and are exploited by fraudsters to avoid the payment of the 
due VAT (See section 2.1.2 and section 2.1.3). 

Finally,  a  new  provision  in  the  VAT  Directive18  will  make  online  market  places, 
platforms and portals "deemed suppliers" for the sales of goods facilitated through their 
electronic  interfaces.  They  will  be  deemed  to  have  received  and  supplied  those  goods 
themselves for a) distance sales of goods imported from third territories or third countries 
not  exceeding  the  value  of  EUR  15019  and  b)  the  B2C  supplies  of  goods  which  are 

11See:https://www.ecommerce-europe.eu/app/uploads/2016/07/survey-barriers-to-growth-ecommerce-
europe-2015-1.pdf  
12See:https://ec.europa.eu/taxation_customs/business/vat/telecommunications-broadcasting-electronic-
services_en#current_rules  
13 The Member State of identification will then redistribute the collected VAT to all the Member States of 
consumption 
14The MOSS led to a collection of EUR 3 billion of VAT in 2015 and EUR 3.2 billion in 2016. 88% was 
collected under the Union scheme. Source: Commission services 
15See:https://ec.europa.eu/taxation_customs/business/vat/digital-single-market-modernising-vat-cross-
border-ecommerce_en   
16 Member States must apply a threshold of either EUR 35 000 or EUR 100 000, Article 34 of Directive 
2006/112/EC: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2006:347:0001:0118:en:PDF 
17 Article 23 of Council Directive 2009/132/EC of 19 October 2009 provides that goods of a total value not 
exceeding EUR 10 shall be exempt on import. Member States may grant exemption for imported goods of 
a total value of more than EUR 10, but not exceeding EUR 22 and can exclude goods imported on mail 
order (including e-commerce channels). The exemption excludes excisable goods 
18 New Article 14a of the VAT Directive as amended by Council Directive (EU) 2017/2455 of 5 December 
2017  amending  Directive  2006/112/EC  and  Directive  2009/132/EC  as  regards  certain  value  added  tax 
obligations for supplies of services and distance sales of goods, OJ L 348, 29.12.2017, p. 7 
19 Above the value of EUR 150 a full customs declaration is required. The Import One Stop Shop system 
can only be applied for goods sold to private consumers in the EU and being imported from third countries 

6 

 
                                                            
 
already  in  the  EU  (i.e.  in  fulfilment  centers)  by  non-EU  established  taxable  persons 
facilitated through these platforms. This measure also represents a simplification for the 
tax authorities of the Member States that will be able to collect the VAT due on certain 
B2C  supplies  of  goods  and  imports  directly  from  a  single  taxable  person  (the  deemed 
supplier)  and  not  from  numerous  suppliers  not  established  in  the  EU.  However,  under 
this  provision,  the  tax  authorities  will  not  be  able  to  detect  or  control  fraudulent 
transactions.  Also  under  the  deemed  supplier  provision  Member  States  will  have  the 
same need they currently have to check that all the transactions are declared, or correctly 
declared.  

The  recently  adopted  measures  are  designed  to  reduce  the  administrative  burdens, 
facilitate  compliance  and  making  the  VAT  system  more  fraud  proof  by  abolishing  the 
thresholds  on  distance  sales  and  on  the  exemption  for  small  consignments.  While  they 
modernised the VAT system in order to make it easier for businesses trading cross-border 
to comply with their obligations and for tax authorities to collect VAT, no adequate and 
new  administrative  cooperation  instruments  had  been  introduced  to  address  the 
specificities of the e-commerce VAT fraud.  

The  consultation  supporting  this  impact  assessment,  showed  that  the  magnitude  of  the 
problem is  still unknown by some  of the Member States  because  of the lack  of data at 
disposal of tax administrations20. However, recent fraud cases in the field of e-commerce 
raised  now  the  need  to  provide  tax  authorities  with  new  tools  addressing  the  specific 
problem (see section 2). 

1.2.  Administrative cooperation 

As stressed by the experts of tax authorities and businesses in the framework of the EU 
VAT  Forum21,  the  traditional  cooperation  to  combat  VAT  fraud  is  between  tax 
authorities  and  is  based  on  records  held  by  the  businesses  directly  involved  in  the 
transaction chain. In the cross-border B2C supplies, this information may not be directly 
available and thus the "traditional" cooperation between tax authorities is not enough22. 

In fact, the evaluation showed that the current administrative cooperation tools are used 
to a very limited extent (only five Member States reported to have received spontaneous 
information  on  e-commerce  VAT  fraud23  and  half  of  the  respondent  Member  States 
reported difficulties in receiving information on request from the other Member States on 
e-commerce VAT fraud). The number of requests for information to other Member States 
on e-commerce VAT fraud is still very low (in 2017 only 319 requests) compared to the 
total number of requests for information processed by the Member States in the field of 
VAT (in 2017 more than 45.000). The reason of these difficulties lies in the lack of third 
party data, as pointed out by the experts of the e-commerce sub group of the VAT forum. 

The  Commission  proposal  recently  agreed  by  the  Council24  amending  Council 
Regulation  (EU)  No  904/2010  as  regards  measures  to  strengthen  administrative 

up to a value of EUR 150. Therefore, the deeming provision is limited to importation of such goods when 
their value remains under EUR 150.  
20 See Annex 2, "Consultation synopsis report". 
21 Commission Decision 2012/C 198/05 of 3 July 2012 setting up the EU VAT Forum, OJ C198 of 6 July 
2012  
22  Consolidated  report  on  Cooperation  between  Member  States  and  Businesses  in  the  field  of  e-
Commerce/modern  commerce,  p.  5.  See:  https://ec.europa.eu/taxation_customs/business/vat/vat-reports-
published_en  
23 See Annex 3, "Evaluation of Regulation (EU) 904/2010 for cross-border Business to Consumer online 
supplies" 
24 http://www.consilium.europa.eu/media/35761/st10203-en18.pdf 

7 

 
                                                                                                                                                                                 
cooperation  in  the  field  of  VAT25  will  provide  for  new  tools  on  administrative 
cooperation  between  tax  administrations  mainly  addressed  to  fight  the  so-called 
“carousel  fraud”  (carried  out  on  business-to-business  B2B  transactions),  the  fraud 
involving  the  margin  scheme  applicable  to  second-hand  cars  and  the  fraud  exploiting 
specific customs regimes applicable to imports carried out by taxable persons (again on 
B2B  transactions).  In  addition,  Eurofisc  officials  will  be  entitled  to  exchange  relevant 
information  on  VAT  fraud  cases  with  Europol  and  the  European  Anti-Fraud  Office 
(OLAF).  However,  the  above  proposal  will  not  affect  VAT  fraud  on  cross-border  B2C 
transactions.  The  peculiarity  of  the  B2C  e-commerce  schemes  was  mentioned  in  the 
Commission VAT Action plan26. In particular, the Commission pledged to address VAT 
fraud  in  the  electronic  commerce  sector  by  means  of  specific  anti-fraud  tools  for  tax 
administrations,  in  cooperation  with  third  parties  that  facilitate  the  B2C  cross  border 
supplies of goods and services27. Therefore, this initiative is to be seen as complementary 
to  the  above  mentioned  amendments  to  Regulation  (EU)  904/2010  to  strengthen 
administrative cooperation in the field of VAT, by giving tax authorities the sources of 
information they are currently unavailable to them, as pointed out by the experts of the e-
commerce sub group of the VAT forum. 

1.3.  Enforcement 

The detection of fraudsters established in a state different from the one of consumption is 
only  a  first  step  for  tax  administrations.  Making  the  fraudsters  comply  with  VAT 
obligations (i.e. VAT registration, VAT declaration and VAT payment) is a subsequent 
step  to  be  addressed  through  enforcement  measures,  which  are  not  part  of  this  impact 
assessment  and  of  the  future  proposal.  Still,  as  a  matter  of  consistency,  it  is  worth 
mentioning enforcement initiatives related to this anti-fraud initiative. When the remote 
suppliers are established in the EU, the tax authorities of the EU Member States can use 
the  European  mutual  assistance  framework28  to  notify  documents  and  apply  recovery 
measures.  However,  when  the  remote  suppliers  are  established  outside  the  EU  the 
enforcement may be more difficult. Member States can activate international cooperation 
under  bilateral  agreements  or  the  Council  of  Europe/OECD  multilateral  Convention  on 
administrative  cooperation  on  tax  matters29.  Nevertheless,  even  in  this  case,  some 
countries  apply  the  reservation  of  the  Convention  excluding  VAT  (and  other 
consumption taxes) from its scope30. 

This problem is internationally recognised and the OECD recommends strengthening the 
international administrative cooperation on VAT or sales tax to address the challenges of 
collecting VAT from non-resident suppliers, particularly in B2C trade31. A step forward 
in this respect is the Agreement between the European Union and Norway in the field of 
VAT  administrative  cooperation  (concluded  in  June  201832)  that  also  includes  specific 
instruments for the recovery of VAT claims.  

25 COM(2017)706 final 
26COM(2016) 148 final, point 3.4  
27Point 6 of 20 measures to tackle the VAT gap, annex to the VAT Action plan  
28 Council Directive 2010/24/EU of 16 March 2010 OJ L 84, 31.3.2010, p. 1. 
29See:http://www.oecd.org/ctp/exchange-of-tax-information/convention-on-mutual-administrative-
assistance-in-tax-matters.htm  
30See: https://www.coe.int/en/web/conventions/search-on-treaties/-/conventions/treaty/127/declarations  
31  2017  OECD’s  International  VAT/GST  Guidelines  and  the  BEPS  Report  on  “Addressing  the  Tax 
Challenges  of  the  Digital  Economy”,  see:  http://www.oecd.org/tax/international-vat-gst-guidelines-
9789264271401-en.htm 
32See: 
http://dsms.consilium.europa.eu/952/Actions/Newsletter.aspx?messageid=22950&customerid=52749&pas
sword=enc_665135434B47373431325650_enc/  

8 

 
                                                            
The present initiative will give Member States the evidence to detect fraudsters in third 
countries  as a  first  step to  activate international cooperation or  to open an international 
dialogue to reinforce administrative cooperation tools.  

2.  PROBLEM DEFINITION 

2.1.  E-commerce VAT fraud 

VAT  non-compliance  can  be  essentially  ascribed  to  two  main  categories  of  taxpayers: 
suppliers  (basically  small  and  medium  enterprises)  not  fulfilling  VAT  obligations 
because of the complexity of the system and suppliers not fulfilling the VAT obligations 
to intentionally gain illicit market advantages. Tax simplification policies can reduce the 
type  of  non-compliance  deriving  from  administrative  burden  avoidance,  but  cannot 
address  intentional  non-compliance  (fraud).  While  the  initiatives  described  in  point  1.1 
addressed the first problem, this initiative addresses VAT fraud only.  

In particular, the problem at stake refers to VAT fraud on cross-border suppliers to final 
consumers (B2C). Also a taxable person can buy goods and services online from another 
taxable person (B2B). However, in this case the tax administration of the Member State 
of  Consumption  (MSC),  where  the  VAT  is  to  be  paid,  can  in  principle  trace  back  the 
transaction chain through the records held by the taxable person acquiring the goods and 
services in  its  own  jurisdiction,  and  subject  to  record-keeping  obligations33.  This  is not 
the  case  for  cross-border  B2C  supplies  where  the  consumer  has  no  record-keeping 
obligations.  Furthermore,  consumers,  unlike  taxable  persons,  do  not  recover  the  VAT 
paid  on  their  purchases.  Therefore,  in  a  B2C  sale,  the  buyer  has  a  clear  economic 
incentive  to  avoid  the  tax.  Unscrupulous  suppliers  face  the  same  incentive  because 
avoiding  VAT  will  allow  them  to  set  prices  lower  and  undercut  the  competition  from 
law-abiding businesses. Finally, it should be noted that VAT fraud on B2B transactions 
(in  particular  Missing  Traders  and  carousel  fraud)  is  tackled  already  by  the  recently 
adopted amendments to Regulation (EU) 904/2010 (see section 1.2). 

When  dealing  with  B2C  cross-border  supplies,  the  following  VAT  fraud  patterns  have 
been identified (domestic transactions are out of scope): 

  The supplier might not register at all for VAT (non-registration);  
  The supplier might register but not declare or pay VAT (in total or partially);  
  The supplier might under-declare the value of the goods;  
  Upon importation, the supplier might mis-describe the good on the package (i.e. 
as  sample,  gift…)  or,  under-declare  its  value  (for  example,  to  profit  from  the 
VAT exemption of packages under a value of 10/22 euros); 

  The  supplier  might  submit  his  VAT  declaration  and  pay  VAT  in  the  wrong 

Member State (for example, to profit from a lower VAT rate). 

The above-mentioned cases can apply to three types of cross-border B2C transactions: 

  Cross-border supplies of services in the cases where the destination principle is of 

application (both intra-EU and from suppliers located outside the EU34); 
Intra-EU distance sales of goods;  
Imports of goods from non-EU countries. 

 
 

33 Council Regulation (EU) No 904/2010 already provides Member States with specific tools to fight B2B 
schemes, and new specific measures have been submitted for adoption to the Council. See Annex 10  
34 In B2C supplies of services, the destination principle is not applied universally but depends on the nature 
of the service. For example, for consultancy services or for transactions related to real estate the principle is 
not  applied.  However,  the  destination  principle  is  applied  for  example  to  the  sale  of  telecommunication, 
broadcasting and electronic services, which represent an important share of cross-border B2C flows.  

9 

 
                                                            
Table 1: Main modalities of fraud on B2C cross-border transactions 

No VAT 
registration 

No VAT 
declaration and 
payment 

Under-
declaration 

Mis-
description of 
the import 

VAT declaration 
in the wrong 
place 

Cross-border supplies 
of services 
Intra-EU distance 
selling of goods 
Imports of goods 
from non-EU sellers 

 

 

   

   

   

   

   

   

E-commerce  business  models  are  multiple  and  keep  evolving.  However,  they  all  have 
something in common: goods and services can be ordered and paid online from the final 
consumers  to  the  suppliers  and  no  physical  presence  of  the  seller  is  necessary  in  the 
Member State of consumption (MSC).  VAT e-commerce fraudsters exploit the Internet 
and its facilities to get easily in contact with consumers abroad and sell services or goods 
without  fulfilling  VAT  obligations.  This  allows  them  to  offer  lower  prices,  gain  illicit 
market  advantages  and  remain  anonymous  vis-à-vis  the  tax  authorities.  The  contacts 
between  suppliers  and  potential  clients  are  facilitated  by  online  intermediaries  such  as 
online  market  places,  online  auction  sites  or  search  engines  that  can  aggregate  the  best 
online  suppliers  by  lower  price  per category  of  product,  best  rank  by  clients'  feedback, 
etc. 

In the section below, examples of VAT fraud are presented to describe the risks posed to 
VAT collection in e-commerce and the need to provide tax authorities with new tools to 
detect these types of VAT fraud.  

2.1.1.  VAT fraud on cross-border supplies of services 

TBE services supplied cross-border to final consumers are taxable in the Member State 
of  consumption.  Businesses  in  or  outside  the  EU  can  fulfil  their  VAT  obligations  on 
cross-border sales of TBE services to European consumers either through the MOSS or 
by registering, declaring and paying VAT in every MSC35. 

However,  various  instances  of  VAT  fraud  have  been  reported:  there  are  businesses 
providing TBE services that do not register in the MSC nor identify in the MOSS and, 
thus,  do  not  declare  and  pay  VAT  on  their  supplies.  There  is  evidence  of  this  kind  of 
fraud in the markets for online television 36 and digital games37. 

In  the  first  case,  websites  advertise  and  offer  TV  programs  to  customers  in  the  EU  at 
extremely  low  prices  compared  to  the  normal  market  price.  The  client  has  to  order  a 
media box, connect it to the internet and set it to start watching the TV services under a 
periodic  subscription.  The  web  shops  often  have  domain  addresses  located  in  third 
countries, while the real businesses behind them could be placed either inside or outside 
the  EU.  The  television  content  is  easily  delivered  through  the  Internet  Protocol 
Television  (IPTV)  using  the  Internet,  instead  of  being  delivered  through  traditional 
terrestrial,  satellite  signal  and  cable  television  formats.  This  fraud  was  documented  by 
EUROPOL  and  the  European  Union  Intellectual  Property  Office38  and  by  the  Nordic 
Content  Protection  (NCP)  in  the  latest  Report  about  illegal  distribution  and  sales  of 

35 See section 1.1 
36 The amount of illegal TV broadcasting in Latvia in 2015, source: www.parlegalusaturu.lv  
37 See Annex 2, Consultation synopsis report, section 3.1  
38 EUROPOL and European Union Intellectual Property Office: 2017 Situation Report on Counterfeiting 
and  Piracy  in  the  European  Union  available  at  www.europol.europa.eu/publications-documents/2017-
situation-report-counterfeiting-and-piracy-in-european-union  

10 

 
 
 
 
 
 
 
 
 
 
                                                            
access to television broadcasts39. An annual estimated loss in sales of EUR 436 million 
for IPTV distributers in Denmark, Finland and Sweden alone (having together less than 
10% of the total IPTV EU market in terms of revenues)40, results in approximately EUR 
103 million of potential VAT loss calculated using the standard rates.  

Digital games associations have also reported VAT fraud. The mechanism is again very 
simple:  big  actors  in  the  European  market  established  both  inside  and  outside  the  EU, 
without  VAT  identification  (and  without  declaring  or  paying  VAT),  sell  games  in  the 
European market with lower prices than their legitimate counterparts41. 

Both  cases  of  fraud  also  raise  copyright  issues,  which  are  not  under  the  scope  of  this 
impact assessment report.  

2.1.2.  VAT fraud on intra-EU distance sales of goods 

When  a  European  supplier  sells  goods  to  final  consumers  in  other  Member  States,  it 
should  register,  declare  and  pay  VAT  in  that  Member  State  (MSC)  when  its  annual 
supplies  in  that  MSC  exceed  a  given  thresholds42.  If  the  threshold  is  not  exceeded,  the 
place  of  supply  remains  in  the  Member  State  of  the  supplier.  The  distance  selling 
thresholds had been introduced to avoid small businesses supplying abroad to register in 
each MSC for every supply and deal with different tax authorities, national legislations 
and procedures (which represents a burden for these businesses). 

Distance selling fraudsters exploit the internet to get easily in contact with clients in other 
Member States  and supply  abroad avoiding  VAT registration  (and thus declaration and 
payment) in the MSC even when the threshold is exceeded. In such a case, the VAT is 
paid in the wrong place – the Member State of establishment (MSE), where, usually, the 
VAT rate is lower. For example43, an Irish trader could make supplies of children clothes 
to customers in Denmark charging the 0% rate applicable in Ireland. The corresponding 
rate of VAT in Denmark is 25%.  

The distance sales' fraudsters can also remain entirely in the black market by registering 
(and thus declaring and paying VAT) neither in the MSE nor in the MSC.  

There  has  been  increasing  evidence  of  the  abuse  of  distance  selling  driven  by  e-
commerce that is of great concern for the Member States. The Finnish tax administration 
alone, in 2016, assessed an amount of EUR 20 million of non-declared VAT by distances 
sellers.  

2.1.3.  VAT fraud on imports of goods 

VAT on imports must be paid applying the right VAT rate (depending on the category of 
goods and on the Member State of importation) to the value of the goods. VAT fraud on 
importation can be committed by:  

39 Trend Report 2017, Nordic Content Protection available at: www.ncprotection.com/wp-
content/uploads/2017/03/Trend-Report-2017.pdf  
40 See: www.ofcom.org.uk/__data/assets/pdf_file/0027/95661/ICMR-2016-4.pdf  
41See:http://www.lemonde.fr/pixels/article/2018/03/22/jeu-video-la-contestation-sociale-s-
internationalise_5274955_4408996.html 
42 Member States must apply a threshold of either EUR 35 000 or EUR 100 000, Article 34 of Directive 
2006/112/EC: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2006:347:0001:0118:en:PDF 
43  SWD(2016)379  final  of  1.12.2016  Impact  Assessment  accompanying  the  document  "Proposal  for  a 
Council Directive, a Council Implementing Regulation and a Council Regulation on Modernising VAT for 
cross-border B2C e-Commerce" 

11 

 
                                                            
  under-declaring  the  value  of  the  goods  (to  unduly  benefit  from  either  the  small 

consignment exemption44 or just a lower amount of VAT);  

  mis-describing the import as a low-value sample45 (to benefit from the exemption) or  
  pretending  to  make  a  C2C  transaction  (instead  of  B2C),  thus  avoiding  the  VAT  on 

importation. 

Similarly to the previous examples, the order and the payment are made online and often 
the VAT number of the supplier is displayed neither in the web shop nor on the import 
and transport documents (or it does not exist) and the amount of VAT does not appear 
under the total price. There is multiple documented evidence of such VAT fraud46.  

2.2. 

Size of the problem 

VAT is a major source of tax revenue for the Member States47 and contributes to the own 
resources of the European Union. However, measuring the scale of the VAT loss on B2C 
cross-border  supplies  is  very  challenging.  Most  tax  authorities  lack  the  tools  and  the 
sources of information to quantify the evidence on the level of e-commerce VAT fraud. 
However,  they  consider  the  level  of  non-compliance  to  be  significant48.  In  the  targeted 
consultation,  only  three  tax  authorities49  provided  rough  estimates  on  the  VAT  loss 
splitting  in  B2C  intra-EU  supplies  of  goods,  B2C  intra-EU  supplies  of  services  and 
imports of goods in 2015, 2016 and 2017.  

Table 2: Tax administrations' estimates of annual VAT losses, by type, EUR million 

Austria 
Finland 
Croatia 
Finland 
Austria 

B2C Intra-EU supplies of goods (2017) 
B2C Intra-EU supplies of goods (2017) 
B2C intra-EU supply of services 
Imports (2017) 
Imports (2017) 

160 
5 
1 
20 
76 

The scale of VAT losses undoubtedly differs substantially from one Member State to the 
other  because  the  rate  of  penetration  of  e-commerce  is  highly  uneven.  Supply  side 
statistics show that  the market for e-commerce  is  up to  seven times  more developed in 
certain  Member  States  over  others  (see  Figure  1);  while  demand-side  statistics,  if  they 
existed, would most probably show a more even picture50, it remains likely that the share 
of VAT losses are quite highly concentrated.  

44 Article 23 of Council Directive 2009/132/EC of 19 October 2009 provides that goods of a total value not 
exceeding EUR 10 shall be exempt on import. Member States may grant exemption for imported goods of 
a total value of more than EUR 10, but not exceeding EUR 22 and can exclude goods imported on mail 
order (including e-commerce channels). The exemption excludes excisable goods.   
45 Council Directive 2009/132/EC of 19 October 2009 determining the scope of Article 143(b) and (c) of 
Directive  2006/112/EC  as  regards  exemption  from  value  added  tax  on  the  final  importation  of  certain 
goods 
46 Full evidence on Retailers Against VAT Abuse Schemes (RAVAS) and VATfraud.org.  
47See:  http://ec.europa.eu/eurostat/statistics-explained/index.php/Tax_revenue_statistics  
48 Deloitte study on VAT Aspects of cross-border e-commerce - Options for modernisation, Lot 1, p. 62   
49 See Annex 2, Consultation synopsis report, section 3.2 
50 The share of individuals having used internet for purchases in the last year is somewhat less polarised: 
the lowest value, for Romania, is 26%, the highest is for UK at 86%. However, this represents the share of 
the population having made purchases online, and not the share of turnover, which is the relevant metric to 
assess potential VAT losses.  

12 

 
                                                            
Figure 1: Turnover from B2C and B2BG (Businesses and Governments) web sales, 
percentage share on total, non-financial enterprises, EU-28, 2017  

Source: Eurostat 

Statistics on the proportion of e-commerce sales in the turnover of EU businesses show, 
as of 2017, for the EU28, 7% of overall turnover are constituted of web sales (up from 
4%  five  years  earlier),  and  that  this  proportion  increases  along  with  the  size  of  the 
business  (from  4%  for  enterprises  between  10  and  49  employees  to  9%  for  large 
enterprises). The B2C portion of web sales is 41%, equivalent to 3% of turnover for EU 
businesses  as  a  whole.  Within  this  general  picture,  however,  there  is  a  fairly  strong 
differentiation in the level of development of web sales depending on the Member States. 
The penetration rate of web sales is not merely a function of GDP per capita, but depends 
on a host of idiosyncratic factors; for example, in Austria the rate is less than one third of 
Lithuania's.  The  diffusion  of  e-commerce  also  differs  significantly  by  economic  sector. 
The  highest  proportion  of  e-commerce  is  found  in  accommodation  and  transport,  on 
account  of  the  popularity  of  web  sales  for  travel  services,  whereas  e-commerce 
understandably  accounts  for  only  a  negligible  share  of  turnover  in  construction  (see 
Figure 2) 51. 

Figure 2: Sectoral distribution of e-commerce, 2017 

Source: Eurostat 

Estimates of VAT loss on imports and B2C intra-EU supplies of goods at EU level have 
been  made  in  the  framework  of  the  Commission  proposal  on  "modernising  VAT  for 
cross-border B2C e-Commerce":  EU Member States  are estimated conservatively to  be 
losing between EUR 2.6 and 3.8 billion annually in missing VAT on B2C cross-border 
supplies of goods (intra-EU and imports)52. In addition, the incomplete levying of VAT 
on postal shipments into the EU is estimated to cause a loss the Member States' income 

51 Note that EDI-type sales relate to B2B e-commerce. Web sales in contrast can refer both to B2B and to 
B2C.  
52 Deloitte study on VAT Aspects of cross-border e-commerce - Options for modernisation, Lot 1, p. 65  

13 

 
 
                                                            
of up to EUR 1.05 billion per year53. The sellers that do not fulfil the VAT obligations 
gain  a  market  advantage  over  the  legitimate  businesses.  The  impact  on  businesses  has 
been  estimated  for  the  UK.  HMRC’s  estimate  of  the  extent  of  online  VAT  fraud  for 
imported goods of £1 billion to £1.5 billion corresponds to £6 billion to £9 billion in lost 
gross  sales  revenue  for  VAT‑compliant  companies  in  2015‑1654.  Applying  the  same 
methodology, the VAT loss estimation at EU level would result in EUR 13 to 19 billion 
of net sales equivalent55 to the detriment of legitimate businesses.  

The  loss  to  the  Member  States'  and  the  Union's  budget  and  the  negative  impact  on 
legitimate  businesses'  sales  are  bound  to  get  worse  with  the  steady  growth  of  the  e-
commerce.  

In particular, the MOSS and its extension to all supplies of services and goods intra-EU 
and from outside the EU (from 2021) are optional systems for compliant businesses. If 
not  accompanied  by  anti-fraud  measures  the  fraudsters  will  have  no  "incentives"  in 
changing attitude and start complying. In other words the full success of the compliance 
measures  in  the  field  of  e-commerce  also  depends  on  the  effectiveness  of  anti-fraud 
measures to be developed in parallel. 

Finally,  it  is  important  to  note  that  VAT  revenues  are  used  by  the  Member  States  to 
finance  public  services  and  infrastructures  for  their  own  citizens.  Therefore,  also  the 
European  citizens  are  suffering  from  the  VAT  fraud.  Wide  concern  about  e-commerce 
VAT fraud resulted also from the public consultation where up to 92% of the respondents 
considered that the e-commerce VAT fraud is damaging public revenues, consumers and, 
finally, compliant businesses. 

53  SWD(2016)379  final  of  1.12.2016  Impact  Assessment  accompanying  the  document  "Proposal  for  a 
Council Directive, a Council Implementing Regulation and a Council Regulation on Modernising VAT for 
cross-border B2C e-Commerce", p. 14 
54 Calculated as follows: £5 billion of sales excluding VAT would be needed to generate VAT, at 20%, of 
£1  billion;  these  two  figures  added  together  equal  £6  billion  gross  sales  revenue.  £7.5  billion  of  sales 
excluding  VAT  would  be  needed  to  generate  VAT,  at  20%,  of  £1.5  billion;  these  two  figures  added 
together  equal  £9  billion  gross  sales  revenue.National  Audit  Office  Investigation  into  overseas  sellers 
failing to charge VAT on online sales, p. 20 
A  similar  estimation  of  £7.5  billion  has  been  done  by  a  UK  retailers'  association  named  RAVAS  See: 
http://www.vatfraud.org/blog/7500000000-in-lost-revenue-to-uk-companies/ 
55 Assuming that the EUR 2.6 – 3.8 of VAT loss is calculated at a standard rate of 20%, the equivalent net 
sale would be EUR 13-19 billion 

14 

 
                                                            
2.3. 

Problem tree 

Figure 3: Problem tree 

 No fraudsters records in 

 Fragmented access to 

the MSC 

PSPs data 

 Anonymity of fraudsters 

 Non adequate use of 

administrative coop. tools 

 Massive volume of 
information needed 

  

 No physical presence 

 Relevant VAT  Info held 

 Tax administration tools 

of the supplier 

by third parties 

and capacities 

2nd level 
drivers 

1st level 
drivers 

Problem 

e-commerce  
VAT Fraud 

 No VAT registration 
 No VAT declaration and payment 
 Under declaration 
 Misdescription of the import 
 VAT declared in the wrong place 

Impact 

Unfair competition 

VAT loss 

Businesses 

Member States and EU  

EU citizens  

2.4.  What are the problem drivers? 

2.4.1.  No physical presence of the suppliers  

No fraudsters' records in the MSC 

E-commerce allows online-performed key functions common to all business models such 
as bringing buyers and suppliers together (i.e. own online-shop, search engines, referrals, 
third party marketplace); providing a safe environment to conduct transactions for buyers 
and suppliers (i.e. own online-shop, trust facilitators, third party marketplace); processing 
payments  from  buyers  to  suppliers,  including  payment  service  providers  (PSPs)  and 
payment gateways (i.e. payment intermediators, on-platform payments, direct payments 
through  bank  transfer,  direct  debit,  cash);  delivering  products  (goods  or  services)  from 
suppliers to buyers (i.e. delivery and fulfilment managed by marketplace, by third party 
logistic organization, by own means).  

The  supplier  can  insource  or  outsource  all  these  functions,  or  use  a  combination  of 
insourcing and outsourcing, but does not need a physical presence to get in contact with 
the  clients  or  to  deliver  its  products  to  its  clients.  Therefore,  in  the  MSC  the  records 
needed to assess VAT liabilities might not be available or their quality/reliability may be 
very  poor  (e.g.  in  case  of  importation  of  goods,  an  invoice  is  not  mandatorily 
accompanying the consignment).  

Furthermore, in B2B transactions the reporting obligations for businesses claiming VAT 
in the MSC allow tax administrations to reconstruct the transaction chain. This is not the 
case  for  B2C  sales,  because  the  final  consumer  does  not  have  similar  record-keeping 
obligations. Information  on B2C supplies  are available to MSCs' tax authorities only  if 
the supplier registers, declares and pays in those MSCs or through the MOSS portal. If 
this is not the case, the MSC will lack VAT records or immediate information to collect 
data  for  the  control  of  VAT  liabilities.  The  lack  of  VAT  identification  numbers  and 

15 

 
 
 
 
 
records  also  affects  tax  authorities’  possibility  to  carry  out  risk  analysis,  because  they 
may even be unaware of suppliers selling online in their own Member State.  

Due  to  this poor  quality  of  information  available  in  the  MSC,  tax  administrations  have 
limited  means  to  (1)  identify  the  sellers;  (2)  detect  taxable  supplies  in  their  own 
jurisdiction;  (3)  understand  whether  the  remote  sellers  are  taxable  persons  that  should 
pay VAT in the EU; and (4) assess VAT liabilities. 

Anonymity of fraudsters 

In  e-commerce  VAT  fraud,  where  B2C  cross-border  transactions  are  at  stake,  the 
internet,  as  demonstrated  above,  allows  the  supplier  to  hide  its  own  identity  behind  a 
domain  name56.  Even  when  a  tax  authority  is  aware  of  the  existence  of  a  given  online 
shop, the identity of the business behind it, its real location or its turnover in that Member 
State remain unknown. It is important to note that the objective of the tax authorities is to 
detect the fraudulent businesses hiding behind the online shops.  

2.4.2.  Relevant VAT information held by third parties 

Intermediaries  such  as  online  marketplaces  and  PSPs  are  involved  in  the  trade  chain 
without  being  a  party  in  the  sales  contract  between  suppliers  and  buyers.  In  2014,  e-
retailers covered 30% of the total global market share. The three biggest firms (Amazon, 
eBay and Alibaba) provided 65% of the global e-retailer sales and 94% of payments for 
cross-border  online  purchases  use  electronic  payment  systems,  credit  or  debit  cards,  or 
prepaid cards57. 

Fragmented access to third party data 

In 2016, the Commission services launched a survey with the tax administrations of the 
Member States58 on e-commerce VAT anti-fraud policies. The survey showed that only 
less  than  half  of  the  respondent  Member  States  collect  data  from  digital  platforms  (or 
their  branches)  established  in  their  own  jurisdiction  for  VAT  control  purposes,  while 
around  half  of  them  replied  that  they  collect  VAT  relevant  data  from  payment 
intermediaries59. However, the type of PSPs involved in the transmission of data to tax 
authorities varies from Member State to Member State (e.g. credit card companies, banks 
and  financial  institutions,  or  others…).  The  format  and  the  way  data  is  collected  also 
differs  (some  Member  State  collect  payment  data  only  on  specific  cases  of  tax  audits, 
others all payment transactions on regular basis, etc…).  

Moreover,  even  in  the  cases  where  structured  forms  of  cooperation  between  tax 
authorities  and  third  parties  have  been  established,  there  are  emerging  criticalities.  In 
fact, Member States do not always receive the information from payment intermediaries 
and sometimes they get it with either significant delays or referring to a limited period. 
Often third parties are not providing the information because they only have a branch in 
the  requesting  Member  State  while  the  information  requested  is  under  another 
jurisdiction.  Finally,  tax  administrations'  non-targeted  requests to  identify  online  sellers 
(bulk requests) are problematic to be dealt with and are often not replied by third parties. 

Conversely,  internet  platforms  can  help  tax  administrations  when  they  receive  targeted 
requests  on  specific  cases.  For  instance,  eBay  developed  electronic  systems  that  law 
enforcement and tax authorities can use to make targeted requests referring to the eBay 

56 A domain name is a unique name that gives an identity on the internet. The first part of the domain name 
is the name itself (e.g. 'thisisme2'). The second part of the domain name is the extension (the bit that comes 
after the final dot – e.g..be, . .brussels, .com, .eu and many more. 
57 International Post Corporation, e-Commerce logistic and delivery, eCom21 2016. 
58 See 10.8 - Annex 8: Result of the TAXUD 2016 survey on e-commerce compliance strategies in the EU  
59 See 10.2 - Annex 2: Consultation synopsis report, section 3.2 

16 

 
                                                            
platform60. However, as stressed in section 2.4.1. e-commerce VAT fraudsters are often 
unknown and the tax authorities have difficulties in addressing targeted requests.  

2.4.3.  Tax administration tools and capacities 

Non adequate use of administrative cooperation tools 

When a given supplier, or the third party (i.e. online market place or PSPs) holding the 
relevant  information  on  that  supplier,  are  established  in  another  Member  State,  the 
authorities of the MSC must ask the tax authority of that Member State to receive some 
relevant 
instruments  under 
Regulation  (EU)  No.  904/2010.  Where  the  fraudsters  and  their  location  are  unknown, 
identifying the Member States where to address a request for administrative cooperation 
is a problem per se.  

the  administrative  cooperation 

information 

through 

Usually,  the  first  need  of  a  tax  authority  is  to  identify  "potential"  taxable  persons 
performing economic activities giving rise to VAT liabilities in its own jurisdiction. This 
could  result  in  bulk  "identification  requests"  either  to  a  third  party  (i.e.  online  market 
place or PSPs) holding this information or to a tax authority of a country where the third 
party is established.  

However,  Council  Regulation  (EU)  No.  904/2010  lays  down  rules  for  cooperation 
between  competent  authorities  of  the  Member  States,  and  not  between  competent 
authorities and third parties. Furthermore, under that Regulation, a Member State cannot 
be requested to transmit "bulk data" to a requesting Member State. Such a request would 
be considered disproportionate under Article 54(1). Finally, under Article 54(2), Member 
States  cannot  be  required  to  provide  information  if  the  national  legislation  does  not 
authorise  them  to  collect  it.  This  limits  the  possibilities  for  Member  States  to  request 
third party data from other Member States. In fact, half of the respondent Member States 
to  the  2016  survey  reported  difficulties  in  receiving  information  from  other  Member 
States  on  e-commerce  B2C  fraud.  Still,  a  competent  authority  aware  of  any  potential 
breach  to  the  VAT  legislation  in  another  Member  State  can  send  spontaneous 
information. However, according to the 2016 survey only five Member States reported to 
have  received  such  spontaneous  information  from  another  tax  administration  under 
Regulation (EU) No. 904/2010. 

Massive volume of information 

VAT is a consumption tax levied as a percentage of every single transaction. This makes 
the  tax  administrations'  task  of  controlling  cross-border  B2C  supplies  particularly 
challenging in view of the volume of online purchases. In 2014 cross-border e-commerce 
across the EU-28 was estimated at EUR 96.8 billion61 (which represents 18% of the total 
online  spending  in  the  EU-28).  This  corresponds  to  several  billion  cross-border 
purchases62  across  Europe.  Part  of  these  cross-border  transactions  is  declared  to  tax 
authorities  (i.e.  through  direct  registration  and  declaration  in  the  MSC  or  through  the 

60 LERS – Law Enforcement which is portal that allow to law enforcement and tax authorities to submit 
targeted requests eRequest System, see: https://lers.corp.ebay.com/AIP/portal/home.do  
LEP  Law  Enforcement  Portal  which  is  a  tool  that  allows  law  enforcement  and  tax  authorities  to  obtain 
see: 
information  without 
targeted  eBay  user 
https://lep.corp.ebay.com/leportal/lep/login.do  
61 The majority of this spending comes from within the EU, with non-EU spending accounting for 28% of 
cross-border e-Commerce. Over 70% of the EU28’s cross-border spending originates from sellers in other 
EU Member States; about 30% originates from the rest of the world. Source: Deloitte 2015 "VAT Aspects 
of cross-border e-commerce - Options for modernisation" Final report – Lot 1, page 16 
62  The  Payments  Statistics  Report  published  by  European  Central  Bank  shows  7  billion  cross-border 
payments 
see: 
http://sdw.ecb.europa.eu/reports.do?node=1000004051     

2016.  European  Central  Bank,  Payments  Statistics, 

submitting  a  data 

the  need  of 

the  EU 

request, 

in 

in 

17 

 
                                                            
MOSS for TBE services63). However, there are still instances of non-compliance or even 
fraud in ecommerce transactions for which the tax authorities need additional sources of 
information  for  their  control  activities  in  order  to  cross-check  the  VAT  declarations, 
verify the correct assessment of VAT liabilities and detect instances of non-declaration or 
fraud.  The  huge  volume  of  data  at  stake  requires  adequate  administrative  capacity  in 
terms  of  IT  and  analytical  resources.  However,  only  a  very  small  minority  of  Member 
States  (6  positive  answers  out  of  23  in  the  targeted  consultation)  indicated  to  have  in 
place  a  kind  of  risk  analysis  system  of  third  party  data  to  detect  e-commerce  VAT 
fraud64.   

2.4.4.  Other  Drivers  influencing  e-commerce  VAT  fraud  (and  addressed  by  other 

initiatives) 

The way goods are controlled at the moment they are introduced into the internal market 
has  an  impact  on  VAT  fraud.  In  particular,  because  of  the  huge  amount  of  parcels 
entering the internal market, the importations of parcels of law value (benefiting from the 
VAT exemption for small consignments) and of the ones not exceeding the threshold of 
EUR 150 (benefiting from the exemption from customs duties) results in significant lack 
of control by customs and VAT authorities65. This issue has been addressed by another 
legislative initiative described under section 5.1 of this report.   

2.5.  How will the problem evolve?  

In  2016,  the  e-commerce  turnover  increased  by  15%  in  Europe  and  it  was  expected  to 
reach over EUR 600 billion in 201766, suggesting that the penetration rate of e-commerce 
will  continue  to  climb.  This  could  potentially  generate  an  increasing  impact  of  VAT 
fraud  in  the  coming  years.  On  the  one  hand,  consumers  are  becoming  more  and  more 
confident  with  buying  online  and  businesses  can  benefit  from  a  growing  e-commerce 
market.  On  the  other  hand,  fraudsters  benefit  from  the  same  opportunities  if  tax 
administrations  are  not  provided  with  the  appropriate  instruments  to  fight  e-commerce 
VAT fraud. 

3.  WHY SHOULD THE EU ACT? 

As  demonstrated  under  section  2,  the  origin  of  the  problem  is  wide-ranging:  the 
economic trend of consumers buying online from various jurisdiction, the VAT rules that 
correctly seek taxation in the Member State of consumption, the huge and unstructured 
amount  of  information  available  in  an  e-commerce  framework,  the  fact  that  such 
information  is  not  directly  available  to  tax  administrations  and  the  limitations  of  the 
administrative cooperation framework.  

The  public  consultation  confirmed  that  the  problem  of  VAT  fraud  in  e-commerce 
concerns  all  the  EU  Member  States.  The  majority  of  the  respondents  (34  out  of  52) 

63  The  number  of  transactions  declared  under  the  MOSS  is  not  available.  However,  the  number  of 
businesses  registered  to  the  MOSS  as  provided  by  Member  States  in  the  Union  scheme  totalled  12.899. 
The  number  of  registrants  in  the  Non-Union  scheme  totalled  1  079.  About  34.000  businesses  supplying 
TBE services are compliant outside the MOSS through direct registration while 36.000 are estimated to be 
outside  the  system.  Source  Deloitte  study  on  VAT  Aspects  of  cross-border  e-commerce  -  Options  for 
modernisation, Lot 3, p. 15   
64 See 10.2 - Annex 2: Consultation synopsis report, section 3.2. 
65  SWD(2016)379  final  of  1.12.2016  Impact  Assessment  accompanying  the  document  "Proposal  for  a 
Council Directive, a Council Implementing Regulation and a Council Regulation on Modernising VAT for 
cross-border B2C e-Commerce", p. 16.  
Copenhagen economics "e-commerce imports into Europe: VAT and Customs treatment  
See: 
vat-and-customs-treatment  
66 Ecommerce Europe European Ecommerce Report 2017 

https://www.copenhageneconomics.com/publications/publication/e-commerce-imports-into-europe-

18 

 
                                                            
considered  that  the  problem  should  be  addressed  at  both  EU  and  Member  States  level 
while many (14) were of the opinion that e-commerce VAT fraud should be addressed at 
EU  level  only.  In  the  targeted  consultation,  17  tax  authorities  out  of  23  confirmed  that 
Member States alone are not able to fight VAT fraud in e-commerce without using the 
administrative cooperation.  

The  European  Court  of  Auditors  noted  that  e-commerce  poses  challenges  to  Member 
States  in  terms  of  VAT  collection  especially  because  of  a  lack  of  information  on  B2C 
cross-border supplies67. 

The  VAT  Forum  subgroup  on  e-commerce68  recognised  that  whereas  business 
understands  the  data  needs  of  tax  authorities  it  should  be  made  as  easy  as  possible  for 
business to provide the relevant data (consistent data sets).  

The administrative cooperation framework is laid down in Council Regulation (EU) No. 
904/2010. The way Member State tax administrations cooperate to fight VAT fraud has 
an impact on the internal market. Individual Member States cannot achieve the objective 
of  ensuring  a  sound  anti-fraud  system  to  protect  the  internal  market  from  VAT  fraud 
unless  they  coordinate  at  EU  level.  It  should  be  noted  that  Regulation  (EU)  904/2010 
also  provide  for  a  clear  legal  base  indicating  the  sources  of  the  information  to  be 
exchange  by  Member  States'  tax  authorities  through  the  electronic  systems  (e.g.  VAT 
national databases, MOSS information…)  69  . Therefore, any new  form  of exchange  of 
data should be regulated under the same Regulation. The VAT Directive lays down the 
record  keeping  obligations  of  taxable  persons  and  intermediaries70  and,  thus,  any  new 
record  keeping  obligation  for  payment  service  providers  should  be  foreseen  under  the 
VAT Directive. Furthermore, implementing legislation will have to be adopted in order 
to  implement  any  new  tool  for  administrative  cooperation  and  to  detail  any  new  VAT 
obligation. Also the 75% of European citizens think that the EU should intervene more 
than  at  present  in  the  fight  against  tax  fraud,  as  indicated  in  the  June  2016 
Eurobarometer71. 

The legal basis is Article 113 of the Treaty on the Functioning of the European Union. 

4.  OBJECTIVES: WHAT IS TO BE ACHIEVED? 

4.1.  General objectives 

The general objectives of the initiative are 

 

 

to  reduce  the  VAT  loss  for  the  Member  States,  thus  contributing  to  the  fiscal 
consolidation within the EU; 
to  level  the  playing  field  for  the  legitimate  businesses  in  the  EU  that  suffer  from 
unfair competition by fraudsters. 

4.2. 

Specific objectives 

The specific objective is to reduce e-commerce VAT fraud by providing tax authorities 
with efficient and effective instruments for detecting non-compliant businesses. 

67   Tackling intra-Community VAT fraud: More action needed (Special Report from European Court of 

Auditors, No 24 of 2015), See: 
https://www.eca.europa.eu/Lists/ECADocuments/SR15_24/SR_VAT_FRAUD_EN.pdf  

68 https://ec.europa.eu/taxation_customs/sites/taxation/files/d-1507602_report_consolidated_en.pdf  
69 Article 17 of Council Regulation (EU) 904/2010 indicates  
70 Council Directive 2006/112/EC Chapter XI 
71 See: http://www.europarl.europa.eu/external/html/eurobarometer-062016/default_en.htm#taxfraud 

19 

 
 
                                                            
At  this  regard  it  should  be  noted  that,  as  described  in  section  2,  the  problem  at  stake 
refers  to  businesses  with  a  real  economic  activity  online,  but  defrauding  VAT  by  not 
registering for VAT purposes, not declaring and paying the due VAT. As such the fight 
against these fraudsters is the specific objective of the initiative.  

4.3.  Operational objectives 

The operational objectives are: 

  To give EU Member States' tax administrations access to relevant third party data to 

fight e-commerce VAT fraud 

  To improve the identification and targeting of potential e-commerce VAT fraud 

  To offer new or improved channels for EU Member States' tax authorities to access 

and share third party VAT-related information  

4.4.  Consistency  with  other  EU  policies  and  with  the  Charter  for  fundamental 

rights 

The objective of fighting tax fraud and evasion to help secure national and EU revenues 
and  prevent  distortion  of  competition  is  amongst  Commission  priorities.  The  political 
guidelines72 of the present Commission called for stepping up the efforts to combat tax 
evasion  and  tax  fraud,  including  through  improved  administrative  cooperation  between 
tax authorities. 

The  proposal  under  consideration  will  trigger  new  exchanges  and  processing  of  VAT-
related information and personal data. The General Data Protection Regulation (GDPR)73 
gives  a  wide  definition  of  personal  data  including  any  information  relating  to  an 
identified  or  identifiable  natural  person  that  can  be  identified  directly  or  indirectly.  As 
such  the  payment  data  listed  above  contains  information  falling  under  the  scope  of  the 
GDPR  and  the  principles  for  the  protection  of  personal  as  laid  down  in  the  Charter  of 
Fundamental  Rights74.  The  GDPR  fixes  the  principles  and  data  subjects  rights  to  be 
respected while processing personal data. However, the Union may restrict by legislative 
measures these principles and the rights of the data subject  – as long as the restrictions 
respect the principles of necessity and proportionality – to safeguard important objectives 
of general public interest of the Union, such as economic and financial interest including 
taxation75.  The  impact  of  the  different  options  on  protection  of  personal  data  will  be 
detailed under section 6 after the detailed description of the different options76. 

See: 

https://ec.europa.eu/commission/sites/beta-political/files/juncker-political-guidelines-

72 
speech_en_0.pdf 
73  Article  4(1)  of  Regulation  (EU)  2016/679  of  the  European  Parliament  and  of  the  Council of  27  April 
2016  on  the  protection  of  natural  persons  with  regard  to  the  processing  of  personal  data  and  on  the  free 
movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation) (Text with 
EEA relevance) OJ L 119, 4.5.2016, p. 1 
74 Charter of Fundamental Rights of the European Union OJ C 326, 26.10.2012, p. 391 
75 Article 23 GDPR 
76The assessment of the principles of necessity and proportionality has been done in line with the European 
Data Protection Supervisor (EDPS) toolkit, which also takes into account the relevant jurisprudence of the 
Court of Justice of the European Union (hereafter CJEU), the European Court of Human Rights (ECtHR), 
the  EDPS  See:  https://edps.europa.eu/sites/edp/files/publication/17-06-
and  previous  Opinions  of 
01_necessity_toolkit_final_en_0.pdf. 
See: 
https://www.echr.coe.int/Documents/FS_Data_ENG.pdf  

jurisprudence 

see: 

For 

the 

20 

 
                                                            
5.  WHAT ARE THE AVAILABLE POLICY OPTIONS? 

As indicated in section 2.1 the VAT loss on e-commerce is also due to the complexity of 
the  VAT  system.  This  was  addressed  by  recent  Commission's  measures,  shortly 
described here below in section 5.1.  

5.1.  Measures  with  a  positive  impact  on  reducing  the  e-commerce  VAT  loss 

introduced with the VAT e-commerce package) 

5.1.1.   Abolition of the distance sale thresholds and extension of the MOSS  

The current distance sale thresholds represent a complication for the European businesses 
that  must  be  aware  of  the  different  rules  in  the  different  Member  States  they  are 
supplying  to,  and  in  the  case  where  the  threshold  is  exceeded  they  must  deal  with 
different  tax  authorities  and  procedures77.  As  from  1  January  2021,  the  distance  sale 
threshold  will  be  replaced  by  a  new  EUR  10.000  intra-EU  cross-border  threshold.  The 
EUR 10.000 threshold will refer to the total value, exclusive of VAT, of the supplies of 
goods and TBE services to consumers in any Member State other than the Member State 
of the supplier in the course of the preceding calendar year78. When the total annual intra-
EU cross-border turnover of a given supplier does not exceed the threshold the place of 
supply remains in the Member State of the supplier. When the threshold is exceeded, the 
destination  principle  will  apply  (and  the  supplier  will  have  to  register  in  the  Member 
States of consumption or in in the MOSS)79. The abolition of the thresholds together with 
the extension of the MOSS to all cross-border supplies of goods and services will make 
the VAT system easier to comply with. Still tax authorities need relevant information to 
control  the  new  EUR  10.000  thresholds,  and  detect  non-registered  distance  sellers  and 
their real turnover in the MSC. 

5.1.2.   Abolition of the small consignments exemption  

As described  in  section 2.1.3 the small  consignments exemption is  abused to  avoid the 
payment  of  VAT  on  importations.  As  from  1  January  2021  the  exemption  on  small 
consignments will be abolished80. Still tax authorities will need tools to control the real 
value of goods imported in case of under-declarations. 

5.1.3.   Import One Stop Shop (IOSS) 

Also imports of parcels of a value over the small consignments exemption but under the 
EUR 150 customs threshold81 raise concerns as regard the way VAT is declared and paid. 

77  SWD(2016)379  final  of  1.12.2016  Impact  Assessment  accompanying  the  document  "Proposal  for  a 
Council Directive, a Council Implementing Regulation and a Council Regulation on Modernising VAT for 
cross-border B2C e-Commerce", p. 14 
78 Article 59c of VAT Directive as amended by Council Directive (EU) 2017/2455 of 5 December 2017 
amending  Directive  2006/112/EC  and  Directive  2009/132/EC  as  regards  certain  value  added  tax 
obligations for supplies of services and distance sales of goods, OJ L 348, 29.12.2017, p. 7 
79  Under  the  EUR  10.000  threshold  the  micro-businesses  will  benefit  from  a  VAT  exemption  on  their 
domestic transactions (as long as permitted by the national legislation), and they will not have to register in 
other Member States or in the MOSS starting from the first intra-EU sale 
80  Article  3  Council  directive  (EU)  2017/2455  of  December  2017  amending  Directive  2006/112/EC  and 
Directive 2009/132/EC as regards certain value added tax obligations for supplies of services and distance 
sales of goods 
81 Customs Duty is not due for goods, provided directly to the buyer when their value does not exceed 150 
euros. 
https://ec.europa.eu/taxation_customs/individuals/buying-goods-services-online-personal-
use/buying-goods/buying-goods-online-coming-from-a-noneu-union-country_en  

See 

21 

 
                                                            
It was estimated  that there were  43 million such  imports in  2015. A study82 found that 
VAT  is  not  paid  on  65%  of  consignments  from  non-EU  suppliers  through  the  public 
postal channels83. This is significant as it is estimated that 70% of transactions are sent 
through  public  postal  channels.  As  from  1  January  2021,  an  Import  One  Stop  Shop 
(IOSS)  regime  will  be  set  up84.  The  IOSS  will  streamline  the  VAT  registration, 
declaration  and  payment  process.  Tax  authorities  will  still  have  the  need  to  detect  the 
suppliers  remaining  outside  the  VAT  system  and  to  crosscheck  the  correctness  of  the 
information received through the VAT declarations from the taxpayers registered in the 
VAT system. 

5.1.4.   Deemed supplier 

As  described  in  section  1.1,  under  the  deemed  supplier  provision85  from  2021  online 
market places, platforms and portals will have to fulfil the VAT declaration and payment 
obligations  for  certain  goods86  sold  through  their  intermediation  by  non-EU  taxable 
persons.  Also  the  “deemed  supplier”  provision  has  been  introduced  to  streamline  the 
VAT declaration and payment process. The tax authorities will still need tools to control 
the correctness of the VAT declarations and payments. 

5.2. 

Policy options 

The  options  have  been  designed  after  consultation  with  Member  States  and  businesses 
representatives in the framework of the VAT forum subgroup on e-commerce87. It should 
be noted that, as described in section 1 this initiative has to be seen as complementing the 
wider  VAT  e-commerce  compliance  framework  where  the  new  legislation  created  new 
VAT responsibilities for electronic interfaces such as internet marketplaces and platforms 
(under the deemed supplier provision). In addition to the baseline, the proposed options 
seek the solution to the problem described in section 2 in a better cooperation between 
tax  authorities  and  PSPs.  In  fact,  the  payment  is  the  consideration  of  any  purchase  of 
goods  and  services.  In  the  last  years  more  than  90%  of  online  purchases  by  European 
customers  went  through  credit  transfers88,  direct  debits89  and  card  payments90,  thus 

See: 

(2016) 

Imports 

Into  Europe:  Vat  And  Customs  Treatment 

82  E-Commerce 
https://www.copenhageneconomics.com/publications/publication/e-commerce-imports-into-europe-vat-
and-customs-treatment  
83 In the vast majority of cases, the customer is not charged VAT at the time of sale but rather the package 
is assessed for VAT at importation in the territory of the European Union. The customer pays the VAT and 
an administrative fee is charged to the customer by the transport operator i.e. the express courier or postal 
operator at the point of delivery of the good to cover the administrative costs of clearing customs. 
84 Under the new import One-Stop Shop (IOSS) – introduced by Council Directive (EU) 2017/2455 of 5 
December  2017  unlike  today  VAT  can  be  collected  at  the  point  of  sale  to  EU  customers  by  sellers  or 
market places. Non-EU sellers will then declare the VAT using the IOSS. These goods will then benefit 
from a fast-track customs mechanism. 
85 New Article 14a of the VAT Directive as amended by Council Directive (EU) 2017/2455 of 5 December 
2017  amending  Directive  2006/112/EC  and  Directive  2009/132/EC  as  regards  certain  value  added  tax 
obligations for supplies of services and distance sales of goods, OJ L 348, 29.12.2017, p. 7 
86 In particular for a) distance sales of goods imported from third territories or third countries not 
exceeding the value of EUR 150 and b) the B2C supplies of goods which are already in the EU (i.e. in 
fulfilment centers) by non-EU established taxable persons facilitated through these platforms. 
87 Commission Decision 2012/C 198/05 of 3 July 2012 setting up the EU VAT Forum, OJ C198 of 6 July 
2012; See: http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32012D0706%2802%29 
88 A credit transfer is a payment initiated by the payer. The payer sends a payment instruction to his/her 
payment service provider (PSP), e.g. a bank. The payer’s PSP moves the funds to the payee’s PSP. This 
can be carried out via several intermediaries. 
89 A direct debit is a transfer initiated by the payee via his/her payment service provider. Direct debits are 
often  used  for  recurring  payments,  such  as  utility  bills.  They  require  a  pre-authorisation  (or  “mandate”) 

22 

 
                                                            
 
through an intermediary involved in the transaction91 and this is a trend that will continue 
in the future92. 

As such third parties holding payment data can give a complete picture to tax authorities 
to  properly  carry  out  their  basic  task  of  controlling  the  correct  fulfilment  of  VAT 
obligations  on  cross-border  B2C  supplies  of  goods  and  services.  The  experience  of  the 
Member  States  that  already  cooperate  with  PSPs  at  national  level  showed  how 
cooperation  with  PSPs  gives  tangible  results  in  fighting  e-commerce  VAT  fraud93. 
Furthermore,  also  some  non-EU  countries  are  using  payment  service  data  as  a  tool  for 
detecting  non-compliant  traders  in  combination  with  simplified  collection  regimes  for 
cross-border B2C supplies of goods (similar to the EU system)94. 

It  should  be  noted  that  –  unlike  in  the  VAT  area  –  in  other  fields  of  taxation  there  is 
already  a  European  legislative  framework  regulating  the  cooperation  between  third 
parties  and  tax  authorities.  The  so-called  Savings  Directive95  foresees  that  "payment 
agents"  must  report  to  the  competent  authority  of  the  Member  State  where  they  are 
established a minimum amount of data as regard the beneficiary of the interest payments. 
Furthermore, in the field of direct taxation96 each Member State shall take the necessary 
measures  to  require  its  Reporting  Financial  Institutions  to  transmit  data  on  personal 
income  and  financial  account  information.  In  both  cases,  after  the  acquisition  of  the 
information, tax administrations exchange the relevant data between them. 

Furthermore, money flow information is also considered important to fight against illicit 
activities  in other  fields. Under the current  Anti-Money  Laundering  Directive97 obliged 
entities must retain a series of documents and information for the purpose of preventing, 
detecting  and  investigating  possible  money  laundering  and  terrorist  financing  and  are 
required to report suspicious transactions and activities to Financial Investigations Units. 
Following  the  Action  Plan  against  terrorist  financing  (2016),  the  Commission  is 
analysing possible new EU systems to track the money flow98.  

from  the  payer.  Direct  debits  are  also  used  for  one-off  payments.  In  this  case,  the  payer  authorises  an 
individual payment. 
90  Debit  cards  allow  the  cardholder  to  charge  purchases  directly  to  his/her  bank  account.  Credit  cards 
provide the cardholder with a certain credit limit, within which he/she can make purchases. The credit card 
holder must pay off the balance in full by the end of a specified period. Alternatively, he/she can pay off 
part of the balance. The remaining balance is taken as extended credit on which the cardholder must pay 
interest. 
91 E-shopper barometer 2017(DPDgroup). See: 
https://www.dpd.com/be_en/business_customers/dpd_insights/e_shopper_barometer_2017 and 
International Post Corporation, e-Commerce logistic and delivery, eCom21 2016 
92 
See:https://www.atkearney.com/documents/10192/1448080/Winning+the+Growth+Challenge+in+Paymen
ts.pdf/b9da93a5-9687-419e-b166-0b25daf585ff p. 5 
93  In  particular  the  Finnish  tax  administrations  was  able  to  collect  EUR16  million  in  2016  based  on 
cooperation with payment service providers 
94 See Annex 11 "Third countries using payment data as VAT control tool" 
95 Council Directive (EU) 2015/2060 of 10 November 2015 repealing Directive 2003/48/EC on taxation of 
savings income in the form of interest payments OJ L 301, 18.11.2015, p. 1 
96  Council  Directive  2014/107/EU  of  9  December  2014  amending  Directive  2011/16/EU  as  regards 
mandatory automatic exchange of information in the field of taxation In force OJ L 359, 16.12.2014, p. 1 
97  Directive  (EU)  2015/849  of  the  European  Parliament  and  of  the  Council  of  20  May  2015  on  the 
prevention of the use of the financial system for the purposes of money laundering or terrorist financing, 
amending  Regulation  (EU)  No  648/2012  of  the  European  Parliament  and  of  the  Council,  and  repealing 
Directive  2005/60/EC  of  the  European  Parliament  and  of  the  Council  and  Commission  Directive 
2006/70/EC (Text with EEA relevance) In force OJ L 141, 5.6.2015, p. 73 
98 See: https://ec.europa.eu/home-affairs/what-we-do/policies/crisis-and-terrorism/tftp_en  

23 

 
                                                                                                                                                                                 
Payment data is also considered as a possible source of intelligence in Customs controls 
for  risk  management  purposes  by  the  World  Customs  Organisation  (WCO)  under  the 
2018 "cross-border e-commerce framework of standards"99. 

It is clear that these different policy objectives are regulated by different European legal 
acts: illicit activities in different fields have different patterns that require different kind 
of  data  or  different  methodologies  for  the  data  collection,  analysis  and  exchange. 
However, the legislative framework shortly described above shows a clear trend toward 
cooperation  between  different  public  authorities  and  payment  and  financial  institutions 
with the aim of enhancing the fight against illicit activities.    

5.2.1.  Payment services and payment service providers100 

The  payment  data  in  the  regulatory  option  will  refer  to  data  on  credit  transfers,  direct 
debits  and  cards  payments  because  –  as  mentioned  above  –  they  represent  almost  the 
totality of the purchases online. Therefore, the providers of that kind of payment services 
will be in the scope of the regulatory option.  

Virtual  currencies  (VCs),  better  known  as  crypto-currencies,  are  not  within  the  present 
initiative. There are two reasons for that. First, cryptocurrencies are at present very rarely 
used for the type of transaction covered by this initiative and this does not seem likely to 
change  in  the  near  future.  Secondly,  they  are  not  regulated  in  the  European  legal 
framework and in particular in the SEPA regulation and the Payment Service Directive 2. 
It should be noted that, as also stressed in the 2016 European Banking Authority's (EBA) 
opinion  on  virtual  currencies101,  VCs  incur  technology  specific  risks  that  makes  them 
distinct from conventional fiat currencies and do not make them – so far – a safe payment 
method.  

As such VCs are not part of this initiative. There is a potential, but not short-term, risk 
that  part  of  e-commerce  VAT  fraud  could  migrate  to  this  kind  of  payment.  The  risk 
appears limited at present because the volatility of cryptocurrencies exposes traders to a 
higher exchange rate risk than the potential gains from VAT non-payment. However, the 
regulatory  option  will  foresee  a  periodic  report  of  the  Council  which  could  eventually 
bring to a review of the scope.  

5.2.2.  Payment data 

Only  the  data  referring  to  cross-border  payments102  that  will  allow  tax  authorities  to 
detect the e-commerce VAT fraud patterns listed under point 2.1 of this report will fall 
within the scope of this initiative. In particular, payment data will refer to the: 
 
  Total amount of the payment transaction 
  Date of the payment transaction 
  Country of origin of the payment 

Identification of the supplier (payee)103: name, address, any kind of tax number … 

99 Resolution Of The Policy Commission Of The World Customs Organization On The Guiding Principles 
For Cross-Border E-Commerce (Luxor, December 2017).  
100 See Annex 9, Payment services framework in the EU 
101 EBA-Op-2016-07, 11 August 2016 
102 To have an idea of the volume of data, the Payments Statistics Report published by European Central 
Bank  shows  7  billion  cross-border  payments  in  the  EU  in  2016.  European  Central  Bank,  Payments 
Statistics, see:  http://sdw.ecb.europa.eu/reports.do?node=1000004051  
103  Directive  (EU)  2015/2366  of  the  European  Parliament  and  of  the  Council  of  25  November  2015  on 
payment services in the internal market, amending Directives 2002/65/EC, 2009/110/EC and 2013/36/EU 
and Regulation (EU) No 1093/2010, and repealing Directive 2007/64/EC (Text with EEA relevance) OJ L 
337, 23.12.2015, p. 35, Article 4(8). 

24 

 
                                                            
  Description of the supply underlining the payment transaction (good or service) – if 

available to the payment service provider 
  Unique identifier104 for a payment transaction. 

The  data  to  be  exchanged  are  the  same  under  all  options.  This  is  because  each  of  the 
elements listed above is indispensable to make the records useable by tax authorities for 
VAT anti-fraud purposes.  

5.2.3.  Structure of the policy options 

This impact assessment takes into account three alternative policy options: 
1.  In  the  baseline  (status  quo)  scenario    the  tax  authorities  of  the  EU  Member  States 
follow different approaches to fight against e-commerce VAT fraud and only some of 
them collect data from online intermediaries;  

2.  Under  the  non-regulatory  option  the  European  Commission  helps  tax  authorities  to 
develop their administrative capacity to fight e-commerce VAT fraud and publishes 
guidelines in order to enhance the cooperation between tax authorities and payment 
intermediaries; 

3.  The regulatory option implies the amending of the EU legal framework: 

  for the PSPs to keep records of VAT relevant payment data that will have to be 
transmitted to the tax authorities (transmission of payment data from PSPs to tax 
authorities);  

  for  the  tax  authorities  to  collect  payment  data  and  exchange  or  share  these  data 

with other Member States’ tax authorities (exchange of data); 

  for  the  tax  authorities  carry  out  a  risk  analysis  to  detect  remote  suppliers  not 

complying with VAT obligations (risk analysis); 

In particular, the regulatory option will imply amending the VAT Directive as regards the 
new record-keeping obligations of the PSPs, and Council Regulation (EU) 904/2010 as 
regards the exchange of payment data between tax authorities.  
Under  the  regulatory  option,  different  alternative  technical  solutions  are  envisaged  to 
make tax authorities exchange or share the relevant payment data.  
The regulatory option does not foresee a direct access of Member States' tax authorities 
to PSPs' databases because it would not be proportionate to the objective of fighting e-
commerce VAT fraud. In fact, a direct access to PSPS' databases would disclose to tax 
authorities data which are not strictly necessary for the purpose at stake, i.e. information 
on the payers and on domestic payments. In fact it is important to note that the objective 
of  the  initiative  is  to  target  fraudulent  businesses  selling  online,  and  not  the  consumers 
buying  online.  As  such,  payers  data  (i.e.  data  regarding  the  consumers  paying  for  the 
purchases of products online) are not included in the scope of this initiative that does not 
aim at revealing the costumers behind an account.  
Finally,  payment  data  are  needed  to  detect  the  fraudsters.  However,  currently  not  all 
Member States have access to this kind of data. Few Member States collect payment data 
systematically (i.e. every month or every quarter) while other only on specific cases, in 
order  to  support  the  finding  of  an  open  VAT  control.  The  initiative  will  make  cross-
border payment data available to all Member States in the same way, with the same set of 
information and with the same periodicity (quarter reporting obligations of PSPs). Only 
the  PSPs  established  in  the  Member  States  will  be  subject  to  the  reporting  obligations 
foreseen in the regulatory options. It should be noted that, in a payment transaction there 
usually are at least two payment intermediaries: one acting on behalf of the payer and one 
acting on behalf of the payee. Both must have the information on the payer and payee in 
order  to  execute  the  payment  transaction.  As  described  in  section  2  the  European 
consumers  are  not  directly  involved  in  the  fraud.  Therefore,  even  when  they  buy  from 

104 Directive (EU) 2015/2366, Article 4(33). 

25 

 
                                                            
suppliers established in third countries, they keep using their own preferred and trusted 
payment methods and intermediary. Therefore, the payment service providers acting on 
behalf of the European payers will provide tax authorities with the necessary information 
to  detect  the  recipient  of  the  funds  even  when  established  outside  the  EU,  and  this 
without disclosing the information on the customer.  
The  regulatory  options  do  not  foresee  any  additional  obligation  to  the  taxable  persons 
supplying goods and services (both online and in the "traditional"market). 

Figure  4:  Link  between  drivers,  options  (non-regulatory  and  regulatory)  and 
specific objective 

Drivers  

       Non-reg. options 

    Operational Objectives 

No records in Member 
State of Consumption 

Important data held by 
third parties 

Capacity of national tax 
authorities 

Guidelines 

Investing on adm. 
capacity 

Access to third party 
VAT relevant data 

Identifying potential 
fraud 

New forms of Exchange 
of Information 

Drivers  

      Reg. options 

     Operational Objectives 

No records in Member 
State of Consumption 

Important data held by 
third parties 

Capacity of national tax 
authorities 

Transmission of VAT 
payment data  

Exchange of data 

Risk analysis 

Access to third party 
VAT relevant data 

Identifying potential 
fraud 

New forms of Exchange 
of Information 

5.3.  What is the baseline from which options are assessed? 

5.3.1.  Policy option 1 – Baseline scenario 

As  mentioned  in  section  2.4.2,  the  survey  launched  with  tax  authorities  in  2016105 
showed  that  only  one  third  of  the  Member  States106  collect  data  relevant  for  VAT 
controls  from  online  market  places,  platforms  and  portals  established  in  their  own 
jurisdiction.  The  targeted  consultation  showed  that  twelve  of  the  respondent  Member 
States107  collect  data  from  PSPs  established  in  their  own  jurisdiction.  Member  States 
have no statutory right to request payment data from taxpayers established abroad. Third 
party data are also used in combination with other tools i.e. cooperation with the national 
Financial  Investigation  Unit/Anti-Fraud  Unit  (15  Member  States),  national  custom 
authorities  (15  Member  States),  post  offices  (10  Member  States),  transport  and  logistic 
companies  (8  Member  States),  online  market  places (9  Member  States),  use  of  internet 
monitoring tools (15 Member States).  

However, the Member States could not indicate whether this information was useful to 
fight e-commerce VAT fraud. It should be noted that, as mentioned in section 5.2. of this 

105 See Annex 8 "Result of the TAXUD 2016 survey on e-commerce compliance strategies in the EU" 
106  Only  seven  Member  States  out  of  the  21  Member  States  that  replied  to  the  survey  communicated  to 
have a sort of cooperation with online market places, platforms and portals.  
107 See Annex 2 "Consultation synopsis report", section 3.2 

26 

 
 
 
 
                                                            
 
 
 
 
 
 
 
 
 
 
 
  
  
  
report,  different  policy  objectives  are  regulated  by  different  legal  basis,  and  also  the 
information  transmitted  by  financial  institutions  to  different  national  authorities  is 
different depending on the purpose.  

As regard international cooperation under the framework of Regulation (EU) 904/2010, 
the Member States set up a new Working Field dealing with e-commerce in Eurofisc108. 
However, also in Eurofisc the legal constraints mentioned in section 2.4.3 apply. Member 
States  make  very  little  use  of  request  for  information  and  rarely  send  spontaneous 
information  in  the  field  of  e-commerce  (see  section  1.2).  Finally,  the  recently  adopted 
amendments to Regulation (EU) 904/2010 (see section 1.2) do not address e-commerce. 
The  envisaged  cooperation  between  Eurofisc  and  Europol  and  OLAF  will  refer  to 
specific information on VAT fraud cases related with criminal organisations. 

Furthermore,  three  Member  States109  indicated  that  the  tax  administration  has  the  legal 
authority  to  take  down  the  domain  name110  of  web-shops  because  of  breaches  to  the 
VAT  legislation,  independently  or  in  collaboration  with  another  agency  (i.e.  consumer 
protection agency). 
Finally, the VAT Directive111 allows Member States to provide that a person other than 
the  person  liable  for  the  payment  of  VAT  is  to  be  held  jointly  and  severally  liable  for 
payment of  VAT.  Even  though  three Member States indicated to  have  general  national 
regulation  that  entails  VAT  responsibility  for  internet  platforms  under  certain 
circumstances, the 2016 survey showed that this opportunity is used to a limited extent. 

Different  from  the  Joint  and  Several  liability  is  the  "deemed  supplier"  provision 
introduced by the new Article 14a of the VAT Directive that will enter into force as from 
2021 (as described in Section 1.1 of this Report). Under the Joint and Several Liability a 
third party is held responsible for the payment of VAT under certain conditions, i.e. if it 
is involved in a fraud and the third party ‘knew or should have known" about the fraud. 
On  the  contrary,  under  the  "deemed  supplier"  provision  the  third  party  is  directly 
considered  as  a  liable  person  because  it  is  "deemed"  to  have  received  and  supplied the 
goods himself.  

5.4.  Description of the policy options 

5.4.1.  Policy  option  2  (non-regulatory):  Investing  in  administrative  capacity  and 

providing EU guideline + standard forms 

This  non-regulatory  option  would  consist  in  strengthening  cooperation  among  EU  tax 
authorities in the following ways: 

 

Investing in administrative capacity 

The  Commission  can  help  the  Member  States  to  invest  in  administrative  capacity  to 
address  e-commerce  VAT  fraud  through  the  Fiscalis  Programme112  and  Structural 

108 Eurofisc is a network for the multilateral exchange of targeted information to combat VAT fraud. The 
legal basis is in Chapter X of Council Regulation (EU) No 904/2010. 
109 See Annex 8: Result of the 2016 TAXUD survey on é-commerce compliance strategies in the EU 
110 A domain name is a unique name that you register for yourself, your company or organisation. Your 
domain name gives you an identity on the internet and provides other people with an easy way of locating 
you. A domain name is made up of a minimum of two parts, separated by a full-stop or dot. The first part 
of  the  domain  name  is  the  name  itself  (e.g.  'thisisme2').  The  second  part  of  the  domain  name  is  the 
extension  (the  bit  that  comes  after  the  final  dot).  There  are  all  sorts  of  extensions  available:  .be, 
.vlaanderen, .brussels, .com, .eu and many more. 
111 Council Directive 2006/112/EC Art. 205 
112 See: https://ec.europa.eu/taxation_customs/fiscalis-programme_en  

27 

 
                                                            
Reform  Support  Programme  SRSP113.  This  is  already  the  case  in  the  framework  of 
Eurofisc where the Fiscalis Programme is used to finance Working Field 5 (WF5) on e-
commerce114. 

  Providing EU-level guidelines and (optional) forms for the Exchange of Information 

(EoI) 

The Commission, acting together with Member States and PSPs, could draft and publish 
guidelines  to collect  data from PSPs.  Tax administrations could  use  these guidelines to 
ask  the  same  set  of  data  with  a  standard  form.  Such  guidelines  would  however  be 
optional  and  non-binding  for  both  tax  authorities  and  businesses.  An  example  already 
exists  in  the  field  of  the  so-called  Missing  Traders  fraud,  where  guidelines  for 
cooperation between tax administrations and businesses to fight the Missing Trader fraud 
were  drafted  in  2016  by  the  VAT  forum115  and  published  in  TAXUD  website116. 
Furthermore,  the  Commission,  together  with  Member  States  could  draft  guidelines  on 
how to use VAT relevant data from PSPs in order to detect fraudsters. 

5.4.2.  Policy option 3 (Regulatory option): Collection and exchange of payment data 

Unlike  the  previous  option,  this  option  would  introduce  binding  provisions  directed  at 
both PSPs and national tax authorities.  This could be realised in different variants (sub-
options). 

Both sub-options work on the base of a “push” approach. The payment service providers 
will  transmit  every  quarter  the  information  to  the  tax  authorities  under  both  cases.  The 
difference between the two sub-options is in the way Member States tax authorities will 
have access to the data and the data available to tax authorities. 

To  make  the  regulatory  option  more  proportional  a  threshold  is  foreseen.  In  order  to 
capture  only  the  payments  that  are  potentially  linked  to  an  economic  activity  (thus 
excluding cross-border payments executed for private reasons) a threshold linked to the 
number  of  cross-border  payments  received  by  a  payee  is  foreseen:  only  when  the  total 
amount of payments received by a given payee exceeds the threshold of 25 payments in a 
3 months period, the payment service providers will have to keep the records available to 
tax authorities on that payee. The threshold has been established taking into account an 
average  value  of  online  shopping  orders  of  EUR  95117.  An  annual  hundred  payment 
transactions of that value will result in almost a total of EUR 10 000 which can already 
give raise to VAT obligations in the Member States, and matches with the EUR 10 000 
threshold on intra-EU supplies introduced by the VAT e-commerce Directive. 

5.4.2.1. Sub-option 3.1: Distributed application 

Phase I: Transmission of payment data to tax authorities118 

The PSPs will have to keep records of the data indicated in section 5.2.2. The retention 
period of these records for the PSPs will be two years, which is a proportionate balance 
between the necessary period for tax authorities to carry out controls and the obligation 

113  See:  https://ec.europa.eu/info/funding-tenders/funding-opportunities/funding-programmes/overview-
funding-programmes/structural-reform-support-programme-srsp_en  
114  Eurofisc  is  a  network  where  the  competent  officials  of  the  Member  States  exchange  data  based  on 
national risk analysis. Eurofisc Working Field 5 established in 2017 deals with the e-commerce control 
115  For  more  information  on  the  VAT  forum,  see:  https://ec.europa.eu/taxation_customs/business/vat/eu-
vat-forum_en  
116 See: 
https://ec.europa.eu/taxation_customs/sites/taxation/files/resources/documents/taxation/tax_cooperation/vat
_gap/2016-03_guide-on-adm-cooperation_en.pdf  
117 
118 See Annex 12 "Visual examples of the regulatory options". 

https://www.statista.com/statistics/239247/global-online-shopping-order-values-by-device  

28 

 
                                                            
for PSPs to keep personal data. Then, every quarter119 the PSPs will transmit that set of 
VAT relevant  data to the tax authority of the Member State where they  are established 
using a single EU format (to be defined with implementing measures). The VAT relevant 
payment data will refer to all inbound and outbound payments (where either the payee or 
the payer are located in the EU) in the previous reporting period  (and exceeding the 25 
payments per payee in a calendar quarter)120. 

The VAT relevant payment data will be stored electronically by the tax authorities. The 
retention period will be defined by the national legislations but no longer than ten years, 
in lines with the general retention period obligation imposed to tax administrations under 
Regulation (EU) 904/2010121.  

Phase II: Administrative cooperation between Member States - Exchange of data122 

As  mentioned  above,  the  VAT  relevant  payment  data  will  be  stored  electronically  at 
national level. The national  databases  will be connected through an electronic interface 
and  distributed  system  available  to  all  the  tax  administrations  (similar  to  the  VIES123). 
Only the Eurofisc officials of the other Member States will have access electronically to 
the inbound and outbound payments from and to their own Member State. The Eurofisc 
officials  of  one  Member  State  will  have  to  access  relevant  data  available  in  another 
Member  State  database  logging  a  "search"  in  the  system  of  the  other  Member  State 
through  the  electronic  interface.  This  will  work  in  a  similar  way  like  the  "automated 
access"  currently  regulated  under  Article  21  of  Regulation  (EU)  904/2010:  the  official 
starting the search should already have some piece of information in order to launch the 
research  (i.e.  an  identification  of  a  given  taxpayer)124.  Then  the  system  will  show  the 
result  almost  in  real  time.  The  result  would  be  the  payment  transactions  referring  to  a 
given payee, in a given period. Eurofisc is a network composed of anti-fraud officials of 
the  Member  States'  tax  administrations125  for  the  multilateral  exchange  of  information 
resulting from national risk analysis. Therefore, limiting the access to the system only to 
the  Eurofisc  officials  will  guarantee  that  the  data  can  be  used  only  for  the  detection  of 

119  Different  reporting  frequencies  (daily,  monthly,  yearly)  had  been  considered  and  discarded  after 
consultation  with  Member  States  and  payment  service  providers.  The  majority  of  the  Member  States 
indicated monthly, the PSPs quarterly. A monthly frequency implies administrative burdens to PSPs while 
quarterly still allow Member States to carry out appropriate controls 
120  A  threshold  of  EUR  10.000  had  been  considered  and  discarded  after  the  result  of  the  targeted 
consultation.  Under  the  threshold,  the  PSPs  would  transmit  the  payment  data  only  when  all  payments 
received by a given payee exceed EUR 10.000. The threshold would be computed based on the payment 
received by a given payee during the previous reporting period.  
The purpose of the threshold would be to exclude from the exchange of information the payments of small 
amounts that unlikely refer to a commercial activity. However, the this threshold as such would not be as 
such  decisive  to  define  an  economic  activity  and  could  be  easily  abused  by  fraudsters  by  using  multiple 
accounts  to  receive  the  payments.  A  threshold  linked  to  the  number  of  transactions  has  been  considered 
more effective. 
121 Article 55(5)(b) of Regulation (EU) 904/2010 as amended by COM(2017)706 final adopted by the 
Council on 22 June 2018 
122 See Annex 12 "Visual examples of the regulatory options". 
123 The VAT Information Exchange System foresee in Chapter V of Regulation (EU) 904/2010 and that 
connect the national electronic systems of the Member States. The VIES makes available the information 
collected  on  intra-EU  supplies  (B2B  only)  on  the  basis  of  VAT  registrations  and  the  recapitulative 
statements submitted by taxpayers.  
124 Automated access is different than automatic exchange of information. The automated access gives the 
tax officials the possibility to search certain information in a database (Article 17 of Council Regulation 
904/2010). Automatic exchange of information is the periodic exchange (on regular base e.g. monthly or 
quarterly or yearly) of a predefined set of data between tax authorities (Article 13 and 14 of Council 
Regulation (EU) 904/2010).  
125 The legal base is in Chapter X of Council Regulation (EU) 904/2010 on administrative cooperation and 
fighting fraud in the field of VAT.  

29 

 
                                                            
VAT fraud. Officials of the European Commission would have access to the system only 
for maintenance and development purposes.  
Phase III: Risk analysis for control purposes 

The  inbound  payments  will  allow  the  detection  of  domestic  sellers  while  the  outbound 
payments will allow the detection of remote sellers (established abroad). The system will 
not aggregate all payment data of a given payee in all the Member States. Therefore, if in 
one  Member  State  there  is  relevant  payment  information  referring  to  potential  taxable 
transactions  in  another  Member  States,  these  Member  States  will  not  be  alerted 
automatically  by  the  system.  In  few  words  the  risk  analysis  can  only  be  carried  out 
nationally  by  the  tax  authorities  following  their own  national  procedures.  Based  on  the 
payment information retrieved from the system, the national Eurofisc officials will have 
to activate their own national tax administration to crosscheck this information with other 
sources of information, such as VAT, MOSS, customs’ declaration and eventually carry 
out VAT controls.  

5.4.2.2. Sub-option 3.2: Central storage126 

Phase I: Transmission of payment data to tax authorities 

As for the sub-option 3.1. also under this sub-option the PSPs will have to keep records 
of  the  data  indicated  in  section  5.2.2.,  and  the  retention  period  of  these  records  for  the 
PSPs  will  be  two  years.  Then  the  transmission  of  the  data  from  the  PSPs  to  the  tax 
authorities  will  be  like  in  sub-option  3.1.  Like  in  the  previous  sub-option,  the  tax 
authorities will store the payment data received in their own databases.  
Phase II and III: Exchange of data and risk analysis for control purposes 

The difference compared to sub-option 3.2 is in the way the tax authorities share amongst 
them the payment data and on the risk analysis. Under this sub-option the tax authorities 
will  be  required  to  upload  the  data  received  from  PSPs  in  an  EU  central  electronic 
repository,  to  be  developed  and  maintained  by  the  European  Commission.  This  data 
repository will be available only to the EU Member States in the framework of Eurofisc. 
Officials  of  the  European  Commission  will  have  access  to  the  system  only  for 
maintenance  and  development  purposes.  The  data  will  be  retained  in  the  central 
repository for an interval of two years. Then they will be erased. The storage period in 
the central repository is shorter compared to the ten years foreseen at national level for 
tax  authorities  in  order  to  reduce  the  volume  of  information  to  be  stored  in  the  central 
repository. 

The central repository will allow the “search” function (like sub-option 3.1) and will also 
automatically aggregate data per payee.  It means that  the central  system will aggregate 
all  payment  data  received  by  all  payment  service  providers  established  in  the  EU 
referring  to  single  payees,  will  be  able  to  recognise  multiple  records  (from  different 
payment  service  providers)  on  the  same  payment  transactions.  Furthermore,  based  on 
indicators chosen by the Eurofisc officials, can retrieve from the system transactions over 
a given amount, or frequent multiple payment transactions per payee, or per country etc... 
Finally  the  system  will  have  a  cleansing  function:  the  system  will  recognise  any 
inconsistency or mistake in the format of the data and will "clean" it, learning also from 
the past.  

The  software  will  work  based  on  criteria  for  the  selection  of  the  payees  established 
jointly by the Eurofisc officials of the Member States. The central repository will be able 

126 See Annex 12 "Visual examples of the regulatory options". 
. 

30 

 
                                                            
to aggregate the data per payee based on the information available from all the Member 
States. Under this sub-option the risk analysis will be carried out jointly by the Eurofisc 
officials  in  the  framework  of  the  Eurofisc  network.  In  this  way  they  can  obtain  an  EU 
wide view of the VAT fraud schemes.  
Finally, like in sub-option 3.1, based on the risk analysis the Eurofisc officials will have 
to activate their own tax administration to crosscheck data with other national sources of 
intelligence. 

5.5.  Discarded option 

5.5.1.  VAT split payment 

A  split  payment  mechanism  would  change  the  regular  VAT  collection  regime  by 
introducing  on  payments  for  taxable  supplies  a  split  between  the  VAT  amount  and  the 
taxable  base  (e.g.  by  two  separate  payments  for  every  taxable  transaction).  It  deviates 
from  the  current  EU  VAT  regime,  which  mainly  relies  on  vendor-based  collection  of 
VAT  and  on  periodical  reporting  and  payment  of  VAT  by  registered  traders.  The  split 
payment  is  regarded  as  a  measure  that  can  combat  VAT  fraud  and  non-compliance  by 
removing the opportunity of suppliers to charge VAT and disappear without declaring or 
paying  it  to  the  tax  authority.  A  Deloitte  study127  measured  the  impact  of  the  general 
application of the split payment in the EU on the current VAT regime including on B2C 
supplies. The study concluded that the benefit in terms of reductions in the VAT Gap are 
not  unequivocally  higher than the costs imposed  on businesses and public bodies (both 
administrative  costs  and  cash  flow  impacts),  and  are  even  outweighed  when  applied  to 
the entire volume of transactions. Furthermore, in order to apply the split payment of the 
VAT amount the payment service provider should be aware of very detailed and specific 
information  in  order  to  determine  exactly  the  VAT  liability.  The  collection  of  this 
information is considered technically highly challenging under the SEPA regulation and 
the PSD2. 

5.5.2.  Direct  access  of  Member  States'  tax  authorities  to  Payment  Service  Providers' 

databases 

Another technical solution to give Member States the access to  payment data would be 
through  a  direct  access  of  tax  authorities  to  PSPs'  databases.  However,  this  solution  is 
considered  disproportionate  in  terms  of  processing  of  personal  data.  In  fact,  not  all 
payment  data  are  necessary  for  tax  authorities  to  achieve  the  objective  of  fighting  e-
commerce VAT fraud. In particular data on domestic payments would not help to detect 
cross-border transactions. Finally the data on payers are disproportionate in terms of data 
protection, because would disclose information on the consumers that are not necessary 
for tax authorities. Therefore, this option has been discarded. 

6.  WHAT ARE THE IMPACTS OF THE POLICY OPTIONS? 

6.1.  Methodology 

An evaluation of Council Regulation (EU) 904/2010 was undertaken with specific regard 
to  e-commerce  VAT  fraud.  A  public  consultation  and  a  targeted  consultation  with  tax 
authorities  and  business  representatives  were  launched  in  the  first  half  of  2018.  The 
outcome of the consultations, and in particular the answers and estimates provided by tax 
authorities and business have been taken into account. The evaluation is annexed to this 
report.  

6.2.  Analysis of the impacts  

Nature of the analysis and factors affecting it 

127 See: https://ec.europa.eu/taxation_customs/sites/taxation/files/split_payment_report2017_en.pdf  

31 

 
                                                            
It was not possible to carry out a quantification of the impacts of this initiative through a 
CGE  (computable  general  equilibrium)  model  simulation  in  the  time  available.  The 
analysis of the impacts will therefore be laid out essentially in qualitative terms. While 
this is not  optimal, it must be considered that the effective impact of this initiative, for 
reasons that will be explained in detail later, will depend to a large extent on a) the scope 
and pace of implementation by individual Member States of new control protocols b) the 
quality, degree, and timing of administrative cooperation between Member States and, c) 
the  degree  by  which  third  country  jurisdictions  cooperate  in  enforcing  EU  VAT  law. 
Given  that  these  three  parameters  are  very  hard  to  forecast,  any  quantification  of  the 
impacts  would  at  any  rate  be  subject  to  a  large  error  margin.  The  analysis  mainly 
addresses  the  economic  impact  of  the  options,  administrative  and  compliance  costs  for 
stakeholders,  and  the  impact  on  the  fundamental  rights  to  protection  of  personal  data. 
Social and environmental impacts are shortly addressed: a more detail analysis of these 
impacts was not possible due to the very technical nature of the options.  

Key Assumptions  

1.  Continued growth in e-commerce: The trend towards an increasing volume of e-
commerce is expected to continue as more and more consumers familiarise with 
purchasing over the internet. While the rate of growth of e-commerce is likely to 
continue moderating as the sector matures128, there is general consensus that this 
trend will continue. The growing concerns about the protection of personal data 
are assumed not to change this outlook fundamentally; the indications from stock 
markets,  which  are  by 
this 
assumption129.  

forward-looking,  corroborate 

their  nature 

2.  Increasing adoption of payment control tools by national tax administrations: At 
national  level,  it  is  assumed  that  in  the  medium  term  more  tax  administrations 
will  seek  to  introduce  payment  control  tools,  on  account  of  the  successful 
experience  of  countries  like  Norway,  Australia,  and  several  EU  Member  States 
(see  section  5.2).  For  the  assessment  of  the  impacts,  it  is  also  assumed  that  tax 
administrations adopt the flanking measures needed to ensure the effectiveness of 
the payment control tools; in particular, that they allocate sufficient staff to carry 
out the checks on the suspect traders identified thanks to the new tools.  

3.  Further  reinforcement  of  cooperation  between  EU 

tax  authorities:  The 
effectiveness  and  quality  of  cooperation  between  EU  tax  administrations  is 
assumed  to  improve  further  because  of  multiple  ongoing  policy  initiatives  to 
address VAT fraud and because of a more propitious political climate.  

4.  Increased collaboration with third country tax authorities: Finally, it is assumed 
that  third  country  tax  administrations  will  increasingly  collaborate  with  EU  tax 
authorities  in  the  enforcement  of  VAT  rules  on  B2C  sales  on  EU  territory.  As 
pointed  out  in  the  problem  definition,  currently  some  important  players  do  not 
cooperate with the EU in enforcing VAT payments on B2C businesses on account 
of  exclusions  stipulated  in  the  OECD  framework.  However,  the  OECD  is  very 
active with the BEPS initiative in order to improve international cooperation also 

128 Source Ecommerce Europe Report 2017 
129    From 1.1.2014 to 31.10.2017, the return on Amazon stock was +262%, compared to a 44% loss for 
traditional  retailers.  The  general  SP500  index  returned  +28%.  The  gap  between  Amazon  and  traditional 
retailers  continued 
in  2017  (see  http://uk.businessinsider.com/amazon-stock-price-retail-
apocalypse-2017-11?r=US&IR=T).  The  same  general  trend  is  expected  in  the  EU,  where  the  share  of 
enterprises selling online has grown from 13% to 18% in the five years to 2016, and worldwide.  

to  grow 

32 

 
                                                            
in the field of consumption taxes130. Furthermore, China has recently introduced a 
new  VAT  system131  following  the  OECD  guidelines:  it  is  reasonable  to  expect 
further  steps  also  in  the  field  of  international  cooperation  (jurisdictions  with 
similar  consumption  tax  systems  based  on  the  destination  principles  tend  to 
cooperate for the assessment of VAT liabilities). Overall, it is assumed here that, 
as the policy options outlined in this initiative lead to a greater awareness of the e-
commerce  VAT  fraud  and  to  identification  of  the  fraudsters  located  in  third-
country,  changes  will  be  made  to  the  collaboration  framework  that  lead  to 
significantly greater pressure on dishonest businesses also in third countries.  

Assumptions  1  to  3  are  deemed  to  be  fairly  straightforward  and  it  seems  difficult  at 
present  to  imagine  any  markedly  different  scenario,  so  that  they  will  not  be  further 
discussed.  For  assumption  4,  given  that  it  depends  on  the  actions  and  policy  of  third 
countries, we present  – alongside our  central  scenario  – an alternative 'non-cooperation 
scenario' when discussing the impacts on fraud and on trade distortion132.  

6.2.1.  Impact on VAT fraud 

General considerations 

The  judgement  that  payment  data  availability  represents  a  quantum  leap  in  the 
effectiveness  of  the  fight  against  e-commerce  VAT  fraud  is  not  merely  a  prospective 
opinion  but  is  borne  out  of  an  understanding  of  the  antifraud  controls  in  current 
administrative  practice.  Already  now,  as  outlined  in  the  problem  definition,  the  EU 
administrative cooperation framework allows tax administrations to retrieve information 
about businesses operating from other EU jurisdictions, if any wrongdoing is suspected. 
Information and transactions data can be sought not only from the tax administrations of 
other Member States, but – in some case – even from payment intermediaries themselves. 
However, for legal reasons related to data protection and due process, such information is 
normally  available  only  on  the  basis  of  a  targeted  and  duly  motivated  request,  while  a 
general 'screening' data request would be immediately refused. In other words, once a tax 
administration has identified a trader as suspect, existing tools can be quite effective in 
enforcing the VAT (at least in the case of an EU-based suppliers).  

However,  the  problem  which  existing  cooperation  agreements  do  not  allow  is  how  to 
effectively identify suspect businesses in the first place. Existing systems rely mainly on 
checking parcels or on follow-up work done on regular VAT audits. This approach could 
suffice  when  the  volumes  of  cross-border  B2C  sales  was  limited.  However,  the 
exponential  growth  in  e-commerce  implies  that  a  system  based  on  controlling  parcels 
would require a very high amount of random checks to provide an effective deterrent to 
fraudsters.  Looking  just  at  small  consignments  originating  from  outside  the  EU,  their 
number was estimated at 115 million already in 2013133, implying that even checking just 
one percent of packages would require opening more than a million parcels every year. 
This would require a disproportionate use of human resources.  

Given  that  the  control  of  parcels  can  only  identify  a  tiny  fraction  of  non-compliant 
operators,  an  unscrupulous  business  can  operate  at  a  significant scale with  little  risk  of 
being  discovered  by  the  tax  administration  of  the  country  of  destination  of  the  parcels. 

130  See:  http://www.oecd.org/tax/consumption/oecd-delivers-implementation-guidance-for-collection-of-
value-added-taxes-on-cross-border-sales.htm  
131 See: https://www.oecd.org/tax/consumption/business-vat-tax-reform-china.pdf  
132 We will not discuss the impacts of the non-cooperation scenario on other variables (eg on compliance 
costs) as they are either not markedly different from the central scenario or straightforward. 
133 See Table 2 on page 35 in Assessment of the application and impact of the VAT exemption for 
importation of small consignments, study prepared for the European Commission, EY – May 2015 , 
available at https://ec.europa.eu/taxation_customs/sites/taxation/files/docs/body/lvcr-study.pdf 

33 

 
                                                            
Under these circumstances, the main hope for identifying a non-compliant business rests 
on  VAT  audits  done  for  other  reasons  –  which  can  take  very  long  or  may  never  take 
place.  In  contrast,  the  availability  of  data  on  payments  allows  tax  administrations  to 
identify which businesses engage in B2C e-commerce and double-check if they are VAT 
compliant,  using  IT  tools.  This  streamlines  and  facilitates  enormously  the  detection  of 
potential fraudsters.  

The crucial role of payment data availability in addressing fraud is confirmed by the fact 
that more and more tax administrations are adopting this approach. At present, twelve tax 
administrations already cooperate with PSPs to collect payment data or have put in place 
payment data monitoring.  

The  experience  of  the  Finnish  tax  administration  can  provide  some  elements  to  assess 
what  can  be  the  quantitative  impact  of  introducing  payments  data  to  track  down  non-
compliant B2C sellers. In the three years from 2015-2017, the use of payments data was 
key  in  the  initiation  of  about  300  audits,  with  a  growing  trend.  These  audits  allowed 
assessing  a  total  of  over  EUR  29  million.  Data  for  2016,  the  year  where  the  amount 
revealed  by  the  audits  was  highest;  indicate  that  around  90%  of  the  audits  referred  to 
distance  sellers.  That  year,  the  VAT  collected  after  the  audits  raised  around  EUR  16 
million Euros. The Finnish tax administration thus gives us an example of why the use of 
payment data was important in recovering amounts owned by taxpayers. Consequently, 
payments data analysis is reported to be the key tool to tackle e-commerce VAT fraud.  

In  the  targeted  consultation,  almost  three  times  as  many  Member  States  answered  that 
new tools are needed to effectively address e-commerce fraud than those that considered 
existing tools sufficient. Others, however, pointed out that an impact on fraud is expected 
from  the  new  measures  introduced  in  the  VAT  Directive  by  the  VAT  e-commerce 
package)134 and that the impact of these should be seen before judging. 

Comparison  with  the  measures  introduced  with  the  VAT  e-commerce  package  and  the 
regulatory option135 

Overall, the analysis conducted in the context of this Impact Assessment suggests that the 
impact (in terms of fighting e-commerce VAT fraud) of the options envisaged under the 
payments initiative on combating fraud would go well beyond the impact of the measures 
introduced by the VAT e-commerce package and described in section 5.1, strengthening 
it in significant ways. This assessment rests in particular on the following considerations: 

  The  measures  envisaged  in  the  regulatory  option  cover  a  significantly  larger  scope 
than  the  measures  included  in  the  VAT  e-commerce  package;  in  particular,  as 
described  in  section  5.1.4,  while  the  deemed  supplier  provision  covers  only  certain 
internet platforms and only for certain supplies of goods, the regulatory options cover 
all  PSPs  established  in  the  EU  which  deal  with  more  than  90%  of  online  B2C 
supplies of goods and services, making it very difficult to escape detection; 

  The  measures  introduced  by  the  VAT  e-commerce  package  are  targeted  to  specific 
transactions,  i.e.  the  abolition  of  distance  sales  thresholds  apply  only  to  intra-EU 
supplies, the IOSS and the abolition of small consignments exemption apply only to 
imports,  the  deemed  supplier  provision  applies  only  to  supplies  of  goods).  The 
envisaged measures under the regulatory option (and partially option 2) will allow a 
control to all cross-border supplies to final consumers.  

  The measures envisaged in the regulatory option (and partially option 2) will be more 
effective,  because  they  introduce  additional  elements:  in  particular,  they  lay  the 

134 See section 1.1 and section 5.1.  
135 See Annex 13 " Comparison amongst different initiatives in terms of fighting e-commerce VAT fraud" 

34 

 
                                                            
groundwork  for  addressing  the  identification  problem  (of  not  VAT  registered 
suppliers) , whereby national tax administrations may remain unaware of fraudulent 
activity  by  an  operator  because  of  legal  limitations  to  existing  data  exchange 
procedures. Furthermore, payment data when cross-checked with VAT data will give 
an  important  indication  of  whether  VAT  declarations  are  submitted  and  correct  (in 
terms of turnover declared). Moreover, mis-description of imports (i.e. “gift” or “low-
value samples”) will be easily spotted by cross-checking  payment data. Finally,  the 
origin  of  the  payments  will  support  tax  administrations  in  their  task  of  checking 
whether the VAT is declared in the right place of consumption (i.e. where the buyer 
is located). 

  The measures introduced with the VAT e-commerce package will enter into force in 
2021  and  it  is  still  premature  to  make  a  real  assessment.  However,  as  already 
mentioned,  they  are  mainly  “simplification”  rather  than  anti-fraud  initiatives, 
although simplification measures to some extent should also improve “compliance”. 
On  the  other  hand,  payment  data  will  help  to  detect  VAT  fraud  (intentional  non-
compliance)  and  also  non-compliance  (non-intentional)  once  crossed-matched  with 
VAT declarations.  

In  particular,  Options  2  and  all  sub-options  of  Options  3  are  expected  to  have  a 
significant  to  large  impact  on  reducing  intra-EU  fraud.  The  impact  is  largest  under 
option  3.2,  because  the  central  repository,  by  making  possible  the  pooling  of  EU-level 
data,  will  allow  to  aggregate  data  over  all  EU  Member  States.  This  is  essential  for 
controlling the respect of the EU wide VAT thresholds described in section 5.1.1.   

Option  2  is  assessed  to  be  less  effective  than  Options  3.1  and  3.2;  while  adoption  of 
guidelines  may  speed  up  adoption  in  some  cases,  as  Member  States  with  less 
administrative capacity can rely on the guidelines instead of developing their analysis ex 
nihilo, experience in the taxation domain shows that guideline writing can in itself be a 
slow  and  complicated  process.  Furthermore,  non-binding  guidelines  and  the  associated 
non-coordinated  adoption  of  payment  data  analysis  do  not  merely  likely  slow  down 
adoption  but  also  aggravate  the  risk  of  perverse  incentives,  exacerbating  market 
distortions (see next section).  

As for e-commerce VAT fraud by extra-EU suppliers, under the assumptions laid out at 
the  beginning  of  this  chapter,  the  policy  options  under  consideration  are  assessed  to 
provide, in the medium term, a positive impact on fraud levels. The effectiveness of the 
options will be, however, less on extra EU suppliers than on intra-EU suppliers because 
within the EU, the existing administrative cooperation framework offers a series of tools 
to  recover  unpaid  VAT  in  another  jurisdiction;  whereas,  in  comparison,  administrative 
cooperation  with  non-EU  tax  authorities  is  in  an  embryonic  state  and  does  not  yet 
guarantee an effective and credible recovery of unpaid VAT, as explained in section 1.3. 
Note however the discussion of the risks of trade diversion in section 6.2.2.  

Risks stemming from lower than expected collaboration from third country jurisdictions 

As  outlined  under  assumption  4,  it  is  assumed  that  availability  of  data  on  fraud  will 
trigger greater collaboration with third countries authorities, because of higher awareness 
in  EU  countries  and  because  third  countries  tax  authorities,  too  have  an  interest  in 
maintaining a good working relationship with foreign tax authorities in general and with 
the  EU  in  particular.  Given  the  importance  of  the  EU  on  the  world  stage,  it  seems 
unlikely that foreign tax authorities would find a non-collaboration strategy sustainable in 
the long term, although it has to be recognised that in the short term, non-collaboration is 
a possibility.  

35 

 
 
 
The existing level of administrative cooperation with third countries should not be taken 
as  a  given,  because,  if  the  payment  data  initiative  is  adopted,  this  will  in  itself  give  a 
strong impetus to conclude new, stepped up cooperation agreements. This is because the 
higher  awareness  provided  by  data  and  the  transparency  about  transactions  at  risk  of 
VAT  fraud  will  inevitably  create  a  significant  pressure  for  upgrading  existing 
cooperation frameworks. The situation will be markedly different from today’s status quo 
in  which  there  is  very  little  certainty  about  the  size  and  existence  of  fraudulent 
transactions. As such, the level of cooperation with third countries should not be treated 
as  exogenous  to  the  policy  options,  but  is  to  a  large  extent  endogenous  (dependent)  on 
them.   
Overall, we conclude that both policy options would have a positive impact on reducing 
e-commerce  VAT  fraud;  this  effect  would  be  significantly  stronger  for  the  two  sub-
options of option 3; in  addition, the impact on intra-EU transactions would be  stronger 
than on extra-EU transactions, but would be positive for both.  

Non-cooperation  by  third-country  jurisdiction  would  have  two  main  negative  impacts: 
first, it would reduce the positive impact of the policy options on VAT revenue; second, 
it could trigger  trade diversion as businesses might concentrate their operations in non-
cooperative jurisdictions. The second impact appears to be the more serious of the two, 
because about 80% of cross-border e-commerce sales originate from other EU countries, 
whereas a shift in the market towards third-countries would create more lasting damage.  

Despite the risk of non-cooperation outlined above, we expect for the medium/long term 
a  positive  impact  of  the  envisaged  policy  options  is  nevertheless  expected  even  with 
respect to traders located in countries where no cogent enforcement framework is put in 
place.  This  assessment  is  based  on  three  sets  of  arguments:  Psychological  and 
reputational considerations; the risk of blocking of non-compliant traders’ web pages by 
tax  authorities,  and  the  possibility  for  tax  authorities  to  introduce  additional  measures 
targeting non-compliant non-EU businesses.  

a) Psychological and reputational considerations encourage in particular larger traders 
to be compliant 

It  is  known  from  the  literature  on  behavioural  economics  that  economic  agents  tend  to 
comply with tax rules more than they would rationally be expected to do solely looking 
at  the  risk  of  detection  and  the  prospect  of  a  financial  penalty136.  As  such,  the  mere 
introduction of a scheme to collect data on B2C at EU level seems likely to spur greater 
compliance than is presently the case. Furthermore, while many smaller traders may not 
be overly concerned by the reputational damage they might incur if charged with VAT 
fraud,  it  seems  likely  that  platforms  operated  by  large,  well-known  multinational 
businesses, which play an important role in the e-commerce market, would not want to 
see their name associated with systematic VAT fraud, or, even worse, to be accused of 
facilitating VAT fraud. Thus, pressure for voluntary compliance would certainly increase 
once businesses become aware that authorities have ways to detect VAT fraud and non-
compliance, even in the absence of a cogent and operational enforcement mechanism.  

b) Persistently non-compliant traders face a risk of blocking of web pages 

A number of administrations have indicated137 that they are legally empowered to block, 
on their territory, the operation of web pages associated with wrongdoing, and that in the 
case  of  persistent  violations,  this  tool  could  be  used  to  sanction  non-compliant  foreign 

136 See for instance discussion in A. Leicester, P. Levell, I. Rasul, " Tax and benefit policy: insights from 
behavioural economics", IFS Commentary C125, Institute for Fiscal Studies, London, 2012, p. 82 ff.. 
137 See section 5.3.1 

36 

 
 
 
                                                            
suppliers.  While,  faced  with  such  a  sanction,  a  foreign  supplier  might  open  another 
website, it seems that this would inevitably result in the loss of some business as clients 
would no longer be able to place their orders on the customary website and would have 
to  identify  the  new  web  page  through  a  new  search,  or  following  a  link  to  a  new  page 
sent by the vendor, both of which processes are likely to result in some leakage.  

The  deterrent  effect  of  such  sanctions  would  probably  vary  considerably  from  one 
supplier  to  the  next,  because  of  different  demand  price  elasticities;  the  experience  with 
sites streaming audio-visual content suggest that blocking sites can have a limited effect 
in cases of a very high price sensitivity and where the content is an e-service. However, 
in most cases one can believe that businesses would view the potential disabling of web 
pages as a significant problem and that this is likely to induce greater compliance. Basing 
on  payment  data  statistics,  national  authorities  would  also  be  able  to  roll  out  such 
sanctions  in  a  more  effective  manner.  Therefore,  overall  one  can  conclude  that  the 
combination  of  greatly  enhanced  detection  thanks  to  availability  of  payments  data, 
coupled  with  the  threat  of  blocking  the  supplier’s  site  by  the  tax  authority  is  likely  to 
have  an  impact  on  reducing  extra-EU  e-commerce  VAT  fraud  even  in  the  absence  of 
strong cooperation mechanisms between the EU and the country of establishment of the 
supplier. 

c) Member States could introduce additional, specific measures to target non-compliant 
third country businesses 
In  case  of  persistent  non-collaboration  by  third  country  jurisdictions,  Member  States 
could  introduce  specific  measures.  Member  States  could  for  example  require,  non-EU 
businesses  to  appoint  a  local  VAT  representative  with  joint  and  several  liability  or 
impose joint and several liability on online marketplaces for unpaid VAT on goods sold 
through  the  website.  These  measures  would  be  significantly  more  effective  once  it  is 
coupled with payments data information, than it is at present.  

Impacts on fraud volumes, by option  

Table  3  presents  the  expected  impacts  of  the  options  on  fraud  volumes  side  by  side  to 
facilitate comparison. Option 1 is not included because it is the status-quo option.  

Option 2 

This  option  consists  of  developing  voluntary  guidelines  for  Member  states  to  facilitate 
introduction  of  payment  data  tools  and  coordination  between  EU  tax  administrations. 
This  option  is  assessed  to  have  a  modestly  positive  impact,  because  it  will  speed  up 
adoption of payment data tools by tax administrations and will reduce its costs thanks to 
better sharing of know-how; the impact will depend on how many Member States adopt 
these  tools.  However,  adoption  will  likely  be  gradual; thus,  this  option implies  that the 
EU  will  not  be  able  to  collectively  exert  pressure  on  third  countries  to  enter  into 
cooperation agreements. As such, the impact of this option on non-EU traders would be 
rather limited.  

Option 3.1  

Compared  to  option  2, this  option would  imply  a  simultaneous  introduction  of  the tool 
throughout  the  EU;  the  coordinated  adoption  of  the  tool  would  also  allow  better 
cooperation  between  EU  tax  authorities.  Both  of  these  aspects  would  correspondingly 
create a stronger deterrent effect for fraudsters. This option is thus expected to result in a 
sizeable reduction of fraud levels and a greater reduction of fraud than under Option 2.  

37 

 
 
 
 
 
 
 
 
 
As  for  non-EU  fraudsters,  the  impact  would  be  less  strong  owing  to  the  fact  that 
administrative cooperation agreements with third countries are now at an incipient stage, 
compared  to  the  EU.  However,  availability  of  data  from  all  EU  Member  States  would 
facilitate  collective  action  to  improve  administrative  cooperation  agreements  with  third 
countries. As such, this option is expected to result in a perceptible decrease of fraud over 
the  medium  to  long-term  in  our  central  scenario.  In  the  alternative  non-cooperation 
scenario,  where  no  effective  agreements  with  third  countries  are  struck,  the  expected 
impact  would  be  a  limited  reduction  in  extra-EU  fraud  levels.  In  theory,  fraud  levels 
could  even  increase  in  case  of  strong  trade  diversion  (see  also  next  section)  but  this 
would  require  a  rather  implausible  set  of  assumptions  (high  demand  and  supply  price 
elasticities, absence of reputational effects, ineffectiveness of countervailing measures by 
Member States, on top of the non-cooperation hypothesis which is in itself not a likely 
outcome).  

Option 3.2 

This  option  has  the  strongest  effect  on  fraud  levels  as  its  centralised  nature  fosters 
cooperation  more  effectively  and  makes  data  analysis  more  efficient  because  of  easier 
data pooling. The impact on extra-EU fraud is similar to that of option 3.1, with a slightly 
stronger  effectiveness  compared  to  option  3.1  because  of  easier  cooperation  (under  the 
central scenario).  

Table 3 Fraud levels: net impacts over baseline, by option 

Scenario 

Location 
traders 

of 

Option 1 
(status quo) 
Baseline 

Option 2  
Voluntary 
guidelines 

Option 3.1 
Distributed 
application 

Option 3.2 

Central 
storage 

Central 
scenario 

EU traders 

Non-EU 
traders 

fraud 

VAT 
volumes 
increase.  From 
2021, 
impact 
of  the  VAT  e-
commerce 
package 
measures  may 
reduce  growth 
loss 
of  VAT 
volume 

fraud 

VAT 
volumes 
increase.  From 
2021, 
impact 
of  the  VAT  e-
commerce 
package 
measures  may 
reduce  growth 
of  VAT 
loss 
volume 

3.1 

suited 
to 

+++ 
Better 
than 
monitor 
threshold; 
fosters 
cooperation 
more 
effectively than 
3.1;  better  and 
wider  process 
and 
of  data 
central 
risk 
analysis 
++ 
Similar  impact 
as 
but 
3.1, 
greater 
transparency 
and 
cooperation 
to 
expected 
in 
result 
stronger effects  

+ 

++ 

Limited 
reduction 
in 
VAT  fraud  in 
line  with  speed 
of adoption 

Coordinated 
adoption  will 
up 
speed 
and 
update 
allow 
better 
cooperation 
between 
authorities 

tax 

0/+ 
to 
Negligible 
limited: 
a 
patchwork-like 
adoption  will 
limit 
coordinated 
action  vs.  third 
countries 

+/++ 
While 
enforcement 
will  depend  on 
country 
third 
cooperation, 
increased 
detection 
to 
expected 
result 
in 
positive  impact 
through 
spontaneous 
compliance 
and 
stimulating 
adoption 
international 

by 

of 

38 

 
 
 
 
 
 
Non-
cooperation 
scenario 

EU traders  

as above 

0/- 

agreements 
+/++ 

+/++ 

non-

Under 
cooperation, 
there  might  be 
a  tendency  for 
to 
fraudsters 
concentrate 
in 
Member  States 
with 
low 
a 
effectiveness 
of controls 

EU 

Given 
institutional 
setup,  payment 
data 
availability 
would  have  a 
positive  impact 
even 
under 
sub-optimal 
cooperation 

EU 

Given 
institutional 
setup,  payment 
data 
availability 
would  have  a 
positive  impact 
even 
under 
sub-optimal 
cooperation 

Non-EU 
traders 

as above 

0 

? 

? 

Lack 
of 
collective  EU 
action 
will 
limit incentives 
third 
for 
countries 
to 
cooperate 

There might be 
increases 
in 
fraud  in  non-
cooperating 
jurisdictions; 
nevertheless, 
fraud 
decline 
larger 
due 
reputational 
concerns 
flanking 
measures. Final 
effect uncertain 

may 
at 
traders 
to 

and 

There might be 
increases 
in 
fraud  in  non-
cooperating 
jurisdictions; 
nevertheless, 
fraud 
decline 
larger 
due 
reputational 
concerns 
flanking 
measures. Final 
effect uncertain 

may 
at 
traders 
to 

and 

Legend: 0: negligible impact; + (-): limited positive (negative) impact; ++ (++): sizeable positive (negative) impact; 
+++ (---) strong positive (negative) impact 

6.2.2.  Impact on distortion of competition 

The  level  of  distortion  of  competition  is  in  direct  relation  to  the  level  of  e-commerce 
VAT fraud: the greater the VAT fraud, the greater also the distortion of competition. As 
such, we can expect the following main trends: 
  Under  the  no-policy  change  option  (Option  1),  distortion  would  increase  following 
the expected higher volumes of e-commerce. There is even some likelihood that VAT 
fraud levels increase more than proportionately as businesses gain experience with e-
commerce  and  conclude  that  existing  instruments  to  fight  fraud  are  inefficient  and 
through  the  typical  learning  activity  by  fraudsters.  The  impact  of  this  would  be 
uneven across sectors; for example, e-commerce fraud is likely to be more prevalent 
amongst  vendors  of  price-sensitive,  commoditised  goods.  It  is  also  to  be  expected 
that  extra-EU  fraud  will  grow  more  than  proportionately  to  intra-EU  fraud  because 
the stronger existing cooperation between EU tax authorities has a deterrent effect.  
  However,  the  entry  into  force  in  2021  of  the  deemed  supplier  provision138  could 
result, in a number of additional impacts. It should be noted that the provision affects 
only e-commerce platforms. While the provision in itself could lead to a reduction of 
the  rate  of  growth  of  e-commerce  fraud,  unscrupulous  businesses  could  decide  to 
operate outside of e-commerce platforms affected by the deemed supplier provision.  

138 For the deemed supplier see section 1.1 and section 5.3.1. There is no certainty yet on the operational 
implications and on the impact of art. 14a as this was introduced in the directive during negotiations in the 
Council  and  as  a  result  was  not  subjected  to  an  impact  assessment.    Furthermore,  the  implementing 
provisions are only now being developed.   

39 

 
 
 
 
 
 
 
 
 
 
                                                            
The  fact  that  the  deemed  supplier  provision  applies  only  to  part  of  the  market,  i.e.  e-
commerce  platforms,  create  a  potential  for  distortion,  as  unscrupulous  vendors  might 
move  out  of  regulated  platforms  to  continue  avoiding  VAT.  It  is  difficult  to  assess,  as 
things  now  stand,  how  strong  the  distortionary  impact  of  this  partial  coverage  of  the 
market could be, because implementing provisions are only now being drawn up and no 
impact assessment was carried out. It might be limited initially, given the important role 
of  platforms  in  e-commerce;  platforms  are  important  for  generating  trust  among 
consumers,  which  is  a  key  prerequisite  for  e-commerce.  However,  as  time  goes  on,  it 
cannot  be  excluded  that  the  impact  could  grow  to  be  significant,  as  a  roughly  20% 
potential  for  price  differences  is  not  negligible,  particularly  for  certain  commoditised 
types of goods for which the price elasticity of demand is high.  

Overall,  under  our  assumptions,  the  impact  on  market  distortion  would be  positive and 
will mirror the projected reduction in intra-EU and extra-EU fraud determined by option 
2  and  particularly  option  3.  An  important  assumption  in  this  respect  is  that  the 
introduction  of  payment  data  monitoring  is  followed  by  EU  initiatives  to  strengthen 
cooperation  with  tax  authorities  in  non-EU  jurisdictions  (assumption  4  above);  if  no 
initiatives  in  this  regard  are  adopted,  the  risk  of  trade  diversion  increases  significantly 
(see discussion in next section)   

Risks 

  As  discussed  in  the  previous  section,  the  main  risk  would be  either  that  business  is 
diverted  to  websites  operated  directly  by  suppliers  outside  the  EU,  or  that  entire 
platforms are set up out of the EU and operate in such a way as to escape cooperation 
with  EU  tax  authorities.  The  reasons  why  this  risk,  although  recognised,  is  not 
considered the central (i.e. most likely) scenario are listed in section 6.2.1. The risk of 
trade diversion is higher under the non-cooperation scenario.  

  Within the EU, trade distortion should decrease, under our assumptions, as the more 
effective  control  allowed  by  payments  data  monitoring  shrinks  the  areas  in  which 
fraudsters  can  operate.  In  this  context  it  should  however  be  mentioned  that  an 
uncoordinated  approach  to  use  of  payments  data  within  the  EU  could  increase  the 
potential  for  distortion  by  magnifying  perverse  incentives;  this  is  because  the  more 
numerous  are  countries  effectively  fighting  e-commerce  VAT  fraud,  the  greater 
become  the benefits  for fraudsters installed in  non-cooperative jurisdictions.  This  is 
why the effectiveness of the options involving greater coordination, viz. the two sub-
options under option 3, is greater, as it counteracts the risk of administrative inertia. 
This  however  also  raises  a  potential  risk  that  some  jurisdictions  do  not  follow  the 
‘loyal cooperation’ rule stipulated  under the EU treaties but remain relatively inert in 
hopes  of  attracting  B2C  business  to  their  country.  In  that  case,  which  does  not 
represent the central assumption in the analysis, obviously, fraud might concentrate in 
some jurisdictions, reducing the positive impact from the measures taken. Overall it 
seems  unlikely  however  that  this  phenomenon  reaches  systemic  proportions,  given 
the  reputational  costs  of  such  a  strategy  and  the  current  societal  low  tolerance  for 
VAT fraud.  

The  same  diversion  risk  affects  also  extra-EU  trade,  particularly  in  the  non-
cooperation  scenario.  Traders  might  concentrate  their  operations  in  jurisdictions 
where there is no, or limited, cooperation with EU tax authorities in recovering due 
VAT.  As  mentioned  in  the  section  on  VAT  fraud,  even  in  the  absence  of 
administrative  cooperation,  factors  such  as  reputational  concerns  or  the  threat  of 
website blockage work to counteract wilful fraud, once authorities have detected non-
compliance.  Nevertheless,  the  risk  that  for  certain  market  segments,  trade  diversion 
out of the EU increases cannot be excluded. The higher level of this risk for extra-EU 
jurisdictions explains why the effectiveness of the proposed measures is rated higher 

40 

 
for intra-EU e-commerce. Finally, a strong increase of trade diversion, particularly in 
a  non-cooperative  scenario,  could  also  jeopardise  the  attainment  of  the  objective  of 
reducing overall VAT fraud.  

Distortion of competition: net impacts over baseline, by option, 

Scenario 

Location 
traders 

of 

Option 1 (status 
quo) 

Central 
scenario 

Intra-EU 
traders 

Extra-EU 
traders 

Non-
cooperation 
scenario 

Intra-EU 
traders 

Baseline 

Market  distortion 
to  increase  in  line 
with  VAT 
fraud 
volumes 
2021, 
From 
supplier 
deemed 
provisions 
may 
exacerbate  risk  of 
diversion 

Market  distortion 
to  increase  in  line 
with  VAT 
fraud 
volumes 
2021, 
From 
supplier 
deemed 
provisions 
may 
exacerbate  risk  of 
diversion 
Aggressive 
enforcement 
intra-EU 
provisions 
may 
exacerbate  risk  of 
diversion 

of 

No  big  difference 
from 
central 
given 
scenario 
limited  scope  of 
current cooperation 
agreements  with 
third countries 

Extra-EU 
traders 

No  big  difference 
central 
from 
scenario 
given 
limited  scope  of 
current cooperation 
agreements  with 
third countries 

Option 2  
Voluntary 
guidelines 

Option 3.1 

Distributed 
application 

Option 3.2 
Central storage 

++ 
A  more  effective 
detection 
and 
enforcement  will 
intra-EU 
reduce 
market distortions 

+++ 
Similar  to  3.1, 
effect 
but 
enhanced 
by 
expected  better 
cooperation 

+/++ 
Impact  will  be  in 
line with reduction 
of  VAT  fraud  on 
extra-EU 
transactions 

++ 
Impact 
stronger than in 
this 
as 
3.1 
is 
option 
expected 
to 
foster 
more 
effective 
coordination 
vs. 
countries 

third 

0/- 
Different levels of 
adoption  and  the 
resulting  different 
of 
intensity 
combat 
against 
VAT  fraud  could 
increase  perverse 
localisation 
incentives  

0/+ 
Limited 
Stepped-up 
in 
enforcement 
some  EU 
only 
countries 
will 
result  in  a  limited 
the 
(under 
of 
assumption 
cooperative 
behaviour) 
negligible 
reduction  of  trade 
distortions vs non-
EU countries 

or 

- 

+ 

+/++ 

a 

non-

In 
cooperation 
scenario,  stepped-
up  enforcement  in 
some  EU 
only 
could 
countries 
result 
some 
in 
increase  in  trade 
distortions 

of 
Availability 
payments data will 
increase  pressure 
for 
effective 
tracking  down  of 
non-compliant 
firms. 

Availability  of 
payments  data 
increase 
will 
pressure 
for 
effective 
tracking  down 
of 
non-
compliant 
firms. 
Centralised 
system 
increase 
effectiveness.  

will 

-- 

--/--- 

--/--- 

a 

non-

In 
cooperation 
scenario,  stepped-
up  enforcement  in 
some  EU 
only 
could 
countries 
result 
some 
in 
increase  in  trade 
distortions 

is 
to  ensure 

If  no  action 
taken 
third-country 
cooperation,  there 
risk 
a 
is 
unscrupulous 
traders concentrate 
their  operations  in 
extra-EU 
jurisdictions.  

If  no  action  is 
taken  to  ensure 
third-country 
cooperation, 
there  is  a  risk 
unscrupulous 
traders 
concentrate 
their operations 
extra-EU 
in 
jurisdictions. 

Legend: 0: negligible impact; + (-): limited positive (negative) impact; ++ (++): sizeable positive (negative) impact; 
+++ (---) strong positive (negative) impact 

41 

 
 
 
 
6.2.3.  Impact on administrative burden and compliance costs 

Introducing  new  obligations  to  supply  data  (for  PSPs)  or  exchange  them  (for  tax 
administrations)  can,  generally  speaking,  create  costs  for  operators.  These  costs  fall 
under two categories: set-up and learning costs, which are incurred once only when the 
new  system  is  introduced,  and  running  costs.  These  costs  have  been  assessed  relying 
mainly  on  Commission  IT  cost  assessments  but  also  on  input  from  Member  States'  tax 
administrations and the replies of stakeholders to the targeted and public consultations.  

a) One-off costs 

The Commission services made a first assessment of the capital costs for setting up an IT 
infrastructure  for  monitoring  payments  data  for  Member  States  and  for  the  European 
Commission (see Table 4). This estimate is based on an extrapolation of the costs from 
the Customs Information System139 rather than on a feasibility study and as such should 
be considered a prudent, de maximis estimate (indeed, some Member States which have 
set up a payments data monitoring system have indicated that they incurred a lower level 
of costs).  

In both option 3.1 and option 3.2 Member States will have to collect payment data in a 
national database. Then, the distributed system consists in an electronic interface that will 
connect the different national databases and will allow the officials of one Member State 
to “interrogate” the systems of the other Member States. The centralised system will just 
collect all payment data that will be transmitted by the Member States. In the distributed 
system  different  functions  will  be  decentralised  and,  thus,  more  expensive  for  Member 
States  to  develop  and  maintain  (i.e.  the  cleansing  of  the  information  received  from 
payment data), training, hardware, information dissemination costs. These costs will be 
bare by the 28 Member  States  under the distributed application, while  only  once  under 
the central system.  

Such capital costs ('CAPEX'), which can be seen as an approximation of the set-up costs, 
vary  between  approximately  EUR  221million  and  EUR  290  million  for  the  EU  as  a 
whole – i.e. between EUR 7.5 million (option 3.2) and EUR 10.3 million (option 3.1) per 
Member State, and EUR 1.8 million (option 3.1) and EUR 11.8 million (option 3.2) for 
the Commission.  This expense is a one-off cost item that  should  be amortised  over the 
entire lifetime of the project, which, on the basis of prior experience, can be estimated at 
10-15  years  at  a  minimum.  Thus,  an  amortisation  rate  in  the  environment  of  EUR  0.7 
million per annum for each Member State is a balanced maximum estimate.  

The  Commission  estimates  also  indicate  that  cost  wise,  option  3.2  is  the  best,  while 
option 3.1 is somewhat more expensive, although the difference is not very significant. 
Option 2 is found to be less expensive than the others because it does not include the cost 
of any individual system set up by the Member State; in reality however the comparison 
should more properly be made with the cost of setting up a system on a national basis, 
which  seems  likely  to  be  more  expensive  as  this  approach  would  limit  the  gains  from 
economy of scale.  

Table  4:  Total  Member  State  +  EU  Commission  costs  for  payments  data  IT 
infrastructure (EUR million; rounded) 

CAPEX 

CAPEX 

CAPEX 

OPEX 

OPEX annual  OPEX annual 

139 The Customs Information System is a central database managed by the Commission for Customs 
controls.  

42 

 
 
  
 
                                                            
(Commission) 

(Total, EU28 + 
Commission) 

Option 2 

Option 3.1 

0.2 

290 

(per 
Member 
State) 
- 

10.3 

Option 3.2 
Source: Commission services preliminary estimate 

221 

7.5 

0.2 

1.8 

11.8 

(5-year total, 
EU28 + 
Commission) 
0.15 

average (per 
Member 
State) 
- 

550 

429 

3.9 

2.9 

(Commission) 

0.03 

0.96 

4.5 

As  for  private  businesses,  the  main  impact  would  be  on  PSPs,  who  under  the  various 
options  would  have  to  materially  put  the  data  at  the  disposal  of  the  authorities.  The 
stakeholder consultation has however revealed that, for these entities, existing IT systems 
could be used – or adapted at a moderate cost – to provide the data, so that the set-up and 
learning costs would be limited.  

b) Recurrent costs  

For tax administrations, on the basis of the Commission extrapolation, the running costs 
('OPEX') of the IT infrastructure per Member State could be estimated at approximately 
between  EUR  2.9  million  (option  3.2)  and  EUR  3.9  million  (option  3.1)  per  year,  not 
including  labour  costs  to  be  incurred  to  exploit  these  data.  The  running  costs  for  the 
Commission would be EUR 0.96 million (option 3.1) and EUR 4.5 million (option 3.2). 
Similarly  to  the  case  of  the  set-up  costs,  the  overall  costs  for  option  3.2  are  somewhat 
lower  than  for  option  3.1.  While  the  options  considered result  in  a  nominal  increase  in 
certain  costs  for  the  administration,  it  must  be  stressed  that  this  allows  a  substantially 
greater effectiveness of control activities. The total effect is a reduction of net outlays, as 
the tax administrations, thanks to data access, carry out audits for larger amounts than the 
costs  incurred  by  the  system.  Some  Member  States  have  been  able  to  provide  data  on 
how many audits were linked to payments data availability and on what amount of VAT 
was assessed during these audits) (see  Table 4)140. The assessment  from these Member 
States was that the benefits offset the costs (see the replies to the public consultation for 
more details.. 

140 The results showed in table 4 belong to the baseline scenario, where some Member States developed an 
electronic system to collect, analyse and use for control purposes payment data in a systematic way, while 
other Member States do not have such a system and, thus, the results in terms of additional VAT collected 
and  assessed  are  limited.  The  consultation  with  Member  States  showed  that  only  50%  of  the  Member 
States collecting payment data at national system have a kind of risk analysis system in place. In particular 
in  some  Member  States,  only  payments  resulting  from  the  bank  accounts  are  communicated  to  tax 
authorities. The EU wide dimension of the information (referring to all kind of payment services resulting 
in transfer of funds) and the risk analysis within Eurofisc are the main advantages that will bring higher 
benefits and a full EU picture to all Member States. 

43 

 
                                                            
Table 5 Audits for which the use of payments data was important 

Year 

Member State 

Number 
audits 

Finland 

of 

Slovenia 

VAT  assessed 
(EUR 
thousand) 

Finland 

Slovenia 

VAT  collected 
(EUR 
thousand) 

Finland 

Slovenia 

Source: Targeted consultation 

2015 

2016 

2017 

46 

NA 

145 

NA 

104 

25 

2.176 

23.168 

3.671 

NA 

NA 

NA 

NA 

16.569 

NA 

136 

NA 

NA 

Pooling the data from all available audits, we arrive at an average value of VAT assessed 
per audit (in cases where the use of payment data was important) of slightly above EUR 
90°000 per audit. While this average reflects a high value for 2016, a comparison with 
annual running costs incurred by the Finnish tax administration of around EUR 100°000 
suggests  that,  if  tax  administrations  utilise  the  payments  data  to  step  up  audits, 
completing  a  relatively  limited  number  of  additional  audits  will  suffice  to  cover  costs; 
although  the  costs  for  a  comprehensive  EU  system  will  be  higher,  it  will  also  be  more 
effective.  Scale  considerations  too  suggest  that  the  amounts  of  potentially  recoverable 
VAT dwarf system costs (see box below). We conclude that the net cost of the payment 
data system is negative. As such, control costs are assessed to be reduced by the options 
being considered, despite the fact that they require some budgetary outlay to be started.  

What is the order of magnitude of recoverable VAT? 

Although it is very hard to estimate fraud levels, there are solid grounds to believe that 
there  are  ample  margins  for  increasing  revenue  from  a  more  effective  control  of  e-
commerce. Member States' tax administrations agree that fraud levels, even in intra-EU 
business,  are  significant  owing  to  the  current  unsatisfactory  effectiveness  of  controls.  
The  order  of  magnitude  of  the  amounts  at  play  can  be  assessed  by  looking  at  the  total 
annual  value  of  B2C  e-commerce.  Even  not  considering  extra-EU  suppliers,  B2C  web 
sales  accounted  for  around  EUR  600  billion  in  2017141.  Each  1%  of  fraud  on  turnover 
would  therefore  generate,  at  EU  28  level,  up to  EUR  1.2  billion  in  non-assessed  VAT. 
Even  accounting  for  incomplete  recovery  of  assessed  VAT,  these  amounts  exceed  the 
operational costs for the entire EU. Furthermore, fraud levels likely account for several 
percentage points of e-commerce sales. 

141 E-commerce Europe estimated the 2017 e-commerce turnover at EUR 602 billion for the North, East 
and South region of Europe for 2015.  

44 

 
 
                                  
 
                                                            
Looking at compliance costs for  payments service providers, they currently receive data 
requests  in  different  formats  and  following  different  procedures,  which  then  requires 
from them substantial work to comply. Compliance further exposes PSPs to legal hazard 
because of the different regimes for data protection. While it was not possible to quantify 
the costs of the different options  based on the result  of the targeted consultation142, the 
strong preference of PSPs for a harmonised solution indicates that the cost saving effect 
compared  to  a  non-coordinated approach can  be substantial. In  addition, the number of 
data  requests  can  be  expected  to  grow  in  the  future  in  line  with  the  expansion  of  e-
commerce. Overall it seems likely that the savings from the ability to supply standardises 
replies to data requests will more than offset any other recurring cost.  

6.2.4.  Sectoral impacts  

The  growth  of  e-commerce  has  shown  that  over  time,  consumers  may  extend  their 
purchases to a greater range of goods over time, as they familiarise with it and become 
more  trustful.  Consumers  also  appreciate  the  convenience  of  having  a  wide  range  of 
goods  and  services  at  their  disposal  without  having  to  move.  Nevertheless,  price 
competitiveness  remains  important,  as  does  trust  in  the  vendor.  VAT  fraud  allows 
vendors to be price competitive143 but at the same time consumers prefer sourcing their 
purchases from reputable businesses operating on well-known platforms that offer them 
trust and credible dispute resolution mechanisms. The need to sustain consumer trust will 
continue to be a potent force limiting the propensity of consumers to seek savings from 
suppliers  operating  outside  established  portals.  This  means  that  it  is  inappropriate  to 
extrapolate any impact directly from the level of e-commerce in particular sectors, as the 
fraud rate is likely to vary substantially between sectors and even within the same sector. 
Given the above dynamic balance between sensitivity to price and need for trust, the risk 
of  VAT  fraud  and  market  distortion  is  highest  in  highly  price-sensitive,  commoditised 
markets.  Many  of  these  markets  are  already  now  dominated  by  extra-EU  vendors. 
Another  area  where  price  sensitivity  is  relatively  high,  and  where  as  a  result  there  is  a 
high risk of evasion and distortion, is streaming of audio-visual content over the internet. 
Greater control of VAT fraud is therefore likely to have varying effects on trade patterns; 
while  the  sourcing  of  commodities,  low-cost  goods  is  unlikely  to  shift  much  trade, 
higher-value  goods  for  which  trust  and  consumer  service  are  important  should  see  a 
reduction of competition from unscrupulous businesses and from extra-EU competition. 
This should result in improvements in EU competitiveness in certain markets. The size of 
these effects will be highly dependent on the nature of the individual goods and services 
traded.  

Impact on prices 

The  impact  on  prices  will  depend  on  the  price  sensitivity  of  the  individual  goods  or 
service  and  on  whether  it  can  be  sourced  from  non-cooperative  jurisdictions.  In  the 
extreme case of a good with high price sensitivity, produced by a perfectly competitive 
sector located in a non-cooperative jurisdiction, the impact on prices would be negligible 
and trade would be diverted towards the non-cooperative jurisdiction. In the more normal 
case  of  a  good  produced  by  a  business  enjoying  a  degree  of  market  power  and  facing 
some  positive  incentives  towards  tax  compliance,  theoretical  considerations  on  tax 
incidence suggest that part of the higher effective tax burden would be absorbed in the 
businesses'  profit  margin  and  some  would  be  reflected  on  prices.  The  degree  of  price 

142  One  contribution  was  received  from  a  stakeholder  with  an  indication  of  a  recurrent  cost  impact  of 
100.000 euros annually. However, this is not felt to be a good basis for analysis because it lacks sufficient 
detail and seems not to take into account offsetting savings on data requests.  
143 See annex 7, Case study – pricing policy and estimation of potential VAT loss 

45 

 
 
                                                            
increase  would  depend  highly  on  the  price  elasticity  of  the  specific  good.  Overall, 
however, the inflationary impact on the general price level is negligible..   

6.2.5.  Impact on terms of trade, employment and environment 

A reduction in the prevalence of fraud on extra-EU B2C supplies would be equivalent to 
an  increase  in  taxation  of  imports.  This  would  result  in  a  positive  but  limited  terms  of 
trade effect, unlikely to have any impact at macroeconomic level. Similarly, while there 
may be sectoral effects on employment, in particular among EU retailers subject to unfair 
competition, these are likely to be modest or negligible at a macro level. There might be 
positive  but  limited  environmental  impacts  linked  to  transport  if  there  is  a  reduction  in 
those imports from extra-EU countries that are driven essentially by savings on VAT.    

6.2.6.  Impact in terms of the fundamental right to protection of personal data 

Under  the  baseline  scenario,  the  tax  authorities  already  collect  personal  data  for  the 
purpose of detecting and fighting e-commerce VAT. Tax authorities' collection, storage 
and analysis of personal data for taxation purposes imply a restriction to the protection of 
personal data rights to be regulated by the national law in line with the GDPR. Under the 
non-regulatory option (option 2), EU guidelines may highlight to the tax administrations 
the main GDPR rules and relevant jurisprudence.  

Under  the  regulatory  option  Council  Regulation  (EU)  No  904/2010  on  administrative 
cooperation  and  fight  against  fraud  in  the  field  of  VAT  that  already  lays  down  data 
protection safeguards – in line with the GDPR - as regard the storage, the exchange and 
the  use  of  data  under  the  purpose  of  the  Regulation.  The  safeguards  laid  down  under 
Regulation  904/2010  and  the  GDPR  rules  will  apply  to  the  exchange  of  payment  data 
under  the  regulatory  option.  For  the  assessment  of  the  necessity  and  proportionality 
principles,  it  should  be  first  noted  that  the  objective  of  the  collection,  exchange  and 
analysis of VAT relevant data is the fight against e-commerce VAT fraud. This is well 
documented by the stakeholders' consultation, where the tax authorities stressed the need 
of payment data for fighting e-commerce VAT fraud effectively144. In addition, only the 
data  with  a  nexus  to  potential  e-commerce  VAT  fraud  will  be  transmitted  to  the  tax 
authorities and exchanged between them: in particular only the data necessary to detect 
potential  fraudsters  established  outside  the  Member  State  of  consumption  (no  domestic 
payments),  the  amount  of  transactions  that  should  be  subject  to  VAT,  the  date  of  the 
transactions and  the information  on where  – in  principle  – the place of taxation should 
be. The data will only refer to the payees receiving payments from abroad. The data on 
the payers is not necessary for the objective (apart from the origin of the payment which 
is  necessary  to  establish  the  place  of  taxation)  and  –  thus  –  not  in  the  scope  of  the 
regulatory  option.  Therefore,  the  payment  data  will  not  be  usable  –  for  instance  –  to 
monitor the purchase habits of the consumers.  

In  terms  of  data  storage,  an  EU  central  repository  (sub-option  3.2)  must  guarantee  the 
appropriate level of security in line with the rules governing the processing of personal 
data  by  the  European  Institutions145.  While  a  central  repository  could  be  seen  as  a 
potential risk in terms of target for unauthorised access, this is not per se a limitation of 
data protection rules, as long as the confidentiality and security of the data processing is 
ensured.  Indeed,  also  a  distributed  application  (sub-option  3.1)  could  be  the  target  of 
cyber-attacks.  Furthermore,  there  are  already  EU  centralised  information  systems 

144 See Annex 2, Consultation synopsis report, section 3.2 and section 4  
145 Regulation (EU) 2018/1725 of the European Parliament and of the Council of 23 October 2018 on the 
protection  of  natural  persons  with  regard  to  the  processing  of  personal  data  by  the  Union  institutions, 
bodies,  offices  and  agencies  and  on  the  free  movement  of  such  data,  and  repealing  Regulation  (EC)  No 
45/2001 and Decision No 1247/2002/EC (OJ L 295, 21.11.2018, p. 39). 

46 

 
                                                            
containing and processing personal data146. Indeed, both tax authorities and PSPs showed 
a preference toward a centralised solution.  

As for the exchange of data between tax authorities, this will be only within the Eurofisc 
antifraud  officials.  Under  sub-option  3.1.,  the  exchange  of  the  data  will  pass  through  a 
secured  electronic  system  that  encrypts  and  decrypts  the  data,  and  the  officials  will 
access  the  data  using  personal  passwords.  Also  under  sub-option  3.2  the  central 
repository  will  be  accessible  only  to  the  Eurofisc  officials.  Again,  this  access  will  be 
regulated through use of a secure system and personal password and the system will keep 
track of any access. Furthermore, the data will be retained only for 2 years, in order to 
allow Member States a reasonable period to carry out VAT audits, and then erased.  

Finally,  in  addition  to  the  exchange  of  data,  the  regulatory  option  also  foresees  a  risk 
analysis process to focus and narrow down the search to the highest-risk traders. Under 
sub-option  3.1.,  this  is  done  nationally  while  under  sub-option  3.2  this  is  done 
automatically at European level. However, the two sub-options restrict the access to the 
risk  analysis  result  of  the  payment  data  only  to  the  anti-fraud  officials  of  the  Member 
States' tax authorities in the framework of Eurofisc. The outcome of the risk analysis will 
have  to  be  further  double-checked  with  other  information  at  disposal  of  tax  authorities 
(such as VAT, MOSS and Customs information). Only after this process, the result will 
be  used  to  detect  e-commerce  VAT  fraudsters  and  carry  out  VAT  controls.  Then,  as  it 
happens  for  domestic  VAT  controls,  the  taxpayers  will  be  called  to  confront  the 
information held by the tax authority on which the VAT assessment is ground on, based 
on  the  national  legislation  of  the  jurisdiction  where  the  taxpayer  is  established.  On  the 
basis of the considerations laid down in the preceding paragraphs, we conclude that the 
data-sharing measures considered for adoption do not infringe the principles of necessity 
and  proportionality  and  do  not  put  citizen's  and  legal  persons'  data  at  greater  risk  of  a 
breach. As such, there is no adverse impact on data protection. 

Under  both  option  3.1  and  3.2  payment  data  will  be  processed  for  operation  reasons 
(VAT controls) by the tax authorities. The GDPR will regulate this process of data, and 
already  foresees  safeguards  for  data  protection  and  restrictions  to  the  scope  of  the 
obligations  and  rights  of  the  data  subject.  Regulation  (EU)  No  2018/1725  provides  for 
the  same  safeguards  and  restrictions  when  data  are  processed  by  the  European 
Institutions, in this case by the duly accredited officials of the Commission that processes 
the data for development care and maintenance. In particular, Member States will have to 
apply the GDPR for the process of data, in their national systems, and for the process of 
data  by  Eurofisc  officials  using  the  European  components  of  the  electronic  system.  In 
terms  of  data  storage,  an  EU  central  electronic  system  will  guarantee  the  appropriate 
level of security in line with the rules governing the processing of personal data by the 
European Institutions. The system will not have an interface on internet, as the payment 
operators  will  submit  their  information  to  national  authorities.  The  exchanges  of 
information  among  national  taxation  authorities  will  occur  using  the  secure  Common 
Communication Network, which supports all exchanges of information between taxation 
and  customs  authorities  and  provides  to  all  of  them  all  necessary  features  for  security 
(including encryption of data). Therefore, in line with Regulation (EU) No 2018/1725 the 
central system will guarantee by design the highest possible level of data security.  

146 E.g.: the Schengen Information System SIS including the Central SIS II and the Information Customs 
System. 

47 

 
                                                            
7.  HOW DO THE OPTIONS COMPARE? 

7.1. 

Summary assessment of the impact 

Table 6: Summary analysis of impacts 

Effectiveness of the options 

Impact on VAT fraud 
(intra-EU) 

Impact on VAT fraud 
(extra EU) 

Impact on market 
distortion (intra EU) 

Impact 
distortion (extra-EU) 

on  market 

Option 1 (status quo) 
Direction of development if no 
policy change 

-- 
VAT  fraud  volumes  increase.  From 
2021, 
the  VAT  e-
commerce  package  measures  may 
reduce growth of VAT loss volume 

impact  of 

-- 
VAT  fraud  volumes  increase.  From 
the  VAT  e-
2021, 
commerce  package  measures  may 
reduce growth of VAT loss volume 

impact  of 

+ 
Limited  reduction  in  VAT  fraud 
in line with speed of adoption 

to 

0/+ 
Negligible 
a 
adoption  will 
patchwork-like 
limit  coordinated  action vs.  third 
countries 

limited: 

-- 
Market distortion to increase in line 
with VAT fraud volumes 
From 
supplier 
deemed 
2021, 
provisions  may  exacerbate  risk  of 
diversion 
-- 
Market distortion to increase in line 
with VAT fraud volumes 
From 
supplier 
deemed 
2021, 
provisions  may  exacerbate  risk  of 
diversion 
Aggressive enforcement of intra-EU 
provisions  may  exacerbate  risk  of 
diversion 

-/-- 
Different  levels  of  adoption  and 
the resulting different intensity of 
combat  against  VAT  fraud  can 
increase  perverse 
localisation 
incentives  
0/+ 
Limited 
Stepped-up  enforcement  in  only 
some  EU  countries  will  result  in 
a  limited  (under  the  assumption 
of  cooperative  behaviour)  or 
negligible 
trade 
distortions vs non-EU countries 

reduction  of 

48 

Option 2  
Voluntary guidelines 

Option 3.1 
Distributed application 

Option 3.2 
Central storage 

++ 
Coordinated  adoption  will  speed up 
update 
better 
cooperation 

allows 

and 

to 

result 

+/++ 
While  enforcement  will  depend  on 
third country cooperation, increased 
detection  expected 
in 
positive 
through 
impact 
spontaneous  compliance  and  by 
stimulating adoption of international 
agreements 
++ 
A  more  effective  detection  and 
enforcement  will  reduce  intra-EU 
market distortions 

+++ 
Better  suited  than  3.1  to  monitor 
threshold;  fosters  cooperation  more 
effectively 
than  3.1;  better  and 
wider  process  of  data  and  central 
risk analysis 

++ 
Similar  impact  as  3.1,  but  greater 
cooperation 
and 
transparency 
expected to result in stronger effects  

+++ 
Similar  to  3.1,  but  effect  enhanced 
by expected better cooperation 

+/++ 
Impact will be in line with reduction 
of  VAT 
extra-EU 
fraud  on 
transactions 

++ 
Impact  stronger  than  in  3.1  as  this 
option  is  expected  to  foster  more 
effective  coordination  vs. 
third 
countries 

 
 
 
 
 
Impact  on  level  playing 
field for businesses  

Efficiency of the options 

Impact on tax 
compliance costs for 
business * 
* a positive sign indicates 
a reduction of costs 
Impact on control costs 
for administrations 

Impact  on  additional 
VAT  collection  for  tax 
authorities 

-- 
In  line  with  the  impact  on  VAT 
fraud and distortion of competition 
SMEs: 
The  increase  of  market  distortion 
will  have  a  negative  impact  on  EU 
SMEs  which  will  suffer  also  from 
VAT fraud 

- 
Costs  will  increase  in  line  with 
assumed  greater  volume  of  data 
requests from tax administrations 

-- 
Control  costs  are  assumed 
to 
increase  to  respond  more  forcefully 
to  increase  in  VAT  fraud  volumes 
and market distortion  
-- 
In  line  with  the  impact  on  VAT 
fraud 

Coherence with other EU policies 

Coherence with the VAT 
e-commerce package 

Coherence  with 
the 
General  Data  Protection 
regulation 

-- 
the 
simplifications 
The 
not 
businesses 
compliant 
followed  by  control  tools  for  tax 
administration 
non-
to 
compliant businesses 
0/+ 

for 
are 

detect 

and 

distortion 

0/+ 
In  line  with  the  impact  on  VAT 
of 
fraud 
competition 
SMEs: 
Limited effect 
In line with the limited impact of 
fighting VAT fraud 

if 

0/+ 
There  may  be  modest  positive 
effects 
tax  administration 
adopt guidelines in a coordinated 
fashion 
+ 
Administrations  can  save  time 
and 
by 
referring to guidelines 

development 

costs 

+/++ 
In  line  with  the  impact  on  VAT 
fraud and distortion of competition 
SMEs: 
In line with reduction of VAT fraud 
and reduction of market distortion 

++ 
In  line  with  the  impact  on  VAT 
fraud and distortion of competition 
SMEs: 
The  stronger  the  impact  on  VAT 
fraud  and 
reduction  of  market 
distortion,  the  more  level  playing 
field for SMEs 

of 

++ 
reporting 
Standardisation 
requirements  will  sizeably  reduce 
costs  in  replying  to  data  request 
from tax administrations 
++ 
Centralised  solution  would  keep 
down development costs 

++/+++ 
stronger 
to  3.1,  but 
Similar 
standardisation  of  operations  and 
software 

++/+++ 
IT  costs  estimated  to  be  lower  than 
in 3.1 

0/+ 
In  line  with  the  impact  on  VAT 
fraud 

+/++ 
In  line  with  the  impact  on  VAT 
fraud 

++ 
In  line  with  the  impact  on  VAT 
fraud 

0/+ 
Limited 
accompanying 
measures 

anti-fraud  measures 
simplification 

+/+ 
New  anti-fraud  tools  will  facilitate 
the control of non-compliance 

+++ 
New  and  more  effective  anti-fraud 
tools  will  facilitate  the  control  of 
non-compliance 

++ 
could  disseminate 
The  EU 
relevant  jurisprudence  on  data 
protection rules 

++ 
The  storage  of  data  will  be  at 
national  level  (GDPR  rules  will  be 
reflected in national legislation) 
Exchange  of  data  will  be  regulated 
at  EU  level  (GDPR  rules  will  be 
reflected in the EU legislation) 

++ 
Storage and exchange of data at EU 
level  (GDOR  rules  reflected  in  the 
EU legislation) 

Legend: 0: negligible impact; + (-): limited positive (negative) impact; ++ (++): sizeable positive (negative) impact; +++ (---) strong positive (negative) impact 

49 

 
 
 
 
 
8.  PREFERRED OPTION 

8.1. 

Identification of the preferred option 

The  analysis  above  shows  that  the  regulatory  option  is  the  one  best  addressing  the 
specific and operational objectives listed in section 4.2 and section 4.3. Compared to the 
baseline  scenario  and  option  2  (guidelines)  option  3  is  the  only  one  ensuring  a  full 
harmonisation of Member States’ tax authorities’ access to VAT relevant payment data. 
Consequently, option 3 also guarantees the subsequent harmonisation of procedures for 
risk  analysis  and  –  thus  –  for  the  identification  of  fraudsters  and  to  exchange  this 
information at EU level.  

In particular, sub-option 3.2 (the central storage) is the one that implies less cost for tax 
authorities  and  businesses  and  ensure  the  best  impact  on  VAT  fraud.  While  the  two 
regulatory  sub-options have  a  similar impact on VAT fraud, sub-option 3.2 gives more 
guarantees in terms of uniformity of data and data analysis and – especially compared to 
sub-option 3.2 (distributed application) – a more clear European view of the turnover of 
the detected fraudster.  

Sub-option  3.2  also  has  a  better  impact  on  reducing  market  distortion.  Where  the 
cooperation brings better results to tax authorities, honest businesses can enjoy of a more 
level playing field. Compliance costs for businesses (in particular PSPs) are considered 
lower with the harmonisation of the reporting obligations. This is not the case under the 
baseline scenario and the non-regulatory option. One single format for the transmission 
of data and one single interface (sub-options 3.2) reduce the compliance costs of PSPs.  

Tax  administrations  as  well  bear  lower  development  and  running  costs  under  the 
centralised solution compared to the distributed application (sub-option 3.1) or the non-
regulatory option (where they must bear the full investment and running cost of any new 
IT solution).  

In  terms  of  data  protection  sub-options  3.1  (distributed  application)  and  3.2  (central 
storage)  are  the  ones  who  give  more  guarantee  compared  to  the  baseline  and  the  non-
regulatory  option  because  they  place  the  process  of  payment  data  under  the  EU  legal 
framework  of  VAT  administrative  cooperation,  which  already  includes  specific  legal 
safeguards and secure IT systems to protect the process of personal data.  

8.2. 

Subsidiarity of the preferred option 

The  preferred  option  (sub-option  3.2)  is  considered  consistent  with  the  principle  of 
subsidiarity, as the main problem at stake is the e-commerce VAT fraud also triggered by 
the  current  tools  at  disposal  of  tax  authorities  to  cooperate  between  them.  It  has  been 
demonstrated  that  Member  States  alone  are  not  able  to  tackle  e-commerce  VAT  fraud 
and any initiative to introduce new tools for cooperation, targeted to the specific problem, 
requires a proposal by the Commission to amend Council Regulation (EU) No 904/2010. 
New  record  keeping  obligations  for  PSPs  require  a  proposal  to  amend  the  VAT 
Directive. Therefore, the preferred option clearly offers value over and above what can 
be achieved at Member State level. 

50 

 
 
 
8.3. 

Proportionality of the preferred option 

The preferred option (sub-option 3.2) does not go beyond what is necessary to meet the 
objective. In particular, the costs are over compensated by the expected return in terms of 
detection  of  VAT  fraud  and  additional  VAT  collection.  The  administrative  burdens  for 
businesses  and  tax  administrations  are  overall  reduced  compared  to  the  baseline  and 
other  options  and  the  honest  businesses  will  benefit  from  a  more  level  playing  field. 
Finally,  also  the  process  of  personal  data  respects  the  principles  of  necessity  (only  the 
data  necessary  to  achieve  the  objective  of  combating  e-commerce  VAT  fraud  are 
processed)  and  proportionality  (the  type  of  data  and  the  way  they  are  processed  by  the 
anti-fraud  experts  of  tax  authorities  do  not  exceed  the  limits  of  what  is  appropriate  to 
achieve the objective of fighting e-commerce VAT fraud). 

In particular, the initiative is proportionate because – as the report wants to demonstrate – 
the  tax  authorities  cannot  obtain  information  in  other  ways.  The  payment  information 
will  not  be  a  duplication  of  what  tax  authorities  collect  through  MOSS  declaration,  or 
through the platforms under the deemed supplier provision. At the contrary the payment 
data  will  be  used  to  cross-check  that  information.  Furthermore,  payment  data  will  give 
the tools to the tax authorities to detect the traders that will be outside the MOSS or not 
covered by the deemed supplier provision.  

The proportionality is also in the kind of data requested to payment service providers: the 
information they will have to transmit to tax authorities is the information they already 
have  at  disposal  (PSPs  will  not  have  to  invest  further  to  collect  the  requested 
information).  

8.4. 

Impact on SMEs 

For  the  assessment  of  the  different  options'  impact,  business  associations,  PSPs  and 
SMEs' associations have been specifically questioned on any specific impact on SMEs. 
Furthermore,  the  public  consultation  has  also  been  circulated  within  the  Enterprise 
Europe Network147 in order to receive the highest number possible of SMEs' opinions. 
Unfortunately,  only  one  SMEs'  association  replied  to  the  targeted  consultation  but  was 
not  able  to  indicate  whether  there  are  actually  SMEs  providing  payment  services  that 
could be impacted by the application of the different options. However, as indicated by 
the  same  association,  SMEs'  in  general  suffer  from  the  unfair  competition  of  traders 
exploiting the e-commerce to avoid the payment of the due VAT. Seven respondents to 
the public consultation were SMEs, some of them e-commerce retailers. They mentioned 
VAT fraud is damaging SMEs and expressed high expectations in new tools to tackle e-
commerce  VAT  fraud.  However,  the  respondent  SMEs  did  not  express  any  preference 
for one or another of the policy options and generally could not estimate the impact of 
those options on SMEs. PSPs and a PSPs association were also asked to indicate figures 
of the numbers of SMEs in the sector, but they were not able to answer. This is probably 
because  the  market  of  payment  services  is  dominated  by  large  businesses.  Anyway, 
lacking any quantification evidence from the consultation, it is reasonable to assume that 
any  EU  harmonisation  of  reporting  requirements  will  have  a  beneficial  impact  on  any 
SMEs  providing  payment  services  which,  otherwise,  will  have  to  deal  with  different 
reporting rules and procedure to tax authorities in the Member States. Finally, SMEs in 
the e-commerce and in the traditional economy will benefit from the more level playing 
field  whereby  Member  States'  tax  authorities  will  be  able  to  detect  e-commerce  VAT 
fraudsters.   

147 See: https://myintracomm.ec.europa.eu/dg/grow/dirunits/H/H1/Pages/thesmetest.aspx 

51 

 
                                                            
9.  HOW WILL ACTUAL IMPACTS BE MONITORED AND EVALUATED? 

9.1. 

Indicators for monitoring and evaluation 

The  table  below  give  an  overview  of  the  objectives,  the  indicators  to  measure  whether 
they will be achieved, the tool for monitoring them and the operational objective. 

In the medium term, the initiative is expected to generate a strong positive impact with 
respect to the general objectives indicated under section 4.1. 

Specific 
objective 

To reduce e-
commerce VAT 
fraud by 
providing tax 
authorities with 
efficient and 
effective 
instruments for 
detecting non-
compliant 
businesses 

Operational objectives 

Indicators 

To  give 
tax  authorities 
access  to  relevant  data  to 
fight  e-commerce  VAT 
fraud 
To  offer  new  or  improved 
channels  for  EU  Member 
States’  tax  authorities  to 
share third party data 

To 
the 
improve 
identification and targeting 
of  potential  e-commerce 
VAT fraud 

Measurement 
tool 
  Eurofisc 

annual report 

  Number of audit carried out 
based on payment data 

  Additional VAT collected by 

  Eurofisc 

Member States 

  Central repository for payment 
data available for 99.9% of the 
time. 

  Annual number of requests for 
information and spontaneous 
exchanges of information 
concerning the e-commerce 
sector between EU countries 
  Number of fraudsters detected 

using payment data 
  Number of requests for 

administrative assistance sent 
after detection of fraudsters 
through payment data 

annual report 
  Commission 

report 

  Annual 

statistics of the 
Member States 

  Eurofisc 

annual report 

  Annual 

statistics of the 
Member States 

9.2.  Monitoring structure 

The  Eurofisc  reports  and  the  annual  statistics  of  the  Member  States  are  presented  and 
discussed in the Standing Committee on Administrative Cooperation in accordance with 
Article  49  (EU)  No  904/2010,  which  is  chaired  by  the  European  Commission.  The 
Commission  will report the European Parliament  and the Council on the application of 
the new system. 

The evaluation of this initiative will take place after few years from the entry into force 
of the new system (taking into account at least few years to implement the new electronic 
databases).  As  such,  the  evaluation  of  the  current  initiative  will  be  probably  after  the 
evaluation  of  the  VAT  e-commerce  Directive.  However,  the  evaluation  of  the  current 
initiative will take into account the outcome of the VAT –e-commerce evaluation.  

52 

 
 
 
 
 
 
 
10.  ANNEXES 

10.1. Annex1: Procedural information 

10.2. Annex2: Consultation synopsis report 

10.3. Annex 3: Evaluation 

10.4. Annex 4: Who is affected by the initiative and how 

10.5. Annex 5: Methodology 

10.6. Annex 6: Technical feasibility of the options 

10.7. Annex 7: Case study – pricing policy and estimation of potential VAT loss 

10.8.  Annex  8:  Result  of  the  TAXUD  2016  survey  on  e-commerce  compliance 

strategies in the EU 

10.9. Annex 9: Payment Services' framework in the EU 

10.10. Annex 10: B2B import VAT fraud 

10.11. Annex 11: Third countries using payment data as VAT control tool 

10.12. Annex 12: Visual examples of the regulatory options 

10.13. Annex 13: Comparison amongst different initiatives in terms of fighting 
e-commerce VAT fraud 

53 

 
  
10.1.  Annex 1: Procedural information 

1. Lead DG, Decide Planning references 

The  initiative  of  adopting  measures  to  fight  e-commerce  VAT  fraud  was  in  the  VAT 
Action Plan148  

TAXUD  is  the  lead  DG  for  this  initiative.  The  agenda  planning  reference  is 
PLAN/2017/2023.  

2. Organisation and timing 

The first meeting of the Inter-Service Steering Group was on 26 January 2018 where the 
context,  the  draft  combined  evaluation/impact  assessment  roadmap,  the  consultation 
strategy,  the  draft  timeline  and  the  problem  tree  were  presented.  The  following 
directorates and services were present: CNNECT, FISMA, GROW, JUST, SG, SJ. The 
comments of the different services have been taken into account. 

The  second  meeting  was  on  15  February  2018  and  the  updated  problem  tree,  the  draft 
questionnaire for the public consultation and the options were presented. The following 
directorates and services were present: CNNECT, FISMA, GROW, JUST, SG, SJ. The 
comments of the different services have been taken into account. 

The  third  meeting  was  on  23  March  2018  mainly  to  inform  the  different  services  and 
directorates  on  the  state  of  play  of  the  consultations  and  the  tentative  timeline.  The 
following directorates and services were present: CNNECT, FISMA, JUST, SG. 

The fourth meeting was on 5 April 2018 to present the draft of the first part of the Impact 
Assessment report. The following directorates and services were present: DIGIT, SG, SJ. 
The comments have been taken into account. 

The  Fifth  meeting  was  on  24  May  2018  to  present  the  second  draft  of  the  full  Impact 
Assessment  report.  The  following  directorates  and  services  were  present:  FISMA,  SG, 
SJ, HOME, and DIGIT. 

3. Consultation of the RSB 

The  Regulatory  Scrutiny  Board  was  consulted  on  27  June  2018.  The  opinion  of  the 
Board was positive. The Board made a number of key recommendations to improve the 
report with respect to the following aspects: 

  The  description  of  the  context  is  not  sufficiently  clear  on  the  political  support 

behind the initiative and the urgency to act; 

  The  baseline  does  not  adequately  project  the  potential  impact  of  other  recently 
adopted  or  proposed  initiatives  designed  to  combat  VAT  fraud.  The  differences 
between  the  options  are  not  clearly  described.  As  a  result,  the  reasons  for  their 
distinct costs and impacts are not evident. 

The report was adjusted to take into account the Board recommendations.  

4. Evidence, sources and quality 

148 COM(2016) 148 final of 7.4.2016 Communication From The Commission To The European 
Parliament, The Council And The European Economic And Social Committee 

54 

 
                                                            
The  evidence  for  the  impact  assessment  report  was  taken  by  different  consultation 
activities: 

  A  2016  survey  with  the  Member  States'  tax  authorities  on  e-commerce  anti-fraud 

strategies 

  The consultation with the VAT forum Commission Expert group on e-commerce 
  The evaluation of  Evaluation of Regulation (EU) 904/2010 
  A targeted consultation addressed to tax authorities on payment data 
  A  targeted  consultation  addressed  to  payment  service  providers  and  businesses  on 

payment data 

  A public consultation 
  Desk research 

55 

 
 
 
 
 
10.2.  Annex 2: Consultation synopsis report 

1. Consultation activities carried out 

For the preparation of this initiative, the Commission launched a public consultation and 
a targeted consultation. The objectives of the consultations were to:  

  collect data and evidence needed to evaluate the application of Regulation (EU) 
904/2010 on administrative cooperation and combating fraud in the field of VAT 
in respect of VAT fraud on B2C cross-border supplies (hereinafter e-commerce 
VAT fraud); 

  gather necessary knowledge in order to assess various options for the collection 
and exchange of VAT-relevant payment data as a tool for combating e-commerce 
VAT fraud; 

  offer  the  public  and  stakeholders  the  opportunity  to  contribute  meaningfully  to 

the exercise and gather their views on the initiative at stake. 

Further detailed regarding the public and targeted consultations are given below.  
The  Inter-Service  Steering  Group  was  consulted  on  the  content  of  the  Consultation 
Strategy and on the draft questionnaire for the public consultation. 

1.1. Public consultation 

The  public  consultation  period  was  between  27  February  2018  and  25  April  2017  and 
was  available  in  the  23  official  EU  languages.  Based  on  TAXUD’s  request,  the 
Secretariat  General  agreed  with  three  derogations  in  order  to  limit  the  duration  of  the 
public consultation, the translation date into all EU languages and the shorter feedback 
period for the inception impact assessment. The derogations were due to be in line with 
the time line for the adoption of the initiative.  

In  order  to  increase  the  visibility  of  the  public  consultation,  the  Commission  promoted 
this consultation on social networks: Twitter and LinkedIn. 

1.2. Targeted consultation 

1.2.1. Tax authorities 

All 28 EU tax authorities have been consulted by means of a dedicated questionnaire.  

The  consultation  period  with  tax  authorities  was  between  9  March  2018  and  13  April 
2018  but  several  answers  were  received  after  the  deadline:  also  the  late  answers  have 
been taken into account. 

1.2.2. Payment providers and other businesses 

Payment  providers  and  other  businesses,  including  internet  platforms,  have  been 
consulted by means of a targeted questionnaire. The deadline for answering was the 13th 
of April 2018. However, most of the answers were received after this date: also the late 
answers  have  been  taken  into  account.  The  dissemination  of  the  questionnaire  was 
largely done through the network of the members of the Sub-group on e-commerce of the 

56 

 
 
 
VAT  Forum  but  several  targeted  mails  were  also  sent  to  representatives  of  banks,  card 
schemes and postal services.  

1.2.3. Small and medium-sized enterprises (SMEs) 

TAXUD invited SMEs to provide their feedback on this initiative by disseminating the 
public  consultation  questionnaire  via  the  Europe  Enterprise  Network.  TAXUD  also 
invited  the  European  Association  of  Craft,  Small  and  Medium-sized  Enterprises 
(UEAPME )149 and Business Europe to answer the targeted consultation questionnaire. 

1.2.4. Other private sector stakeholders 

The public consultation has been flagged out to the Belgian Bitcoin Association  as well 
as to consumers’ representatives, through the European Consumers Association (BEUC - 
Bureau  Européen  des  Unions  de  Consommateurs),  a  network  covering  31  European 
countries,  including  all  EU  Members  States.  However,  they  have  not  answered  to  the 
consultation.  

1.2.6. Other international organizations 

The  European  Payment  Council,  an  international  no  profit  association  representing  76 
payment service providers, is responsible for managing four payment schemes across the 
Single Euro Payments Area (SEPA). The EPC was interviewed, on March 2nd, 2018, in 
particular as regard the feasibility of the proposed policy options.  

Aiming  to  learn  from  previous  similar  experiences,  TAXUD  also  consulted  the 
Secretariat  of  the  Committee  of  Experts  on  the  Evaluation  of  Anti-Money  Laundering 
Measures  and  the  Financing  of  Terrorism  (MONEYVAL),  a  body  of  the  Council  of 
Europe. However, no contribution was received.  

2. Stakeholder participation 

2.1. Categories of stakeholders 

The  identified  stakeholders  categories  are  composed  of:  (i)  citizens,  (ii)  MSs  tax 
authorities,  (iii)  businesses  (payment  providers,  internet  platforms,  SMEs,  other 
businesses),  (iii)  cryptocurrencies  providers,  (iv)  consumers’  representatives,  (v) 
institutions and organizations with competences in the field of payment and anti-money 
laundering. The majority of stakeholders provided for feedback but at variable extent.  

149  UEAPME  incorporates  67  member  organizations  consisting  of  national  cross-sectorial  SME 
federations, European branch federations and other associate members. 

57 

 
 
 
 
 
 
 
 
 
                                                            
Figure  5:  Respondents  to  the  public  consultation 
(number) 

1 1  2 

3 

4 

14 

14 

13 

Citizens

Private enterprises

Trade, business or professional associations

Professional consultancies, law firms, self-employed consultants

International or national public authorities

Research and academia

Non-governmental organisation, platform or network

Others

2.2.  Participation 
public consultation 

in 

the 

A total number of 52 answers 
were received by the end of 
the public consultation. Out of 
that, 14 respondents replied as 
citizens, in their personal 
capacity. The others (38 
answers), responded in their 
professional capacity, as 
representatives of private 
enterprises (13), trade, 
business or professional 
associations (14), 
consultancies (4), 
international or national 
public authorities (3), research 
and academia (1) or other 
organisations (2).  

Figure  6:  Country  of  residence  of  the  respondents  to  the  public  consultation 
(number) 

4 

5 

1 

1 

9 

7 

6 

2 

10

8

6

4

2

0

8 

1 

1 

1 

2 

2 

2 

AT

BE

CZ

DE

FR

ES

IR

IT

NL

PT

PL

RO

UK

N/A

Non
EU -
USA

The  survey  resulted  in  a  relatively  un-balanced  representation  in  terms  of  number  of 
respondents compared to the population of the respective Member States.  

On  the  businesses  side,  only  one  respondent  replying  to  the  public  consultation  was  a 
self-employed while five were large companies. The seven answers received from SMEs 
can be split as follows: 

  4 answers from businesses with fewer than 10 employees – Micro enterprises,  
  1 answer from businesses with 10 to 49 employees and  
  2 answer from businesses with 50 to 249 employees.   

25  of  the  respondents  replied  in  their  professional  capacity.  Some  of  the  respondents 
were  representing  associations  active  in  the  field  of  taxes  or  enterprises  involved  in  e-
commerce (sales of goods and services, including electronic gambling) which chosed to 
attach position papers or to make refference to other sites or content.  

58 

 
 
 
 
Furthermore,  20  replies  to  the  public  consultation  originated  from  organizations 
registered in the Transparency Register.  

Analising  the  public  consultation  replies,  TAXUD  did  not  detect  a  co-ordinated 
campaign for the submission of answers.  

The  majority  of  the  respondents  (up  to  60%)  seemed  to  represent  businesses  acting  as 
traders (distance sellers) in e-commerce or associations and consultants representing their 
interests.  

Even though more than half of the respondents demonstrated by their answers in the open 
questions  a  certain  expertise  regarding  the  e-commerce  challenges  and  the  tax 
administration’s practice, the information collected during the public consultation did not 
allowed  for  a  clear  conclusion  on  the  reputation,  track  record  and  longevity  of  the 
respondents. 

TAXUD processed the data and information collected through the public consultation, on 
the basis of an Excel spreadsheet, purely for the scope of assessing the possible impact of 
the  current  proposal,  ensuring  the  appropriate  protection  of  personal  data  without 
publishing the information of the respondents that did not give their consent. 

2.3. Participation to the targeted consultation 

From the tax authorities’ side, TAXUD received 23 answers out of 28 possible despite 
the  extended  period  for  replies.  Most  of  MSs'  tax  authorities  faced  difficulties  in 
providing  factual data  on the size of the problem and the possible impact of the policy 
options.  The  reason  of  this  lack  of  evidence  is  that  the  necessary  data  is  held  by  third 
parties  or  authorities  in  other  countries  and  Member  States  have  no  methodologies  to 
make  estimates  in  the  field  of  e-commerce.  In  particular,  the  tax  authorities  rarely 
manage  to  monitor  specific  information  on  e-commerce  because  it  refers  to  B2C 
transactions. 

From  the  businesses’  side,  TAXUD  received  only  5  answers.  One  of  the  payment 
providers’  association  asked  for  an  interview.  The  answers  received  from  one  of  the 
banks  demonstrate  the  good  understanding  of  the  challenges  ahead  and  of  the  policy 
options and highlighted some of the issues related to the implementation of the initiative. 
However,  this  answer,  despite  acknowledging  the  problem  and  clearly  indicating  a 
preferred  policy  option,  did  not  provide  for  sufficient  data  to  assess  the  impact  of  the 
policy  options  on  businesses.  Finally,  one  of  the  large  associations  representing  SMEs 
acknowledged  the  negative  impact  of  the  e-commerce  VAT  fraud  on  SMEs.  However, 
that  large  SMEs  association  did  not  give  any  substantial  contribution  in  respect  of  the 
policy options and possible impact on SMEs. 

2.4. Consultation channels used 

The Commission offered a set of diversified consultation channels: 

 
 

the public consultation questionnaire available via the EU Survey tool; 
two targeted consultation questionnaires, one for Member States tax authorities 
and one for businesses; 

59 

 
 
 
 
 
 
 
  an expert meeting of the Sub-group on e-commerce of the VAT Forum; 
  an  interview  with  the  European  Payment  Council  and  a  conference  call with  a 

payment services association; 

  written contributions received directly by e-mail.  

Despite  the  diversity  of  channels  used,  the  number  of  contributions  received  remained 
small. The limited response rate to the public consultation can be explained by the rather 
technical aspects of the initiative at stake. However, the very limited number of answers 
of SMEs and payment providers in the targeted consultation was not expected. 

3. Consultation results  

3.1. Results of the public consultation 

Problem definition and size of the problem 

The  majority  of  those  who  answered  the  questionnaire  perceived  VAT  fraud  as  an 
important problem. Most of the respondents (up to 48 out of 52) considered that the e-
commerce  VAT  fraud  is  damaging  revenues,  consumers  and,  finally,  compliant 
businesses.  

Figure 7: Perception of the negative impact of VAT fraud in e-commerce 

60

50

40

30

20

10

0

4 
0 
3 
5 

16 

26 

3 
1 
5 
1 

16 

26 

1 
0 
0 
3 

13 

35 

a. VAT fraud on online sales is
diminishing VAT revenues by a
significant share

b. VAT fraud on online sales is
harming consumers interests on the
long term, by reducing market
competition

c. VAT fraud on online sales is
damaging the compliant businesses
selling on-line

Strongly agree

Agree Do not agree nor disagree Disagree

Strongly disagree Do not know / NA

The answers received confirmed that e-commerce VAT fraud might take various forms: 
(i) under-declaration of supplies and no VAT payment (40 opinions), (ii) non-registration 
of the remote supplier (39 opinions) and (iii) declaration and payment of VAT in a wrong 
Member State, to take advantage of a lower VAT rate (33 opinions). 

Finally,  from  a  quantitative  perspective,  most  of  the  individuals  and  organisations 
answering  the  public  consultation  (35)  were  of  the  opinion  that  the  e-commerce  VAT 
fraud  is  a  common  problem  in  all  the  EU  Member  States.  Several  answers  pointed  to 
unfair  competition  from  Asian  suppliers  of  goods  and  at  the  breach  of  intellectual 
property rights associated with VAT fraud on the online computer games market.   

60 

 
 
Evaluation of the administrative cooperation 

The majority of the respondents to the public consultation (28 answers) was unsatisfied 
with  the  efficiency  of  the  fight  against  e-commerce  VAT  fraud  (when  comparing  the 
results  obtained  and  the  resources  invested).  Only  10  respondents  out  of  52  considered 
the current fight against e-commerce VAT fraud efficient. 

On the  effectiveness  of the current EU regulation, only  12 respondents replied that the 
EU  Member  States  have  the  right  tools  to  fight  e-commerce  VAT  fraud  while  32 
respondents replied the opposite.  

On  the  EU  added  value,  the  majority  of  respondents  (27)  seemed  to  agree  that  the 
existing  administrative  cooperation  tools  allow  Member  States  to  fight  against 
ecommerce VAT fraud at a higher level than what could be achieved by the EU Member 
States acting independently. 

From  a  qualitative  perspective,  most  of  the  respondents  considered  that  the  causes  of 
the lack of effectiveness in the fight against e-commerce VAT fraud are: 

 

lack of resources (people, money and even tools) for tax authorities compared to 
the volume of transactions to be verified; 
lack of willingness to cooperate between Member States’ tax authorities; 
lack of cooperation between customs and tax authorities; 

 
 
  absence  of tools  to enforce the VAT rules on remote suppliers from outside the 

EU and 
lack of cooperation from big platforms and marketplaces. 

 

Subsidiarity and proportionality of the intervention 

The  majority  of  the  respondents  (34  out  of  52)  considered  that  the  e-commerce  VAT 
fraud  is  a problem  that  should  be  addressed  at  both  EU  and  Member  States  level 
while  an  important  number  (14)  of  the  respondents  preferred  the  solution  at  EU  level 
only.  

As regard proportionality, the vast majority of the respondents (41 answers out of 52) 
considered that the collection and exchange of payment data is justified.  

61 

 
 
  
Figure 8: Proportionality of the initiative  Figure 9: Subsidiarity of the initiative 

50
40
30
20
10
0

41 

7 

4 

The problem of VAT fraud on online sales
across all the EU Member States

Justifies the collection and exchange VAT-
relevant payment data

Does not justify collection and exchange
VAT-relevant payment data

I do not know / NA

40
35
30
25
20
15
10
5
0

34 

14 

1 

3 

At which level do you think VAT fraud on
online sales can be effectively addressed?

MS level

EU level

Both levels

I don't know / NA

Policy options and their possible impact on all the stakeholders 

In the questionnaire, the respondents were invited to express their view on the three main 
policy options and on different technical solutions. 

The  regulatory  option, involving  the  collection  and  exchange  of  payment  data,  was  the 
one  preferred  by  the  majority  of  respondents  (fig.  6)  because  it  was  considered  as  the 
most effective for the fight against e-commerce VAT fraud.  

Figure 10: Public consultation: Comparison of policy options 

40
35
30
25
20
15
10
5
0

34 

15 

12 

13 

12 

11 

6 

6 

4 

3 

27 

13 

Easiest to implement

The most effective

The most coherent with other
initiatives

Baseline

Guidelines

Regulatory option

Don’t know / NA 

However,  the  analysis  of  the  answers  revealed  that  the  preference  for  the  regulatory 
policy option does not exclude the other options. Increasing the administrative capacity 
of  Member  States’  tax  authorities  and  issuing  guidelines  were  perceived  by  the 
respondents as complementary or, at least, not excluding one another.  

Most  notably,  in  terms  of  efficiency,  the  option  of  investing  only  in  the  administrative 
capacity of the Member States’ tax authorities was considered as easy to implement. This 
conclusion  is consistent with  some of the contributions received in relation to the open 
questions. 

62 

 
 
 
 
Within  the  regulatory  option,  the  respondents  expressed  a  preference  for  the  central 
database  (38  respondents)  as  means  of  collecting  and  exchanging  payment  data  among 
tax  authorities.  However,  respondents  did  not  consider  the  choices  as  excluding  one 
another. Therefore, some of the respondents also indicated a preference for the automatic 
exchange of information. 

Figure  11:  Public  consultation:  Preferred 
technical choices 

12:  Public 

Figure 
consultation: 
Exchange  of  data  must  not  reveal  the 
identity of the customer (buyer) 

60

50

40

30

20

10

0

4 
7 
8 

33 

3 
11 

15 

23 

2 
8 
4 

38 

Automatic
exchange

Access to each
other database

Central EU
database

Don't know / NA

(Strongly) disagree

Do not agree nor disagree

(Strongly) agree

Protection of personal data 

2 

8 

12 

30 

I (strongly)
agree

I (strongly)
disagree

I do not agree
nor disagree

I don't know /
NA

Concerning  the  protection  of  personal  data,  most  of  the  respondents  (30  out  of  52) 
considered  that  the  identity  of  the  buyer  should  be  protected  and  thus  should  not  be 
exchanged between tax authorities. Only one respondent mentioned that the disclosure of 
this information may be necessary to assess VAT liabilities.  

Overall,  the  majority  of  respondents  mentioned  that  the  collection  of  payment  data  is 
necessary  (37  respondents)  but,  they  pointed  out  the  risks  that  data  could  be  used  for 
other purposes than detecting VAT fraud (35 respondents) and to identify the customer 
(35 respondents). 

3.2. Results of the targeted consultation  

Despite  the  good  response  rate  from  tax  authorities,  there  were  few  answers  received 
from  businesses.  The  Commission  did  not  received  any  feedback  from  consumers’ 
associations, cryptocurrencies and anti-money laundering institutions. 

Feedback from the tax authorities (answers received from 23 respondents) 
Only three tax authorities were able to provide some partial estimation of the VAT loss. 
Furthermore, Member States were not able to estimate the loss of competitiveness of EU 
businesses  due  to  e-commerce  VAT  fraud.  However,  more  than  half  of  the  respondent 
tax  authorities  developed  strategies  to  fight  e-commerce  VAT  fraud.  14  tax  authorities 
use internet-monitoring tools for detection purposes. Less than half of the tax authorities 
(12) already receive data from payment service providers at national level and 6 of the 

63 

 
 
 
 
respondent  Member  States  process  third  party  data  to  detect  e-commerce  VAT  fraud 
based on national risk analysis. Up to half of the responding tax authorities were able to 
indicate the number of tax audits on e-commerce during the last three years.  

As regard the evaluation of the current administrative cooperation tools most of the 
responding  tax  authorities  considered  that  they  are  still  relevant  but  effective  only  to  a 
limited extent. Member States mentioned difficulties in using administrative cooperation 
tools to fight e-commerce VAT fraud relating to: the identification of businesses over the 
internet;  getting  information  from  servers  located  outside  the  EU;  insufficient  level  of 
resources  allocated  to  fight  e-commerce  VAT;  needs  of  more  training  for  the  staff; 
insufficient  cooperation  from  some  Member  States,  etc.  Finally,  nine  tax  authorities 
mentioned that other tools are needed in order to reinforce administrative cooperation. In 
particular,  they  indicated  that  tax  authorities  need  access  to  third  party  data  on  e-
commerce transactions, including data from payment service providers. 

Figure 13: Tax authorities: evaluation of the administrative cooperation tools 

25

20

15

10

5

0

1 
4 
2 
3 

12 

1 
6 

2 
1 

11 

1 
a) the administrative 
cooperation tools laid down in 
Regulation (EU) 904/2010 
meet the scope of fighting 
against “e-commerce VAT 
fraud” 

2 
b) the application of
Regulation (EU) 904/2010
contributes to the reduction of
the e-commerce VAT fraud

0 
1 
2 
0 

14 

6 

c) the administrative
cooperation tools laid down in
Regulation (EU) 904/2010
allow Member States to
cooperate in order to fight
against e-commerce VAT
fraud

13 

4 

4 
1 
0 
1 
d) Member States alone are
able to fight e-commerce VAT
fraud, without using the
administrative cooperation
tools laid down in Regulation
(EU) 904/2010

Absolutely true Mostly True Neither tue or false

I don't know Somehow not true Not true

Member States seemed to prefer the regulatory option. 18 respondents declared their 
tax authorities are in favour of an EU standard form to collect data from payment service 
providers  while  the  only  one  opposing  stressed  that  the  central  repository  (payment 
providers  uploading  payment  data  directly  to  a  central  repository)  is  the  only  possible 
option to implement in a reasonable timeframe.  

Regarding  the  technical  sub-options,  the  majority  of  tax  authorities  (19  answers) 
supported  the  central  repository,  while  only  10  of  them  found  acceptable  that  payment 
service  providers  could  transmit  payment  data  only  to  one  Member  State  of 
identification.  Most  of  the  respondents  (18  answers)  were  in  favour  of  a  monthly 
reporting frequency for the transmission of payment data but against setting a threshold 
(14 answers).  

With respect to  personal data protection, almost half of the respondents (11 answers) 
mentioned  difficulties  when  gathering  and  processing  information  collected  from  third 
parties. However, the difficulties seem mostly related to the reluctance of third parties to 
transfer data to tax authorities rather than to the lack of protection of the data once it has 
been handed over to tax authorities.  

64 

 
 
 
Feedback from businesses (answers received from 5 respondents) 

E-commerce VAT fraud has a different impact on businesses depending on their field of 
activity.  Payment  service  providers  seem  not  to  be  affected  by  the  problem  or  just 
indirectly affected to very little extent. The representatives of SMEs and other businesses 
indicated that e-commerce VAT fraud is widespread and that it is generating distortions 
and negative financial implications for honest businesses.  

One association of payment service providers and two large payment service providers 
answered  in  the  targeted  consultation.  The  payment  service  providers  confirmed  they 
currently  provide  payment  data  to  tax  authorities,  mostly  on  request.  There  is  no  clear 
indication  of  the  costs  incurred  by  these  reporting  obligations  but  one  large  payment 
provider mentioned that monthly transmission of information to national tax authorities 
generates  work  for  one  or  two  full  time  employees  and  yearly  costs  of  around  EUR 
100.000.  

The responding payment service providers confirmed that payment data is useful to fight 
e-commerce VAT fraud but also mentioned that some other sources of information may 
be needed (from internet platforms or marketplaces).  

Payment  service  providers  indicated  there  is  a  benefit  in  creating  a  single  EU  wide 
reporting  standard  for  payment  data  instead  of  having  various  reporting  obligations  in 
different EU Member States. Some payment service providers expressed a preference for 
the  regulatory  option  because  it  provides  more  legal  certainty  and  effectiveness.  One 
payment  service  provider  indicated  that  the  most  cost-efficient  solution  is  to  transmit 
payment  data  to  a  central  EU  repository;  another  mentioned  that  data  should  be 
transmitted  to  the  Member  State  of  identification.  The  payment  service  providers 
expressed concerns of data protection if the payment data is transmitted directly from the 
payment service provider to a Member State different from the one of establishment.  

The  payment  service  providers  considered  the  frequency  of  the  reporting  obligation  as 
decisive  for  the  costs  of  any  reporting  obligation  (rather  than  reporting  thresholds).  A 
quarterly, semi-annually or annually submission of payment data seem to be reasonable 
by  one  of  the  associations  representing  payment  service  providers.  Thresholds  in 
reporting  payment  data  may  also  be  difficult  to  manage.  In  general,  payment  service 
providers  were  not  able  to  quantify  the  administrative  burden  entailed  in  a  new 
requirement  on  reporting  payment  data  but  only  one  of  them  considered  that  the 
collection of the data puts unacceptable additional burden on payment service providers.  

From  other  businesses,  different  from  payment  service  providers,  TAXUD  received 
only  two answers in the targeted consultation: one  from a very large SMEs association 
and another from an international association of VAT professionals and consultants. It is 
not clear if the policy options presented under this initiative have a direct impact on their 
members.  

4. Conclusions 

The results of the public and targeted consultations allowed the Commission to collect a 
significant  number  of  views  and  opinions  on  the  initiative.  This  may  not  be 

65 

 
representative  at  statistical  level,  due  to  the  relatively  small  number  of  answers 
(notably in respect to SMEs), but it is significant in terms of quality.  
The quantity of data collected for evaluating the current administrative cooperation tools 
and assessing the possible policy options impact was very small.  

All  the  data  and  views  collected  were  used  for  the  evaluation  of  the  administrative 
cooperation  tools  in  respect  of  e-commerce  and  for  the  impact  assessment  of  the  new 
initiative.  The  findings  of  the  two  consultations  helped  to  assess  the  effectiveness, 
efficiency, relevance, coherence and EU added value of both the existing administrative 
cooperation tools as well as of the new policy options. The public consultation and the 
targeted  consultation  showed  that  the  current  administrative  cooperation  tools  are  still 
considered  effective,  efficient  and  relevant  to  a  certain  extent  but  also  showed  the 
vulnerabilities  thereof.  Moreover,  the  arguments  collected  through  the  consultations 
demonstrated the need to amend the current regulation on administrative cooperation, to 
allow  for  the  exchange  of  payment  data  for  fighting  VAT  fraud  in  e-commerce  and  to 
increase, in general, administrative capacity of tax authorities. All those arguments have 
been included and sometimes presented in more detail than in the current synopsis report, 
within the impact assessment report, i.e. chapters no.2  - problem definition, no.3 – why 
should  EU  act,  no.6  –  impacts  of  the  policy  options,  and  no.7  –  how  do  the  options 
compare, as well as in  the  annexes no.3  –Evaluation of  Regulation (EU) 904/2010 and 
no.4 – who is affected and how. Finally, the feedback received through the public and the 
targeted consultations has been used to select the preferred policy option and assess the 
impact  (mainly  economic  impact  and  on  administrative  and  compliance  costs). 
Hereunder are some of the key findings which have been used in the impact assessment 
report. 

Both  the  public  and  targeted  consultations  confirmed  the  problem  definition  and  the 
important  size  of  the  e-commerce  VAT  fraud.  E-commerce  VAT  fraud  has  a  strong 
impact on honest businesses by distorting competition. Some respondents gave examples 
to show the negative effects on several economic sectors heavily affected by cross-border 
non-compliant  sellers.  Tax  authorities  generally  need  to  collect  and  exchange  payment 
data  in  order  to  detect  e-commerce  VAT  fraud  and  identify  the  VAT  non-compliant 
suppliers.  However,  tax  authorities  may  need  access  to  other  categories  of  data  to 
crosscheck payment data for detection purposes.  
Privacy was not mentioned as an important impediment to the collection and exchange 
of payment data as far as the personal data of the buyers (clients) receives a reasonable 
level of protection.  

The  majority  of  respondents  expressed  a  preference  for  the  regulatory  option.  In 
particular,  the  respondents  indicated  that  the  centralised  repository  is  the  most  cost-
efficient.  
Tax authorities and payment providers confirmed the added value of a EU wide 
standardised approach for the collection and exchange of payment data but very few 
were able to estimate the positive impact in terms of supplementary VAT collection for 
any of the policy options. 

66 

 
 
 
 
 
10.3.  Annex  3:  Evaluation  of  Regulation  (EU)  904/2010  for  cross-border 

Business to Consumer online supplies 

TABLE OF CONTENT 

EXECUTIVE SUMMARY .......................................................................................................................... 66 

1. INTRODUCTION .................................................................................................................................... 68 

2. BACKGROUND TO THE INITIATIVE ................................................................................................. 68 

3. EVALUATION QUESTIONS AND METHOD ...................................................................................... 71 

3.1. EVALUATION QUESTIONS ..................................................................................................... 71 

3.2. EVALUATION MATERIALS .................................................................................................... 71 

3.3. EVALUATION PROCESS AND MATRIX ............................................................................... 72 

3.4. LIMITATIONS AND ROBUSTNESS OF FINDINGS .............................................................. 77 

4. ANALYSIS OF THE ANSWERS TO THE EVALUATION QUESTIONS ........................................... 77 

4.1. EFFECTIVENESS ....................................................................................................................... 77 

4.2. EFFICIENCY ............................................................................................................................... 81 

4.3. RELEVANCE .............................................................................................................................. 82 

4.4. COHERENCE .............................................................................................................................. 85 

4.5. EU ADDED VALUE ................................................................................................................... 86 

5. CONCLUSIONS ...................................................................................................................................... 89 

1.  EXECUTIVE SUMMARY 

The  current  evaluation  is  performed  in  conjunction  with  the  impact  assessment 
supporting  the  subsequent  legislative  proposal  to  amend  Council  Regulation  (EU)  No 
904/2010  of  7  October  2010  on  administrative  cooperation  and  combating  fraud  in  the 
field of value-added tax (hereinafter ‘Regulation (EU) 904/2010.  

The objective of the evaluation is to examine to which extent Regulation (EU) 904/2010 
met  the  overall  objectives  of  contributing  to  a  closer  cooperation  between  Member 
States, of avoiding budget losses, of fighting VAT fraud and of preserving the principles 
of fair taxation, when considering e-commerce. 

Although  the  stakeholders failed to provide the Commission  with  the expected level of 
factual data and the evaluation process has been marked by short deadlines, its findings 
are  strongly  supported  by  the  comprehensive  evaluation  of  the  Regulation  (EU) 
904/2010150,  finalised  in  2017,  and  by  the  generally  convergent  views  of  numerous 
stakeholders.  The  Member  States  participation  to  the  targeted  consultation  was 
significant (23 replies) and, thus, had a decisive contribution to building the conclusions 
of the current evaluation. 

150 SWD(2017) 428 final, IMPACT ASSESSMENT accompanying the document Amended proposal for a 
Council  Regulation  Amending  Regulation  (EU)  No  904/2010  as  regards  measures  to  strengthen  
administrative cooperation in the field of value added tax, Annex 3, p. 83. 

67 

 
 
 
                                                            
The  general  opinion  concerning  the  administrative  cooperation  tools  provided  by 
Regulation (EU) 904/2010  and their application in  relation to  the e-commerce  sector  is 
favourable  overall,  even  though  it  is  more  positive  amongst  the  tax  authorities  than 
amongst the respondents to the public consultation. This situation is probably because tax 
authorities  have  a  much  better  knowledge  of  the  administrative  cooperation  process, 
which is mostly a back-office process, hardly visible for the public. 

The  administrative  cooperation  tools  in  the  field  of  VAT  seem  to  remain  relevant, 
efficient and effective, even though the needs of the Member States to fight e-commerce 
VAT  fraud  are  evolving.  The  effectiveness  is  partially  hindered  by  the  very  specific 
information needs in the field of e-commerce VAT fraud: this information is often held 
in other countries and there are limited enforcement tools in respect of e-commerce VAT 
fraudsters  located  outside  EU.  In  addition,  some  respondents  pointed  out  the  need  to 
invest more in the administrative cooperation, by increasing the commitment of Member 
States and reducing the proportion of late replies on answering requests for information, 
but also by training the tax officials in the field of e-commerce. Finally, although factual 
data on the costs and benefits associated to the current administrative cooperation tools is 
scarce,  tax  authorities  estimate  that  the  benefits  of  employing  the  Regulation  (EU) 
904/2010  instruments  are  higher  than  or  proportional  to  the  costs.  Several  stakeholders 
raised the need to develop an automated system to exchange payment data as a valuable 
instrument permitting the detection of e-commerce VAT fraud. This last conclusion also 
resulted from the consultation carried out in the framework of the 2017 comprehensive 
evaluation. 

The coherence of the current administrative cooperation tools with other EU policies and 
new  initiatives  has  been  confirmed.  Most  notably,  as  the  Council  adopted  the  e-
commerce VAT Directive in December 2017, fully entering into force in 2021, Member 
States will heavily rely on administrative cooperation for checking on the correctness of 
VAT registration requests and of VAT returns. However, it was also noted that Member 
States should address new challenges such as the capacity of processing large volumes of 
data allowing for the detection of e-commerce VAT fraud. For the time being, except for 
some  limited  cases  in  which  it  was  reported  that  banks  or  internet  platforms  denied 
access  to  data  on  grounds  related  to  data  protection  rules,  tax  authorities  did  not  faced 
significant issues in complying with privacy regulations. For the future, the coherence of 
current  administrative  cooperation  tools  and  data  protection  legislation  may  be 
challenged,  as  the  e-commerce  specificities  require  massive  access  to  data  and  intense 
cooperation among tax authorities, both inside EU and with third countries. 

Furthermore,  the  different  stakeholders  agreed  on  the  EU  added  value  of  the 
administrative  cooperation  framework  laid  down  in  Regulation  (EU)  904/2010.  The 
administrative cooperation rules contribute to the protection of the Internal Market and of 
the VAT revenues. The e-commerce VAT fraud is affecting all EU Member States and, 
due to  the nature of e-commerce,  Member States  need to work together to  detect fraud 
and  enforce  VAT  rules.  Stakeholders  perceive  that  implementing  individual  Member 
States' remedies is rather ineffective and generally ask for more cooperation. 

Overall,  this  evaluation  shows  that,  despite  a  rather  positive  assessment  of  the  current 
rules, new administrative cooperation instruments are needed to the Member States. Both 
the  2017  evaluation  and  the  recent  2018-targeted  consultation  showed  that  Member 
States  are  generally  in  favour  of  exchanging  payment  data  in  order  to  cope  with  the 
shortcomings related to the effectiveness, relevance and coherence of the current rules of 
administrative  cooperation.  Therefore,  exchanging  payment  data  is  one  area  in  which 

68 

 
Regulation (EU) 904/2010 may be further amended to give the tax authorities the right 
tools to cooperate in the fight against e-commerce VAT fraud. 

2.  INTRODUCTION 

This proposal is a follow-up of the Commission’s commitment to "address VAT fraud in 
the electronic commerce  sector"  by "working on proposals for third  parties involved to 
supply targeted information to tax administrations in order to allow the latter to cope with 
the  new  e-commerce  business  models".  It  complements  the  recently  adopted  VAT  e-
commerce package  that modernizes and simplifies the VAT system on B2C cross-border 
supplies  of  goods  and  services  and    the  recent  proposal    amending  the  rules  on 
administrative  cooperation  and  combating  VAT  fraud  adopted  by  the  Commission  in 
November  2017  (and  mainly  addressing  B2B  transactions).This  initiative  wants  to 
provide tax administrations with appropriate tools to detect fraudsters and control VAT 
liabilities  on  cross-border  Business-to-Consumer  (B2C)  supplies  (hereinafter  e-
commerce) by collecting and sharing VAT relevant payment data. It should also ensure a 
level  playing  field  for  businesses  and  adequate  data  protection  for  any  VAT-relevant 
payment data concerned. 

A  comprehensive  evaluation  of  Regulation  (EU)  904/2010  was  carried  out  in  2017, 
covering  the  period  from  the  entry  into  force  of  the  Regulation  until  mid-2017.  That 
assessment covered all the EU Member States, including Croatia. 

Therefore,  the  current  evaluation  is  not  a  fully-fledged  evaluation  of  the  administrative 
cooperation instruments laid  down in Regulation 904/2010 but  it is rather focussing on 
how the Regulation is applied in relation to the specific case of e-commerce VAT fraud, 
building on the general findings of a previous extensive evaluation.  

In particular, this evaluation examines to which extent Regulation (EU) 904/2010 met the 
overall  objectives  of  contributing  to  a  closer  cooperation  between  Member  States,  of 
avoiding  budget  losses,  of  fighting  VAT  fraud  and  of  preserving  the  principles  of  fair 
taxation, when considering e-commerce.  

The  result  of  the  evaluation  is  feeding  into  the proposal to  amend  the  Regulation  (EU) 
904/2010 in order to give a substantial contribution to the fight against e-commerce VAT 
fraud. The aim is to learn about the administrative cooperation tools in use based on the 
application of the Regulation (EU) 904/2010 and to check whether changes or even new 
cooperation tools are needed.  

3.  BACKGROUND TO THE INITIATIVE 

Administrative cooperation in the field of VAT has been developing over time in order to 
better  manage  and  control  VAT  in  relation  to  the  intra-EU  B2B  transactions  and  to 
ensure a level playing field for businesses. 

Two main objectives were pursued with the introduction of Regulation (EU) 904/2010: 

 
 

to contribute to a closer cooperation between Member States; and 
to  avoid  budget  losses,  to  fight  VAT  fraud  and  to  preserve  the  principle  of  fair 
taxation. 

69 

 
Figure 14: Regulation (EU) 904/2010: intervention logic 

Regulation  (EU)  904/2010  currently  in  force  lays  down  rule  for  the  exchange  of 
information between Member States tax authorities. The exchange of information can be 
on  request,  spontaneous  (when  a  Member  State  informs  another  Member  State  of  a 
possible  breach  of  the  VAT  legislation  in  that  Member  State).  A  particular  kind  of 
spontaneous  exchange  of  information  is  the  automatic  exchange  (Member  States 
periodically exchange a predefined set of data in specific fields). Furthermore, Member 
States'  tax  authorities  can  have  automated  access  to  each  other  databases  on  intra-EU 
B2B  supplies  (through  an  electronic  system  called  VIES),  carry  out  simultaneous 
controls  and  permit  the  presence  of  tax  auditors  from  another  Member  State  in 
administrative  offices  and  during  administrative  enquiries.  Finally,  Regulation  (EU) 
904/2010 also set up a network for a multilateral exchange of early warning information 
to prevent VAT fraud, called Eurofisc. 

All  the  above-mentioned  tools,  allow  tax  authorities  to  cooperate  by  collecting  and 
exchanging  sets  of  records  and  information  originating  from  the  businesses  directly 
involved  in  the  transaction  chain.  These  sets  of  records  and  information  are  at  the 
disposal of tax authorities or are easily accessible to them. However, in the cross-border 
B2C  online  supplies,  the  relevant  information  may  not  be  directly  available  to  tax 
authorities151.  Data  about  the  transactions  may,  for  example,  be  stored  in  another 
jurisdiction.  Tax  administrations  often  need  access  to  data  held  by  online  platforms, 
payment  service  providers  and  other  intermediaries,  in  order  to  identify  any  non-
compliance.  This  presents  legal  and  practical  challenges  depending  on  how  and  where 
data is held. Therefore, the "traditional" way tax administrations cooperate may need  to 
be modernised. 

151 Because, under the VAT rules, the final consumer cannot offset the input VAT and, thus, does not have 
to keep any records of the purchase. 

70 

Administrative cooperation in VAT: intervention logicCommissionMember StatesIMPACTACTIVITIESOUTPUTSOUTCOMESExchange of information on requestTrans-European IT systems set-upSpontaneous exchange of informationAutomatic exchange of informationVIESMultilateral controls (MLCs)Presence in administrative officesJoint auditsEurofiscMessages exchangedLists of alerts & risky taxpayersData transmitted & storedMINI ONE STOP SHOP operations (MOSS)Tax returns & payments processedMLCs & missions performedVIES & other IT systemsFair taxation / Level playing field$$VAT collectedInvestigationsTax decisions issuedTax audits€ € € € € € VAT GAP closingEUCloser cooperationMOSS services 
 
 
                                                            
The  comprehensive  evaluation  carried  out  in  2017152  showed  that  Regulation  (EU) 
904/2010  suits the needs  of the Member States and is coherent  with  other EU policies, 
existing  or  under  implementation.  The  high  level  of  cooperation  demonstrates  a  good 
knowledge  and  application  of  this  Regulation  and  shows  its  level  of  effectiveness  and 
efficiency.  

Overall, the Member States expressed a positive view regarding the legal and operational 
framework referring to Regulation (EU) No 904/2010. The vast majority considered that 
it  helped  improving  administrative  cooperation.  Exchanges  of  information  on  request, 
automated  access  to  information,  Eurofisc  and  multilateral  controls  were  considered  as 
the Regulation’s most effective instruments. 

However,  Member  States  should  still  work  at  national  and  EU  levels  to  improve  its 
functioning.  For  instance,  that  evaluation  showed  that  new  administrative  cooperation 
instruments are needed by the Member States. The 2017 evaluation concluded that there 
is  certainly room to  further develop automatic and automated exchange of information. 
The categories of information that Member States considered as the most relevant were 
car  registration  information,  data  relevant  for  controlling  e-commerce  transactions  and 
payment data held by financial institutions153.   

E-commerce was not considered as a separate area in the previous evaluation. Therefore, 
the current evaluation needs to assess whether the conclusions from the 2017 evaluation 
apply also to the VAT fraud in the field of e-commerce and indicate any provisions that 
may need to be revised or supplemented. 

3.1.Application of the regulation 

Regulation (EU) No 904/2010 only lays down the legal framework for tax authorities to 
cooperate  for  the  fight  of  VAT  fraud.  The  practical  application  of  these  tools  is  a 
responsibility  of  the  Member  States,  and  the  success  of  the  administrative  cooperation 
depends  on  the  way  Member  States'  tax  authorities  commit  and  make  use  of  the 
administrative cooperation tools. 

Overall,  the  Member  States  expressed  a  positive  view  on  the  application  of  the  tools 
provided  by  Regulation  (EU)  No  904/2010,  in  particular  regarding  the  exchanges  of 
information  on  request,  automated  access  to  information,  Eurofisc  and  multilateral 
controls. 

However,  over  the  last  years,  e-commerce  volumes  as  well  as  cross-border  sales 
increased  at  high  rates.  Despite  the  individual  efforts  of  some  of  the  Member  States, 
VAT fraud in cross-border B2C e-commerce has become a true challenge.  

In particular, according to a TAXUD survey launched in 2016 with tax authorities, only 
five  Member  States  reported  to  have  received  spontaneous  information  on  e-commerce 
VAT  fraud  from  another  tax  authority  under  Regulation  (EU)  No.  904/2010. 
Furthermore, half of the respondent Member States to the survey reported difficulties in 
receiving information on request from other Member States on e-commerce VAT fraud.  

152 SWD(2017) 428 final and COM(2017) 706 final - Amended proposal for a COUNCIL REGULATION 
amending  Regulation  (EU)  No904/2010  as  regards  measures  to  strengthen  administrative  cooperation  in 
the field of value added tax, annex 3.  
153 SWD(2017) 428 final, p. 142. 

71 

 
                                                            
The Commission launched in June 2017 an expert group called e-commerce sub-group of 
the  EU  VAT  forum154,  composed  of  Member  States`  tax  authorities  and  businesses 
representatives in order to provide for input in this area. The consultation showed that the 
main problem is in the lack of third party data (and in particular payment data) available 
to tax authorities and - thus - in the reduced chances of using administrative cooperation.  

4.  EVALUATION QUESTIONS AND METHOD 

The evidence needed for the current evaluation made use of what collected through the 
comprehensive  evaluation  completed  in  2017.  In  addition,  TAXUD  gathered  evidence 
via a targeted consultation, a public consultation and desk research. 

As  the  object  of  the  evaluation  remains  Regulation  (EU)  904/2010,  the  evaluation 
questions were mostly similar to those used in the comprehensive evaluation completed 
in 2017. However, the judgement criteria and the indicators are more specific, in order to 
focus on e-commerce. 

4.1.Evaluation questions 

The  evaluation  is  based  on  the  following  questions  (all  of  them  focussing  on  e-
commerce): 

1. 

2. 

3. 

4. 

5. 

6. 

7. 

To  what  extent  has  Regulation  (EU)  904/2010  contributed  to  a  closer 
cooperation between Member States? (effectiveness) 
To  what  extent  has  Regulation  (EU)  904/2010  contributed  to  detect  e-
commerce VAT fraud ? (effectiveness) 
To what extent has Regulation (EU) 904/2010 facilitated cooperation between 
Member  States  by  making  it  smoother,  faster  and  less  burdensome? 
(efficiency) 
To  what  extent  the  resources  spent  on  the  administrative  cooperation 
generated results in the fight against e-commerce VAT fraud? (efficiency) 
To  what  extent  the  provisions  of  Regulation  (EU)  904/2010  continue  to 
correspond  to  the  needs  of  the  Member  States  and  other  stakeholders  in 
respect to e-commerce? (relevance) 
To  what  extent  are  the  provisions  of  Regulation  (EU)  904/2010  in  line with 
other policies and priorities of the EU in respect to e-commerce? (coherence) 
Could  Member  States  have  achieved  similar  results  without  acting  at  EU 
level? (EU added value) 

4.2.Evaluation materials 

Views  and  evidence  were  collected  by  means  of  a  questionnaire  for  a  targeted 
consultation (addressed to tax authorities and businesses representatives participating in 
the  Commission  expert  group  "e-commerce  sub-group  of  the  EU  VAT  forum")  and  a 
questionnaire for a public consultation. The Commission services also had meetings with 
relevant experts and authorities and performed desk research. 

154 Commission Decision 2012/C 198/05 of 3 July 2012 setting up the EU VAT Forum, OJ C198 of 6 July 
2012; See: http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32012D0706%2802%29  

72 

 
 
 
                                                            
 
4.2.1.  Questionnaire to tax authorities155  

The  questionnaire  addressed  to  Member  States'  tax  authorities  aims  at  collecting  views 
and evidence on all the evaluation criteria with a focus on e-commerce. On top of that, 
tax  authorities  were  asked  about  the  difficulties  encountered  in  the  application  of 
Regulation  (EU)  904/2010  and  about  the  effectiveness  of  each  of  the  administrative 
cooperation tools provided by the Regulation.  

The  tax  authorities’  consultation  period  was  from  09/03/2018  to  13/04/2018  but  was 
extended of additional two weeks. 

4.2.2.  Questionnaire to businesses156  

The  questionnaire  for  businesses  was  made  available  through  EU  Survey  and  was 
addressed to payment providers and internet platforms. The aim of the questionnaire was, 
among  others,  to  collect  evidence  and  views  from  businesses  on  the  compliance  costs 
related to the fight against e-commerce VAT fraud. Some of the questions addressed the 
specific  administrative  burden  in  relation  to  the  reporting  requirements  that  businesses 
are must provide to tax administrations (notably payment data). 

The businesses consultation period was between 12/03/2018 and 13/04/2018. However, 
most of the answers were received after the deadline. 

4.2.3.  Open-public consultation 

The  public  consultation  was  designed  with  the  purpose  of  collecting  a  maximum  of 
evidence and views on the application of the evaluation criteria (relevance, effectiveness, 
efficiency, and EU added value). However, the public may have little knowledge of the 
administrative  cooperation  rules  and  mechanisms  between  competent  authorities  of  the 
Member  States.  The  public  consultation  was  also  made  available  through  the  SMEs 
portal. 

The public consultation period was from 27/02/2018 to 25/04/2018. 

4.2.4.  Desk research 

In order to collect evidence about the evaluation criteria, a number of papers, reports or 
other documents were consulted. Among those documents, the most relevant are: 

1.  SWD(2017)  428  final  –  the  annex 3  –  Evaluation  of  Regulation  (EU) 904/2010 

and 

2.  the  answers  form  21  Member  States  on  the  2016  questionnaire  concerning  the 
administrative cooperation on VAT (AntiVATFraudEUMSE-commerce102016 – 
see 10.8). 

4.3.Evaluation process and matrix 

The  evaluation  process  is  based  on  analysing  the  compliance  of  the  current 
administrative cooperation rules with the five criteria, according to the Better Regulation 
Guidelines,  taking  into  account  the  specificities  of  the  subject  and  the  limitation 
described hereunder.  

155 Ref. Ares(2018)1325223 - 09/03/2018 and follow up Ref. Ares(2018)1962904 - 12/04/2018 
156 Ref. Ares(2018)1354337 - 12/03/2018 

73 

 
 
                                                            
The planning of the evaluation has been integrated into the planning of the initiative on 
the  collection  and  exchange  of  VAT-relevant  payment  data  for  e-commerce  activities. 
The activities related to the component on evaluation, respectively to the component on 
impact  assessment,  are  performed  in  conjunction,  as  a  back-to-back  exercise.  The 
findings of the evaluation feed into the impact assessment, respecting the “evaluate first” 
principle.  

The evaluation matrix presents the judgement criteria for each of the evaluation questions 
as well as the indicators used to assess the current situation and the data sources used.  

74 

 
Table 7: Evaluation matrix 

Evaluation question 

Judgement criteria 

Indicators 

Data source 

1.  To  what  extent  has  Regulation  (EU) 
904/2010 
closer 
cooperation  between  Member  States? 
(effectiveness) 

contributed 

to 

a 

1.a.  Development  of  the  various  forms  of 
administrative 
between 
Member  States  on  e-commerce  VAT 
matters 

cooperation 

1.a.1.  Number  of  requests  for  information 
on  e-commerce  VAT  fraud  cases  sent  / 
received by EU MSs. 

Questionnaire MSs 27 and 28 

Evaluation 2017 

1.b.  Difficulties  in  applying  the  tools  of 
administrative  cooperation 
the  e-
commerce sector 

in 

1.b.1.  Proportion  of  MSs 
difficulties 

reporting 

Questionnaire MSs 29 

2.  To  what  extent  has  Regulation  (EU) 
904/2010 
e-
detect 
contributed 
commerce VAT fraud? (effectiveness) 

to 

2.a. Positive stakeholder assessment of the 
administrative cooperation tools in relation 
to  the  detection  and/or  reduction  of  VAT 
fraud in e-commerce 

2.a.1.  Perceived  effectiveness  of  the  tools 
for  administrative  cooperation  on  e-
commerce VAT fraud 

Questionnaire MSs 25a) 

Questionnaire MSs 25b) 

2.a.2. VAT gap related to e-commerce 

2.b.  The  tools  provided  by  Regulation 
(EU) 904/2010 are considered adequate to 
fight VAT fraud 

2.b.1.  Perception  of  stakeholders  on  the 
adequacy  of 
fight  e-
the  means 
commerce VAT fraud 

to 

2.c. The tools provided by Regulation (EU) 
904/2010 are considered sufficient to fight 
VAT fraud 

3.a.  Stakeholder’s  assessment  of 
administrative  cooperation 
burden in respect of e-commerce. 

  the 
speed  and 

3.  To  what  extent  the  Regulation  (EU) 
904/2010  made 
administrative 
cooperation  between  Member  States 
smoother,  faster  and  less  burdensome? 
(efficiency) 

the 

2.c.1. 
considering the tools as sufficient 

Proportion 

of 

stakeholders 

3.a.1.  Perceived  administrative  burden 
associated 
in 
administrative  cooperation  by  Member 
States in respect to e-commerce 

participation 

with 

75 

Questionnaire MSs 26 

Questionnaire  public  consultation  33a), 
33b) 

Questionnaire public consultation 33a) 

Questionnaire public consultation 33b) 

Questionnaire MSs 31 

Evaluation 2017 

Questionnaire MSs 31 

 
 
 
 
 
 
Evaluation question 

Judgement criteria 

Indicators 

Data source 

To  what  extent 

4. 
the  resources 
spent  on  the  administrative  cooperation 
generated  results  in  the  fight  against  e-
commerce VAT fraud? (efficiency) 

4.a. Benefits of administrative cooperation 
in the fight against e-commerce VAT fraud 
overweight costs  

4.a.1.  Reported  ratio  between  costs  and 
benefits  resulting  from 
tools  for 
administrative  cooperation  is  respect  of  e-
commerce 

the 

5. 
To  what  extent  the  provisions  of 
Regulation  (EU)  904/2010  continue  to 
correspond  to  the  needs  of  the  Member 
States  and  other  stakeholders  in  respect  to 
e-commerce? (relevance) 

5.a.  The  e-commerce  VAT  fraud  problem 
determines  the  tax  authorities  to  ask  for 
administrative  cooperation  with  other 
Member States 

5.a.1.  Number  of  requests  for  information 
on e-commerce VAT fraud cases generated 
by EU MSs. 

Questionnaire MSs 30 

Questionnaire public consultation 34 

Questionnaire MSs 27 

5.a.2.  Assessment  of 
information used for detection 

the  sources  of 

Questionnaire public consultation 36 

5.b.  The  size  of  the  VAT  fraud  in  e-
commerce is significant 

5.b.1.  Number  of  Member  States  which 
have  dedicated  strategies  /  compliance 
programs 

5.b.2  Cases  of  cross-border  e-commerce 
VAT fraud 

5.b.2.  Number  of  Member  States  which 
liabilities 
supplementary 
reported 
following 
tax  audits  on  e-commerce 
activities 

tax 

To what extent are the provisions 
6. 
of  Regulation  (EU)  904/2010  in  line  with 
other  policies  and  priorities  of  the  EU  in 
respect to e-commerce? (coherence) 

6.a. Synergies with other EU initiatives  

6.a.1. Qualitative assessment of the level of 
of 
convergence 
Regulation 
other 
Commission's strategies and policies 

of 
the 
904/2010 

objectives 

with 

Questionnaire MSs 10 

Questionnaire MSs 4 

Questionnaire MSs 31 

Desk research 

6.b.  Identified  areas  that  require  to  amend 
administrative cooperation rules in relation 
to e-commerce 

6.b.1.  Number 
of 
tools/changes needed  

identified 

new 

Questionnaire MSs 31, 32 

76 

 
 
 
Evaluation question 

Judgement criteria 

Indicators 

Data source 

7. 
Could  Member  States  have 
achieved  similar  results  at  similar  costs 
without  acting  at  EU  level?  (EU  added 
value) 

7.a.  Joint  EU  approach  in  administrative 
cooperation  in  VAT  has  advantages  over 
other  forms  of  national  and  international 
forms of tax cooperation 

7.a.1.  Proportion  of  stakeholders  having  a 
positive  perception  of  the  advantages  of  a 
joint EU approach 

Questionnaire MSs 25d) 

Questionnaire public consultation 33c) 

7.b. Stakeholders perceive the e-commerce 
VAT  fraud  as  a  common  cross-border 
problem rather than as a national one.  

7.c.  The  provisions  of  Regulation  (EU) 
904/2010  on  cross-border  administrative 
cooperation can be considered as providing 
EU  solution  to  EU  problems  in  terms  of  
fighting e-commerce VAT fraud 

7.b.1. 
considering 
national 

Proportion 

of 
the  problem 

stakeholders 
is  not  only 

Questionnaire public consultation 28g) 

7.c.1.  Qualitative  assessment  of  the  tools 
that are appreciated by the MSs. 

Questionnaire MSs 26 
Questionnaire public consultation 36 
Evaluation 2017 

77 

 
 
 
 
 
 
 
4.4.Limitations and robustness of findings 

The  evaluation  of  the  existing  administrative  cooperation  tools  in  relation  to  the  e-
commerce VAT fraud needs to rely at a large extent on the findings of the comprehensive 
2017  evaluation  of  Regulation  (EU)  904/2010.  The  current 
initiative  mainly 
complemented  and  reconfirmed  the  2017  findings  by  collecting  data  and  views  form  a 
wide  range  of  stakeholders.  While  the  Member  States  participation  to  the  targeted 
consultation  was  very  positive  (23  respondents)  this  was  not  the  case  for  the  other 
stakeholders,  whom  participation  was  very  low.  This  could  be  explained  by  the 
technicality of the subject at stake. 

There were essentially two types of limitations affecting this evaluation: 

1.  Duration and resources. The evaluation has been performed in the framework of 
a  back-to-back  exercise  accompanying  the  new  Commission  initiative  on 
collecting  and  exchanging  payment  data  for  fighting  e-commerce  VAT  fraud. 
Because of the nature of the back-to-back exercise, the volume of work available 
had  to  be  distributed  between  the  evaluation  and  the  impact  assessment  of  the 
different policy options. Furthermore, the short timeline to perform the evaluation 
did not allow a study with an external consultant.  

2.  Availability  of  data.  Data  collected  through  the  open  public  and  the  targeted 
consultation  was  limited.  In  particular  the  respondents  did  not  provide  precise 
data on: 

a.  e-commerce VAT gap estimations; 
b.  the  number  of  cases  of  administrative  cooperation  in  the  field  of  e-

commerce; 

c.  the costs of the administrative cooperation for Member States; 
d.  the  supplementary  VAT  assessed  as  a  result  of  the  administrative 

cooperation activities. 

For the purpose of this initiative, “e-commerce” refers to cross-border supplies of goods 
or services to final consumers. However, some of the tax authorities indicated that they 
do not have specific statistics because they miss a clear definition of "e-commerce". This 
is  a  possible  explanation  for  part  of  the  missing  data,  most  notably  in  the  targeted 
consultation. 

However, even though quantification data are general missing, it was possible to collect 
many  relevant  qualitative  opinions,  including  on  the  evaluation  of  the  Regulation  (EU) 
904/2010 with respect to e-commerce VAT fraud. Unfortunately, the SMEs participation 
was quite low. 

5.  ANALYSIS OF THE ANSWERS TO THE EVALUATION QUESTIONS 

5.1.Effectiveness 

Q1.  To  what  extent  has  Regulation  (EU)  904/2010  contributed  to  a  closer 
cooperation between Member States? 
The Regulation (EU) 904/2010 entered into force in 2012. The exchange of information 
is  significant,  both  in  terms  of  volume  and  in  terms  of  impact  on  cross-border  VAT 
fraud.  The  exchange  of  information  allows  the  tax  authorities  to  detect  un-reported  or 
under-reported transactions in the e-commerce sector.  

78 

 
 
 
 
 
1.a.  Development  of  the  various  forms  of  exchange  of  information  between  Member 
States on e-commerce VAT matters 
According  to  the  2017  evaluation,  the  use  of  the  various  tools  for  exchange  of 
information  slightly  increased:  in  particular,  the  total  number  of  exchanges  of 
information on request increased from 46.000 in 2012 to 49.000 in 2016. However, the 
decrease  of  the  number  of  late  replies  seems  to  be  more  significant.  Overall,  the 
proportion of requests not answered within three months, decreased from 43 % in 2012 to 
33  %  in  2016.  These  trends  are  likely  to  apply  also  in  the  specific  case  of  the 
administrative cooperation concerning the cross-border VAT fraud on e-commerce. 

In  the  framework  of  the  current  back-to-back  exercise,  23  out  of  28  Member  States 
answered the targeted consultation between March and April 2018. Based on the answers 
received,  only  9  tax  authorities  confirmed  that  they  have  sent  at  least  one  request  for 
information concerning e-commerce VAT fraud in 2017. Other 9 tax authorities were not 
able to  provide any  figure while 5 of them did  not  send  any request on e-commerce  in 
2017. An overall number of 319 requests for information concerning e-commerce VAT 
fraud  was  sent  in  2017.  Almost  half  of  this  number  originated  from  France  only.  It 
appears that, most of the Member States have no systems in place to monitor the number 
of exchange in the field of e-commerce. However, the number of exchanges in this field 
(319) is still very small when compared to the total number of requests for information 
processed annually by the Member States in the field of VAT (more than 45.000).  
Member  States  received  a  total  number  of  124  requests  for  information  referring  to  e-
commerce  VAT  fraud  in  2017.The  highest  number  of  requests  (30)  was  received  by 
Luxembourg.  
Based  on  the  2016  survey  concerning  the  administrative  cooperation  on  VAT157,  5 
Member  States 
they  received 
spontaneous  information  from  another  tax  administration  on  e-commerce  cases  and  8 
Member State received information on request. Unfortunately, the response rate for this 
question was quite low, with only 10 answers received. 

that  under  Regulation  (EU)  904/2010 

indicated 

Consultation  with  the  Member  States  in  the  e-commerce  sub-group  of  the  VAT  forum 
showed  that  VIES  cannot  be  used  systematically  in  the  field  of  e-commerce  because  it 
only contains information on intra-EU B2B supplies. In 2017 the Member States set up a 
new  Eurofisc  working  field  dealing  with  e-commerce  (WF5)  but  the  exchange  of 
information  is  still  very  limited  (an  indication  of  the  number  of  exchange  will  be 
indicated in the next Eurofisc report which is - anyway - a confidential document only for 
the use of Member States tax authorities). 

Finally,  based  on  the  data  collected  through  the  public  consultation  and  the  targeted 
consultation,  it  is  not  possible  to  conclude  whether  the  use  of  the  administrative 
cooperation tools to fight e-commerce VAT fraud increased since the entry into force of 
Regulation  (EU)  904/2010.  The  limited  information  that  the  Commission  was  able  to 
collect suggests a low level of cooperation on this specific matter. 

1.b.  Difficulties  in  applying  the  tools  of  administrative  cooperation  in  the  e-commerce 
sector 
According to the 2017 evaluation, Member States have an overall positive opinion of the 
administrative  cooperation  framework  laid  down  by  Regulation  (EU)  904/2010.  In 
particular,  the  stable  trend  since  2013  in  the  number  of  requests  for  information, 

157 AntiVATFraudEUMSE-commerce102016 

79 

 
 
 
 
                                                            
spontaneous and automatic exchanges shows a good appropriation of these tools by the 
Member States. Member States indicated that the most efficient tools are the automated 
access  to  information  (VIES),  Eurofisc  and  multilateral  controls.  However,  Member 
States mentioned drawbacks, most notably in respect of the large number of late replies, 
the missing accuracy of data in VIES and the lack of commitment from some of the tax 
authorities. 

The  targeted  consultation  launched  under  the  current  initiative  also  revealed  other 
shortcomings:  
(i) 

the identification of online businesses is difficult (do not have a physical address, 
do not always show a tax number); 
in the e-commerce, the domain of the online business is often located in another 
country  and  the  relevant  information  about  transactions  is  stored  in  non-EU 
countries; 
there  are  extremely  limited  enforcement  tools  in  respect  of  non-compliant 
businesses selling online and which are located outside EU; 
tax  officials  need  more  training  to  be  able  to  effectively  use  the  administrative 
cooperation tools.  

(ii) 

(iii) 

(iv) 

There is no indication of how frequently these difficulties occur. However, less than half 
of  the  respondent  tax  authorities  (11)  mentioned  some  difficulty  in  answering  the 
requests for information on e-commerce cases while 12 respondents did not answered or 
did not indicated any difficulty.  

Furthermore,  several  respondents  in  the  public  consultation  were  of  the  opinion  that 
Member  States  do  not  have  the  resources  and  the  tools  for  fighting  e-commerce  VAT 
fraud  and  do  not  cooperate  enough.  The  public  was  also  of  the  opinion  that  tax 
authorities face a heavy workload generated by the high number e-commerce transactions 
that require a huge effort in terms of investigations. This could result in a lack of interest 
in cooperating to fight e-commerce VAT fraud. 

The consultation showed important difficulties in applying effectively the administrative 
cooperation tools in the field of e-commerce. This is partly due to the lack of access to 
relevant information and to the need of increasing the commitment of Member States to 
use administrative cooperation tools.  

Q2. To what extent has Regulation (EU) 904/2010 contributed to detect e-commerce 
VAT fraud? 

2.a.  Perception  of  stakeholders  on  the  effectiveness  of  the  administrative  cooperation 
tools in relation to the detection and/or reduction of e-commerce VAT fraud 
The  majority  of  the  respondent 
tax  authorities 
the  recent 
targeted  consultation  (13  out  of 

Figure 15: Tax authorities: perceived effectiveness 
of the administrative cooperation tools 

to 

80 

 
 
 
 
 
 
 
 
25
20
15
10
5
0

23  answers)  considered  that  the 
administrative  cooperation  tools 
laid  down  in  Regulation  (EU) 
904/2010  meet  the  scope  of 
fighting e-commerce VAT fraud 
and  contribute  to  the  reduction 
of  the  e-commerce  VAT  fraud. 
However, 7 respondents did not 
share 
this  opinion,  probably 
any 
because 
quantitative  evidence  of  e-
commerce VAT fraud and of the 
the  administrative 
impact  of 
cooperation on it. 

they 

lack 

1 
4 
2 
3 

12 

1 
6 
2 
1 

11 

2 

1 
a) the administrative 
cooperation tools laid down in 
Regulation (EU) 904/2010 
meet the scope of fighting 
against “e-commerce VAT 
fraud” 

b) the application of
Regulation (EU) 904/2010
contributes to the reduction of
the e-commerce VAT fraud

Absolutely true
Neither tue or false
Somehow not true

Mostly True
I don't know
Not true

Member States showed similar opinions when questioned about the most effective tools 
for fighting e-commerce VAT fraud. The tools considered as most effective are: (1) the 
exchange of information on request - 18 positive opinions); (2) the spontaneous exchange 
of information - 18 positive opinions; (3) the multilateral controls - 17 positive opinions 
and (4) the Eurofisc network (19 positive opinions). 

Figure  16:  Positive  and  negative  perception  on  the  effectiveness  of  different 
administrative cooperation tools 

Joint audits

Eurofisc network

Presence in administrative offices

Multilateral controls

5 

-1 

-1 

-1 

-1 

VIES

-4 

Automatic exchange of information

-3 

-2 

Spontaneous exchange of information

Exchange of information on request

-1 

0

-5

3 

12 

10 

12 

9 

9 

12 

14 

5

10

7 

5 

5 

5 

2 

6 

15

4 

20

Mostly true

Absolutely true

Somehow not true

Not true

Based  on  an  external  study,  the  Commission  estimated  that  EU  tax  administrations  are 
missing around EUR 5 billion of VAT revenue when consumers buy goods online from 
another country158. There are no estimates of the VAT gap caused by cross-border online 
services. Presumably, in the absence of the administrative cooperation tools provided by 
Regulation (EU) 904/2010, the level of the VAT gap could have been larger but there is 
no evidence to demonstrate this. 

158 Commission SWD(2016)379 final, point 3 p. 13. 

81 

 
 
 
 
 
                                                            
2.b. Perception of stakeholders on the adequacy of the means to fight e-commerce VAT 
fraud 
In  the  2018  public  consultation,  only  12  respondents  indicated  that  the  EU  Member 
States  have  the  adequate  tools  to  fight  e-commerce  VAT  fraud  while  32  respondents 
indicated  the  opposite  because  the  shortage  of  resources  and  "legal  powers"  and  not 
enough cooperation between tax authorities for the fight against e-commerce VAT fraud. 

2.c. Proportion of stakeholders considering the tools as sufficient 
In the 2018-targeted consultation, the majority of tax authorities indicated that the current 
Regulation  allows  for  a  fair  level  of  administrative  cooperation,  even  though  some  of 
them recognised  that there is  a need of supplementary tools, including the exchange of 
payment data. 
However,  in  the  public  consultation  only  7  respondents  replied  to  believe  that  the 
instruments at the disposal of the EU Member States are sufficient to fight e-commerce 
VAT  fraud.  This  number  even  decreases  to  only  4  if  we  count  only  those  respondents 
which declare having a good or partial familiarity with the subject. On the opposite side, 
36 respondents believe that the tax authorities do not have sufficient instruments to fight 
VAT fraud on online sales. 

As  a  preliminary  conclusion,  it  appears  that  the  effectiveness  of  Regulation  (EU) 
904/2010  in  respect  to  e-commerce  VAT  fraud  is  limited  compared  to  other  types  of 
fraud. Member States indicated that the effectiveness of  the administrative cooperation 
tools  are  affected  by  different  shortcomings  such  as  problems  to  identify  the  online 
businesses,  the  volume  of  resources  needed  for  an  effective  cooperation  (staff  and  IT) 
and  the  lack  of  incentives  to  protect  the  tax  base  of  other  Members  States  (more 
spontaneous exchange of information is needed).  

5.2. 

Efficiency 

Q3. To what extent Regulation (EU) 904/2010 made the administrative cooperation 
between Member States smoother, faster and less burdensome?  

3.a.  Stakeholder’s  assessment  of  the  administrative  cooperation  speed  and  burden  in 
respect of e-commerce 
The  2017  evaluation  determined  that  most  significant  burdens  are  linked  to    human 
resources  to  deal  with  requests  for  administrative  enquiries,  reply  to  requests  for 
feedback  and  participate  in  multilateral  controls.  However,  those  administrative 
cooperation tools seem to be very effective. 

The  2017  evaluation  indicates  that,  under  Regulation  (EU)  904/2010,  the  proportion  of 
requests for information not answered within three months, decreased from 43 % in 2012 
to 33 % in 2016. Despite this progress, there is still a considerable space for improving 
the  speed  of  answering  the  requests  for  information  from  other  Member  States.  In  the 
case  of  e-commerce,  the  speed  may  be  particularly  affected  by  the  low  capacity  of  tax 
authorities  to  retrieve  information  on  on-line  sales,  by  the  high  volume  of  transactions 
and by the very labour intensive approach of the exchange of information based on case-
by-case requests from other Member States. 

As  such,  the  logical  solution  would  be  to  improve  as  much  as  possible  the  work 
productivity by investing in more resources in order to make a better use of these tools.  

82 

 
 
 
 
 
In 2018, 10 tax authorities reiterated problems due to late replies and limited cooperative 
approach from other Member States. This may lead, indirectly, to the conclusion that the 
framework  laid  down  by  Regulation  (EU)  904/2010  does  not  imply  difficulties  for  the 
use  of  administrative  cooperation  tools.  The  difficulties  encountered  by  the  tax 
authorities mostly result from objective external causes, as described above. 

Finally, the targeted consultation did not lead to the collection of relevant statistical data 
concerning the ease of exchanging information. The number of cases in which Member 
States use administrative cooperation in respect of e-commerce VAT fraud remains low 
and  mostly  unreported.  Therefore,  it  is  not  possible  to  draw  a  clear  conclusion  on  the 
burden of the administrative cooperation activities.     

Q.4.  To  what  extent  the  resources  spent  on  the  administrative  cooperation 
generated results in the fight against e-commerce VAT fraud? 

4.a.  Benefits  of  administrative  cooperation  in  the  fight  against  e-commerce  VAT  fraud 
overweight costs 
The majority of the respondents to the public consultation (28 answers) was not satisfied 
with  the  efficiency  of  the  fight  against  e-commerce  VAT  fraud  (when  comparing  the 
results  obtained  and  the  resources  invested).  Only  10  respondents  considered  the  fight 
against e-commerce VAT fraud as efficient. 

The  costs  and  benefits  of  the  administrative  cooperation  tools  in  fighting  e-commerce 
VAT fraud cannot be assessed based on factual evidence. Member States lack monitoring 
tools to measure the extent to which administrative cooperation has contributed to assess 
additional VAT. Little information referring to all type of VAT fraud (not specifically to 
e-commerce)  may  be  drawn  from  the  2017  evaluation.  That  evaluation  showed  that 
Multilateral  controls  (MLC)  led  to  an  average  result  of  EUR  18,5  million  additional 
liabilities (VAT and direct taxes). 
However,  as  per  the  comprehensive  2017  evaluation,  25  out  of  27  Member  States 
strongly  agreed  or  agreed  that  costs  associated  with  participating  in  administrative 
cooperation are proportionate to the benefits. The same perception results from the 2018 
targeted  consultation.  Most  of  the  tax  authorities  were  not  able  to  provide  data  or  to 
estimate the level of resources involved. However, none of them was of the opinion that 
the resources involved in the administrative cooperation overcomes the benefits while 5 
tax  authorities  considered  that  the  administrative  costs  due  to  the  use  of  administrative 
cooperation under Regulation (EU) 904/2010 to fight the “e-commerce VAT fraud”, are 
low or fair compared to the higher VAT revenues. The 2017 evaluation also concluded 
that the highest costs for tax authorities are associated with requests for information and 
administrative enquiries, multilateral controls and Eurofisc.  

Therefore,  despite  the  lack  of  factual  data,  tax  authorities  estimate  that  the  benefits  of 
administrative cooperation are higher than or proportional to the costs. 

5.3.Relevance 

Q5.  To  what  extent  the  provisions  of  Regulation  (EU)  904/2010  continue  to 
correspond to the needs of the Member States and other stakeholders in respect to 
e-commerce? 

83 

 
 
 
 
 
Figure  17:  Tax  authorities:  perception  on 
the administrative cooperation tools 

c) the administrative cooperation tools laid 
down in Regulation (EU) 904/2010 allow 
Member States to cooperate in order to fight 
against e-commerce VAT fraud 

of 

the 

relevance 

The 
current 
Regulation  (EU)  904/2010  in  fighting 
e-commerce VAT fraud is  assessed by 
checking  the  needs  of  the  member 
States’  tax  authorities  and  on  the 
effectiveness  of 
the  administrative 
cooperation tools. 

0 

0 

1 

2 

6 

14 

Absolutly true

Mostly true

Neither true or false

Somehow not true

Not true

I don't know

The targeted consultation showed that 
Member States have adequate tools in 
the Regulation 904/2010/EU but there is 
room to use these tools more intensively 
and to develop new ones. 
In addition, the 2017 evaluation showed 
that the Member States generally 
recognise that the administrative 
cooperation instruments are relevant. 
Requests for information, Eurofisc, 
MLCs and administrative enquiries score 
particularly high. 

5.a. The cross-border VAT fraud problem in e-commerce determines the tax authorities 
to ask for administrative cooperation with other Member States 
The  2018  consultation  showed  that  tax  authorities  have  sent  only  a  small  number  of 
requests  for  information  (319  cases).  However,  due  to  lack  of  statistical  system  of  the 
Member States, this figure results from the information received from only 14 Member 
States.  
Furthermore, Member States expressed support for administrative cooperation tools such 
as  Eurofisc  and  MLCs.  The  majority  of  Member  States  recognised  that  more  intense 
administrative  cooperation  is  needed  to  fight  e-commerce  VAT  fraud.  The  same 
conclusion  is  supported  by  the  findings  of  the  2017  evaluation  of  the  administrative 
cooperation  as  well  as  by  the  results  of  the  2016  Survey  concerning  the  administrative 
cooperation on VAT. 

Those Member States which developed VAT investigation and compliance strategies in 
the field of e-commerce are all facing an increasing need for data. In order to assess VAT 
liabilities, tax authorities must crosscheck the information referring to online businesses 
established  abroad  with  VAT,  MOSS  and  Customs  information.  When  potential  VAT 
fraud is detected, a request for administrative enquiry is sent to the State of establishment 
of  the  online  business.  In  general,  in  order  to  detect  e-commerce  VAT  fraudsters,  tax 
authorities need access to information such as: 

 

  business  identification:  name  and  address,  tax  identification  number  (and  VAT 
number,  if  existing),  IP  numbers  or  other  information  needed  to  identify 
activities over the internet;  
information  on  transactions  (flow  of  goods/services  and  flow  of  payment), 
including the description of the supply, the date, currency and value of the sales, 
bank account / payment methods, etc.; 
information  on  delivery  channels  (like,  for  example,  the  fulfilment  centres  and 
the carrier transporting the goods). 

 

84 

 
 
 
 
The  consumers  have  no  record  keeping  obligations.  Therefore,  all  the  relevant 
information is held either by the supplier in its country of establishment (different from 
the  one  of  consumption)  or  by  an  intermediary  such  as  payment  service  providers, 
internet platforms, or transport and logistic intermediaries, in cases of goods, which may 
be  also  established  in  another  country.  This  explains  why  the  tax  authorities  need  to 
activate administrative cooperation in order to collect the necessary information to detect 
e-commerce VAT fraud and assess VAT liabilities. 
Both  from  the  side  of  the  Member  States  requesting  for  assistance  and the  ones  giving 
assistance  under  Regulation  (EU)  904/2010,  the  two  main  difficulties  refer  to  (i)  the 
identification of the online businesses and (ii) the access to the relevant information that 
could be not accessible to tax auditors as it may be held in another jurisdiction or by third 
parties. 

Finally, given the low number of requests for information concerning e-commerce, it is 
legitimate to wonder whether the administrative cooperation tools currently in force suit 
tax administrations needs in the field of  e-commerce VAT fraud. Some of the Member 
States and part of the public suggested that, in order to detect e-commerce VAT fraud, 
exchange of massive volume of data, risk analysis and crosscheck processes must be put 
in place. Administrative cooperation granted on a case-by-case basis may not be relevant 
anymore  when  compared  to  the  size  and  dynamics  of  the  e-commerce,  and  its 
effectiveness in terms of VAT gap reduction is marginal. Even though Regulation (EU) 
904/2010  allows  automated  access  to  data  by  electronic  means,  the  specific  tools, 
adapted  to  the  exchange  of  massive  VAT  e-commerce  relevant  data,  are  still  to  be 
developed. 

5.b. The size of the e-commerce VAT fraud is significant 
As  demonstrated  by  both  the  targeted  and  the  public  consultation,  the  size  of  the  VAT 
fraud in the cross-border B2C e-commerce seems to be significant.  

On the tax authorities’ side, only three respondents provided for some partial estimation 
of  the  VAT  loss  but  more  than  half  of  them  developed  strategies  or  plans  to  fight  e-
commerce  VAT  fraud.  At  least  14  tax  authorities  use  internet-monitoring  tools  for 
detection purposes. Up to half of the responding tax authorities were able to indicate the 
number  of  tax  audits  on  e-commerce  in  the  last  three  years  and  the  additional  VAT 
assessed, per Member State, were ranging from modest amounts up to EUR 53 million. 

The  majority  of  the  respondents  to  the  public  consultation  perceived  e-commerce  VAT 
fraud as an important problem. Most of the respondents (48 out of 52) considered that the 
e-commerce  VAT  fraud  is  damaging  revenues,  consumers  and,  finally,  compliant 
businesses. 

The rapid global expansion of e-commerce is also a factor that may contribute to the size 
of  the  e-commerce  VAT  fraud,  thus  supporting  the  relevance  of  the  administrative 
cooperation. 

The 2018-targeted consultation showed that the majority of tax authorities consider that, 
generally, the current regulation allows for a fair level of administrative cooperation. On 
the other hand, 9 respondents among tax authorities indicated that other tools are needed 
to  reinforce  administrative  cooperation,  including  access  to  third  party  data  on  e-
commerce  transactions.  Considering  the  positive  assessment  of  tax  administrations 
regarding  the  effectiveness  of  the  existing  administrative  cooperation  tools,  it  is  likely 
that  Regulation (EU) 904/2010  is still relevant, at least  for certain patterns of VAT the 

85 

 
 
 
 
fraud. The opinion of these tax authorities requiring additional tools, like the automated 
access  to  payment  data,  and  the  opinion  of  those  answering  the  public  consultation 
demonstrates  that  the  rules  of  administrative  cooperation  need  to  be  updated,  to  keep 
pace with the development of e-commerce and new business models in general.  

5.4.Coherence 

Q6.  To  what  extent  are  the  provisions  of  Regulation  (EU)  904/2010  in  line  with 
other policies and priorities of the EU in respect to e-commerce? 

The administrative cooperation in the field of VAT contributes to the proper functioning 
of  the  Internal  Market.  From  this  perspective,  the  administrative  cooperation  is  crucial 
for  supporting  the  free  circulation  of  goods  and  services  and  for  preventing  any 
distortions  arising  from  VAT  fraud.  Moreover,  administrative  cooperation  supports 
contributes  to  the  competitiveness  of  European  businesses  by  ensuring  a  more  level 
playing field. All these arguments prove that administrative cooperation is coherent with 
the objectives and general policies of the internal market.  

6.a. Synergies with other EU initiatives  
In  December  2017,  the  Council  adopted  the  e-commerce  VAT  Directive  that  will  fully 
enter  into  force  in  2021.  The  e-commerce  VAT  Directive  abolishes  distance  sales 
thresholds,  the  VAT  exemption  on  small  consignments  and  introduces  the  One  Stop 
Shop  (OSS)  to  imports.  The  simplifications  introduced  with  the  e-commerce  VAT 
Directive  aim  at  improving  VAT  compliance  by  making  the  VAT  system  easier  to 
comply with. 

However,  tax  authorities  still  need  the  tools to  detect  and  control  the  online  businesses 
that will not comply with VAT rules even under the simplified regimes, or the ones that 
will declare less VAT than what actually due. 

As seen the current Regulation (EU) 904/2010 allows tax authorities to exchange data on 
specific  fraud  cases,  or  to  check  VAT  registration  of  businesses  that  have  intra-EU 
supplies with other businesses (B2B). However, the current Regulation does not provide 
for specific tools to check the identity of cross-border B2C suppliers outside the MOSS 
or  to  automatically  carry  out  any  check  on  the  real  turnover  of  cross-border  online 
businesses. 

The extension of the MOSS and the introduction of the OSS on imports will represent an 
important  opportunity  for  businesses,  bringing  substantive  simplification  for  the 
fulfilment  of  VAT  obligation  on  intra-EU  supplies  and  imports.  At  the  same  time,  it 
requires  proper  tools  (such  as  collection  and  exchange  of  payment  data)  for  tax 
authorities  to  check  the  reality  and  correctness  of  registration  and  tax  declaration  and, 
most of all, control the businesses outside the system to ensure a level playing field.  

In fact, as mentioned before, the 2018-targeted consultation showed that 9 tax authorities 
asked  for  more  administrative  cooperation  tools  to  fight  e-commerce  VAT  fraud.  The 
other  tax  authorities  either  do  not  have  an  opinion,  or  prefer  to  wait  for  the  entry  into 
force  of  the  e-commerce  VAT  Directive  in  order  to  assess  its  relation  with  the 
functioning of the administrative cooperation under Regulation (EU) 904/2010.  

These may lead to the conclusion that the current rules on administrative cooperation are 
largely  in  line  with  the  other  policies  concerning  the  internal  market  and  the  recent  e-
commerce  VAT  Directive.  Nonetheless,  Member  States  should  get  prepared  for  new 

86 

 
 
challenges  such  as  the  capacity  of  processing  data  allowing  for  identification  of  e-
commerce VAT fraud cases, which is difficult under the current regulatory framework. 

6.b. Identified areas that require to amend administrative cooperation rules in relation to 
e-commerce  
In the context of the targeted consultation the tax authorities did not precisely identified 
legal provisions in the Regulation (EU) 904/2010 which need to be improved. However - 
as  already  mentioned  -  they  identified  a  few  issues  (in  respect  of  the  administrative 
practice) that require improvements: 

 
 

 
 

the high rate of late replies; 
the  level  of  resources  involved  in  administrative  cooperation  which  is  still  too 
low, especially when compared to the volume of work imposed by the number of 
requests for information; 
the staff involved in the administrative cooperation needs more training;  
the  Member  States  have  to  commit  in  granting  a  better  assistance  to  other 
Member States. 

In particular, some of the tax authorities mentioned159 difficulties on accessing relevant 
data  from  internet  platforms  and  payment  providers  (mainly  because  of  data  protection 
reasons). 
Both  the  2017  evaluation  and  the  recent  targeted  consultation  in  2018  showed  that 
Member States are generally in favour of exchanging payment data and consider it as one 
area  in  which  Regulation  (EU)  904/2010  may  be  further  amended  to  give  the  tax 
authorities the right tools to fight e-commerce VAT fraud. 

5.5.EU added value 

Q7.  Could  Member  States  have  achieved  similar  results  at  similar  costs  without 
acting at EU level?  

7.a.  Joint  EU  approach  on  VAT  administrative  cooperation  has  advantages  over  other 
forms of national and international forms of VAT administrative cooperation 

The  EU  can  already  rely  and  gain  from  a  40  years’  experience  of  administrative 
cooperation between the Member States. 

In  order  to  control  cross-border  transactions,  the  Member  States  need  to  cooperate 
between each other because most of the time the VAT fraud is not restricted to their own 
territory.  The  tools  foreseen  by  Regulation  (EU)  904/2010  evolved  during  the  time  in 
order to respond to the need of Member States. These tools currently include exchange of 
information  on  request,  spontaneous  exchange  of  information,  automatic  exchange  of 
information,  automated  access  to  data  through  VIES,  multilateral  controls,  presence  in 
administrative offices, presence during administrative enquiries, Eurofisc.    

The  respondents  to  both  the  open  public  and  the  targeted  consultation  stressed  the 
advantages of common EU rules in order to allow Member States to work more closely 
together  and  fight  e-commerce  VAT  fraud.  In  particular,  the  businesses  claimed  that  a 
uniform  approach  as  regard  collection  of  VAT  relevant  data  is  more  efficient  and 
guarantees  more  legal  certainty  while  tax  authorities  considered  administrative 
cooperation as effective to combat e-commerce VAT fraud.  

159  As  a  result  of  the  2016  survey  (AntiVATFraudEUMSE-commerce102016),  at  least  in  7  cases,  tax 
authorities mentioned difficulties of cooperation with internet platforms and even banks. 

87 

 
 
 
                                                            
Figure  18  -  Public  consultation:  Public 
perception of the EU added value 

Figure  19:  Tax  authorities:  perception 
of the EU added value 

The existing administrative cooperation tools 
allow Member States to fight against VAT 
fraud involving online sales at a higher level 
than what could be achieved by the EU 
Member States acting indepentl 

Member States alone are able to fight e-
commerce VAT fraud, without using the 
administrative cooperation tools laid down 
in Regulation (EU) 904/2010 

7 

9 

10 

3 

5 

18 

0 

1 

1 

4 

4 

13 

Stongly agree
Do not agree nor disagree Don't know / NA
Strongly disagree
Disagree

Agree

Absolutely true
Neither true or false
Not true

Mostly true
Somehow not true
I don’t know 

The perception of the majority of respondents to the public consultation (27 answers) was 
that the existing administrative cooperation tools allow Member States to fight against e-
commerce VAT fraud more effectively than what could be achieved by the EU Member 
States acting independently. Furthermore, the majority of tax authorities answering to the 
2018  targeted  consultation  (17  answers)  agreed  or  strongly  agreed  that  Member  States 
alone  would  not  be  able  to  fight  e-commerce  VAT  fraud  need  the  tools  of  the 
administrative cooperation. 

From  another  perspective,  replacing  the  common  EU  framework  of  administrative 
cooperation  in  the  field  of  VAT  with  other  forms  of  national  and  international  tax 
cooperation seems to be less effective and, possibly, more expensive. Currently, there is 
no other organization offering the same level of administrative cooperation in the field of 
VAT as the EU. OECD, for example, dedicates most of its recent efforts to the field of 
direct taxation while the level of mutual assistance for VAT which has been developed 
under  the  Regulation  (EU)  904/2010  is  unmatched  by  any  other  multi-lateral  legal 
instrument in the field of taxation. Finally, the Fiscalis evaluations show, generally, that 
the  trans-European  IT  systems  in  the  field  of  taxation,  like  VIES,  offer  good  value  for 
money, as it would be more expensive for the Member States to develop independently 
national IT systems with an equivalent effect. 

Finally,  in  2017,  33%  of  the  customers  buying  on-line  across  Europe  shopped  from 
sellers in other EU countries while 23% shopped from sellers outside EU160. Therefore, 
one of the highest benefits of the administrative cooperation tools implemented based on 
Regulation (EU) 904/2010 seems to be the protection of the Internal Market. 

http://ec.europa.eu/eurostat/statistics-explained/index.php/E-commerce_statistics_for_individuals#e-

160 
shopping_from_other_EU_countries. 

88 

 
 
 
                                                            
7.b.  Stakeholders  perceive  the  e-commerce  VAT  fraud  as  a  common  cross-border 
problem rather than as a national one. 

Figure  20:  Public  consultation:  perception 
on the e-commerce VAT fraud problem 

All EU Member States are concerned by the 
VAT fraud on online sales 
4  1 

3 

9 

10 

25 

Stongly agree
Do not agree nor disagree
Disagree

Agree
Don't know / NA
Strongly disagree

above, 

between 

explained 

cooperation 

There is no doubt that, by its nature and 
e-commerce 
as 
tax 
requires 
authorities  in  order  to  assess  VAT 
correctly.  The  destination  principle 
makes this necessary, as the VAT is due 
in  the  country  of  consumption,  even 
though 
from 
the  supply  originates 
another  Member  State  or  from  a  third 
country  or  territory.  In  order  to  protect 
the 
free  circulation  of  goods  and 
services  within  the  Internal  Market,  tax 
authorities have to find ways of working 
together  for  protecting  VAT  revenues 
and for ensuring a level playing field for 
businesses. 

The  Customs  Union  require  also  to  set  common  rules  related  to  imports,  thus  when  it 
comes to e-commerce VAT fraud, Member States have to find common EU solutions by 
using the administrative cooperation tools provided by Regulation (EU) 904/2010. 
As  highlighted  by  the  public  consultation,  most  stakeholders  are  aware  of  this  “EU 
dimension” of the e-commerce VAT fraud. In fact, 35 respondents declared they consider 
that the e-commerce VAT fraud is affecting all EU member States. 

7.c.  The  provisions  of  Regulation  (EU)  904/2010  on  cross-border  administrative 
cooperation  can  be  considered  as  providing  EU  solution  to  EU  problems  in  terms  of 
fighting e-commerce VAT fraud 
The effectiveness of the tools for administrative cooperation gives an indication of their 
EU added value.  

The  results  of  the  2017  evaluation  indicated  that  the  most  efficient  tools  provided  by 
Regulation (EU) 904/2010 are the automated access to information (VIES), Eurofisc and 
multilateral controls. 

In 2018 with respect to e-commerce, the tax authorities indicated that the most efficient 
tools are Eurofisc, followed by the exchange of information on request, the spontaneous 
exchange of information and the multilateral controls. 

However, as highlighted by some of the tax authorities in the targeted consultation, the 
potential of the current administrative cooperation tools is not exploited at its best. The 
EU  added  value  could  be  higher  by  increasing  the  use  of  the  tools  provided  by 
Regulation (EU) 904/2010.  

In essence, while the EU provides for the legal framework for administrative cooperation 
to  combat  e-commerce  VAT  fraud,  its  impact  on  VAT  fraud  depends  on  the  resources 
invested and the commitments of each Member State to cooperate to reduce VAT loss at 
EU level and contributing to a level playing field for businesses in the Internal Market. 
This  statement  is  also  supported  by  the  findings  of  the  public  consultation.  In  fact  the 
majority  of  the  respondents  (34  out  of  52)  considered  that  the  e-commerce  VAT  fraud 
should be addressed both at EU and Member States level while an important number (14) 

89 

 
 
 
 
of the respondents considered that the problem can be only solved at EU level. Only one 
respondent  argued  that  e-commerce  VAT  fraud  should  be  addressed  only  at  Member 
States level.  

In conclusion, the EU added value of administrative cooperation is the protection of the 
Internal  Market  and  of  the  VAT  revenues.  E-commerce  VAT  fraud  is  a  common 
problem, affecting all the Member States. Member States alone are not able to tackle the 
problem  of  e-commerce  VAT  fraud.  Therefore,  Member  States  should  invest  in 
administrative cooperation. Some of the administrative cooperation tools, like Eurofisc, 
seem  to  be  rather  well  fitted  for  this  purpose.  However,  the  EU  added  value  of  the 
administrative cooperation is still somehow limited, as the level of resources invested in 
the  administrative  cooperation  is  not  sufficient  compared  to  the  needs.  New  and  more 
effective tools may still be needed.   

6.  CONCLUSIONS 

The current evaluation assesses to what extent Regulation (EU) 904/2010 met the overall 
objectives  of  contributing  to  a  closer  cooperation  between  Member  States,  of  avoiding 
budget  losses,  of  fighting  VAT  fraud  and  of  preserving  the  principles  of  fair  taxation, 
when  considering  e-commerce.  It  mostly  confirmed  that  the  findings  of  the  2017 
comprehensive evaluation of Regulation (EU) 904/2010 also apply to the specific case of 
e-commerce.  The  exception  is  that,  in  the  field  of  e-commerce,  the  tax  authorities 
consider  the  Eurofisc  network  and  the  exchange  of  information  on  request  and 
spontaneous as the most effective tools, while the 2017 evaluation showed that VIES is 
the most appreciated tool. Indeed, VIES is conceived as a tool for sharing information on 
B2B intra-EU supplies and not on B2C transactions. For this reason, VIES does not fit 
with the need of fighting e-commerce VAT fraud. 

With  respect  to  the  effectiveness  of  the  current  tools  for  administrative  cooperation  in 
relation to e-commerce VAT fraud, tax authorities have a better opinion than the public, 
probably  because  they  have  a  direct  knowledge  of  their  application.  In  general,  tax 
authorities consider the current Regulation (EU) 904/2010 on administrative cooperation 
as effective. However, there are a number of shortcomings:  

(i) 
(ii) 

(iii) 

(iv) 

the identification of online businesses is difficult; 
the domain and records of the online business is often located in another country 
(also outside the EU); 
there are limited enforcement tools in respect to  VAT fraudsters located outside 
EU; 
tax  officials  need  more  training  to  use  more  effectively  the  administrative 
cooperation tools. 

The needs to increase the commitment of Member States and dedicating more resources 
to  administrative  cooperation  appear  as  crucial  because  they  currently  limit  the 
effectiveness  of  the  Regulation  in  respect  of  fighting  e-commerce  VAT  fraud. 
Furthermore,  some  Member  States  also  mentioned  that  the  effectiveness  of  the 
Regulation could be increased with new tools, such as access and exchange of relevant 
payment data. 

There  is  not  sufficient  quantitative  evidence  to  support  the  efficiency  of  the 
administrative  cooperation  in  respect  of  e-commerce.  However,  the  opinions  of  the  tax 
authorities are converging and positive, considering that the benefits of the administrative 
cooperation  are  proportional  or  even  higher  than  the  costs.  This  positive  opinion  is 

90 

 
 
consistent with the findings of the 2017 comprehensive evaluation. The evaluation also 
showed a need to increase the use of automated access to information. 

The targeted consultation showed that the tools laid down in Regulation (EU) 904/2010 
are relevant to fight VAT fraud but there is room for improvement. The evolution and 
the volume of e-commerce transactions may require new and more effective and efficient 
administrative cooperation tools. Therefore, the existing tools may become less relevant 
in  the  future  due  to  the  evolution  of  the  business  models  and  of  the  patterns  of  VAT 
fraud.  

The  analysis  of  the  coherence  of  Regulation  (EU)  904/2010  with  other  policies  and 
priorities of the EU in the e-commerce sector showed a good level of alignment. In this 
respect,  it  is  important  to  stress  that  administrative  cooperation  in  the  field  of  VAT 
contributes to the proper functioning of the Internal Market and, in particular, of the e-
commerce  VAT  Directive  rules.  Nonetheless,  Member  States  should  deal  with  new 
challenges such as the capacity of processing data for the detection and fight against e-
commerce VAT fraud.  

Finally,  the  EU  added  value  of  the  current  tools  of  administrative  cooperation,  as 
provided by Regulation (EU) 904/2010, appears evident. Both tax authorities and other 
stakeholders  recognised  the  benefits  of  acting  together  at  EU  level,  as  the  e-commerce 
VAT  fraud  is  affecting  all  EU  Member  States.  Individual  national  measures  are  not 
considered effective enough.  

Overall, both the 2017 comprehensive evaluation and the targeted consultation under the 
current  initiative  showed  that  Member  States  are  generally  in  favour  of  collecting  and 
exchanging payment data and amending Regulation (EU) 904/2010 accordingly.  
The findings of this evaluation must feed the legislative proposal to collect and exchange 
VAT relevant payment data to combat e-commerce VAT fraud.  

91 

 
 
 
 
 
 
 
 
 
10.4.  Annex 4: Who is affected by the initiative and how? 

The  preferred  option  (sub-option  3.2)  will  imply  payment  service  providers  to  keep 
records  to  be  transmitted  every  quarter  to  the  tax  administration  of  establishment.  The 
record  keeping  and  the  format  of  the  transmission  of  data  to  tax  authorities  will  be 
harmonised EU wide. Compared to the baseline scenario, payment service providers will 
benefit from common EU harmonised rules instead of dealing with different procedures 
in the Member States, thus leading to increased legal certainty. 

Tax  authorities  will  have  to  upload  the  data  received  in  a  centralised  database,  and 
manage the analysis of the data at Eurofisc level. The result of the risk analysis will have 
to be used by the Eurofisc officials to activate VAT controls. Compared to the baseline 
scenario, tax authorities will exchange payment data and will have to activate controls on 
the  information  received.  There  will  be  a level  of  direct  costs  for tax  authorities  which 
have been extrapolated from the costs of the Customs Information System (ICS2), which 
is another centralised database with a number of functionalities that could be similar to 
the  ones  foreseen  in  the  preferred  option.  Besides  the  initial  cost  of  developing  the  IT 
capabilities  to  collect  massive  volume  of  payment  data,  tax  authorities  will  have  to 
maintain their own systems. However, it is reasonable to expect that most tax authorities 
already have large scale capabilities of processing large volumes of data as most of them 
invested  in  the  automatic  exchange  of  information  on  direct  taxes.  With  very  few 
exceptions, tax authorities were not able to estimate the costs of implementing different 
policy  options.  Nonetheless,  most  respondents  in  the  targeted  consultation  (16  answers 
out  of  23)  declared  they  are  probably  or  certainly  capable  of  storing  the  data  received 
from  the  payment  service  providers  established  in  their  Member  State  in  an  electronic 
database. 

Concerning  the  indirect  costs,  one  could  expect  that  tax  authorities  would  have  to 
dedicate limited resources to cross check the correctness of the payment data format or to 
log the information in the central repository. In fact, the payment data will be transmitted 
in an EU harmonised electronic format. 

The  European  Commission  will  have  to  develop  and  maintain  the  central  repository, 
but  will  not  have  access  to  transaction  level  information.  However,  the  Commission 
should  be  allowed  to  extract  statistical  data  for  ensuring  the  security  of  the  central 
repository and to follow up the performance of the initiative. 

European  citizens  will  not  be  affected  when  buying  products.  Their  personal 
identification data will not be transmitted to the tax authorities. Data collected will refer 
to payees receiving payments from another state only. Moreover, only when risk filters 
will indicate that these payments could refer to an economic activity, the tax authorities 
will  first  carry  out  a  preliminary  crosscheck  with  other  sources  of  tax  information  and 
eventually  decide  on  a  tax  audit.  Finally,  the  European  citizens  will  be  positively 
impacted  by  the  higher VAT  revenues  resulting  from  the  fight  against  VAT  fraud  and, 
probably, by a less distorted market.  

European businesses and SMEs will benefit from the more level playing field resulting 
from  the  fight  against  VAT  fraudsters.  European  businesses  selling  on-line  will  not  be 
affected by any new reporting obligation. 

In  respect  to  costs  for  businesses,  these  are  likely  to  have  a  limited  one-off  impact  on 
payment providers. The limited impact is foreseen due to the automation of the business 
processes and to the fact that most payment providers seem to own already a strong IT 

92 

 
 
support,  allowing  them  to  exchange large  volumes  of  data with  tax  authorities  or  other 
entities  (i.e.  with  members  of  the  same  economic  group,  other  payment  providers  and 
clearance  institutions,  analytics  companies,  other  providers  of  services  on  their  behalf, 
etc.).  At  present,  for  example,  one  large  payment  providers  mentioned  costs  of  around 
100.000  Euros  /  year  for  answering  the  case-by-case  information  requests  from  tax 
authorities (mostly generated by the time consumed by employees). 

On the longer term, the costs for payment providers may result from the requirement of 
storing  the  information  on  a  10  years  term  and,  more  importantly,  from  the  periodical 
effort  to  gather  and  transmit  data.  However,  as  reported  by  some  payment  providers 
during  the  targeted  consultation,  this  requirement  seems  to  exist  already  for  some  EU 
countries, even though for shorter periods. Equally, the prices for large storage capacities 
have  been  continuously  decreasing  over  the  recent  decades,  so  this  may  not  seem  an 
unbearable  cost.  Finally,  it  remains  only  to  mention  that  the  reporting  period  seems  to 
play  a  more  significant  role  in  respect  to  recurrent  costs  for  payment  providers.  As 
suggested  during  the  targeted  consultation  by  one  of  the  associations  representing 
payment  providers,  quarterly,  semi-annually  or  annually  submission  of  payment  data 
seem  to  be  reasonable  in  terms  of  costs,  thus  leading  back  to  the  conclusion  that  the 
overall costs for payment providers will be limited. 

93 

 
Summary of costs and benefits 

Description 

Amount 

Comments 

I. Overview of Benefits (total for all provisions) – Preferred Option 

Direct benefits 

VAT collection increase 

Increased  legal  certainty 
for payment providers 

Level playing field 

Spill  over  effect  on 
consumers 

The investment costs of the tax authorities will be radically outweighed by the VAT revenue increase due to the fight against VAT 
fraud. An initial investment of EUR 180.000 in Finland (where such a system already exists at national level) led to a collection of 
more than EUR 16 million of VAT collected after targeted controls. As a result of the VAT collection increase, it is expected that the 
VAT gap will be reduced in the e-commerce sector.      

Payment service providers will deal with the Member States’ tax authorities through harmonised procedures and common reporting 
standards. This may first lead to a better predictability and less errors. Secondly, this may subsequently lead to some limited costs 
savings as payment providers will implement standardised IT systems and procedures for reporting in different EU countries. 

Indirect benefits 

European businesses, including SMEs, both in the e-commerce and traditional economy, will benefit from the fight against VAT 
fraud. The number of fraudsters that benefit from unfair competition (thanks to the VAT fraud) is supposed to decrease, thus leading 
to a more level playing field. 

Businesses involved in e-commerce VAT fraud usually pay little attention to ensuring a good level of customer support, ensuring the 
legal guarantee for the products they sell and respecting intellectual property rights. This assumption has been confirmed by some 
answers in the public consultation. Even though the eviction of fraudsters from the  market does not necessarily trigger a positive 
effect on those issues, there is a reasonable expectation that a number of customers will not be any more victims of poor customer 
services or the non-respect of intellectual property. 

II. Overview of costs – Preferred option 

Payment service providers  

Tax administrations 

European Commission 

One-off 

Recurrent 

One-off 

Recurrent 

One-off 

Recurrent 

Transmission payment data   

Storage and exchange of payment data   

Direct costs 

limited 

limited 

Indirect costs 

Direct costs 

Indirect costs 

limited 

limited 

EUR 7.5 million 

EUR 2.9 million (1 year)  EUR 11.8 

EUR 4.5Million (1 year) 

limited enforcement costs 

million 

94 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10.5.  Annex 5: Methodology 

It was not possible to carry out a quantification of the impacts of this initiative through a 
CGE  (computable  general  equilibrium)  model  simulation  in  the  time  available.  The 
analysis of the impacts will therefore be laid out essentially in qualitative terms. 

The  evidence  for  the  impact  assessment  report  was  taken  by  different  consultation 
activities: 

  A survey with the Member States' tax authorities on e-commerce anti-fraud strategies 
  Consultation with the VAT forum Commission Expert group on e-commerce 
  A targeted consultation addressed to tax authorities on payment data 
  A  targeted  consultation  addressed  to  payment  service  providers  and  businesses  on 

payment data 

  A public consultation 
  Desk research 
Furthermore, a feasibility study has been carried out internally in TAXUD calculating the 
costs of the different options. For the quantification, the study (Annex 6) considered the 
costs of the Import Control System, which presents some of technical specificities similar 
to the ones of the preferred option of this initiative. 

Finally, the case study on pricing policy and estimation of potential VAT loss (in Annex 
6) was drafted using a mock purchase approach.   

95 

 
 
 
10.6.  Annex 6: Technical feasibility of the options 

OPTION 1 – Status quo  

Transmission of payment data to the tax administration  

National competence through national processes. 

Cleansing 

The data have to be usable. For this, they must be linked to a usable tax identifier, which 
is assumed to exist nationally. Other processing is also necessary, such as aggregation of 
payments in a certain period of time. 

Risk analysis 

The  data  thus  collected  may  be  used  to  compare  with  other  national  sources,  such  as 
MOSS or VAT returns, turnover information, or other. 

Store and exchange of data 

Storage at national level. Specific cases that affect other MS may be sent spontaneously 
through administrative cooperation forms 

Processing 

MS can use payment data to carry out nationally VAT controls 

96 

 
 
 
 
 
OPTION 2 – non-regulatory  

Transmission of payment data to the tax administration  

As per option 1, But guidelines as regards the format of the data may be published. 

Cleansing 

As per option 1. 

Risk analysis 

As per option 1. 

Store and exchange of data 

The form for the spontaneous exchange of information may be standardised  

Processing 

As per option 1 

97 

 
 
 
 
 
OPTION 3.1 – Distributed application (similar to the VIES) 

Transmission of payment data to the tax administration  

Transmission is to be foreseen in all MSs, by the PSP established in the Member States. 
The  standardisation  of  the  information  received  is  necessary.  The  technical  means  for 
collection may differ per MS. 

Cleansing 

The data received by MSs need to be usable. It is assumed that they contain an identifier 
for payees. The data need to be cleansed (corrected) and organised per MS, where MS is 
the  MS  of  the  consumer  (MS-C)  or  the  seller  (MS-B)  in  the  payment  record.  The  data 
then are stored and reorganised for dissemination. 

Risk analysis 

The aggregated data received per MS are used for risk analysis in comparison with other 
national sources, such a MOSS, VAT returns, turnover data etc. 

Store and exchange of information 

In  each  MS,  The  data  have  to  be  stored  per  MS  and  reporting  period  a)  as  raw 
information concerning payees in that MS receiving the payment data or payees in other 
MS-B b) as aggregated information per reporting period per payee in the MS-B or having 
received  payments  from  MS-C.  The  system  has  to  a)  send  spontaneously  aggregated 
information per MS and b) send the raw information based on queries specific to a payee. 

This system is equivalent to the VIES recapitulative statements handling. It needs to use 
some form of validated identity for follow up queries to the detail of the information. 

Processing and VAT audit 

The  result  of  the  above  analysis  may  give  rise  to  specific  administrative  investigations 
and VAT audits. Such investigations may trigger receipt of further detailed payment raw 
data through the facility made available by the "store and disseminate" subsystem. 

OPTION 3.2 – Central storage  

98 

 
 
Transmission of payment data to the tax administration  

As  3.1.  However,  the  data  received  are  sent  as  such  to  a  central  location  for  the  next 
processing step, the cleansing. 

Cleansing 

Processing taking place centrally. 

The central system receives all raw data from all MS. It is assumed that they contain an 
identifier  for  payees.  Specific  processing  needs  could  be  established  to  associate  the 
identifier of the  payees with a taxable person. In  such scenario, an  identity matching 
system  needs  to  be  foreseen,  which  learns  from  experience  (machine  learning),  from 
input of officials assigned to this identity matching and from results of the risk analysis 
process  in  MS,  which  may  feed  the  identity  matching  system.  In  this  system,  the 
transmitted  information  is  associated  to  one  or  many  pieces  of  validated  information, 
such  as  a  VAT  number.    Following  such  processing,  the  data  need  to be  organised  per 
MS, where MS is the MS of the consumer (MS-C) or the seller (MS-B) in the payment 
record. 

Risk analysis 

At  each  MS,  the  aggregated  data  received  per  MS  are  used  for  risk  analysis  in 
comparison with other national sources.  

Aggregation of data per risk indicators can be established (e.g. per amount of payments, 
number of payments, country of origin, country of destination….) 

Store and sharing the information 

At  the  centre,  the  data  have  to  be  stored  per  MS  and  reporting  period  a)  as  raw 
information  concerning  payees  per  MS  and  b)  as  aggregated  information  per  reporting 
period per payee in per MS. 

The  system  thus  created  has  to  send  spontaneously  aggregated  information  per  MS. 
Sending  the  raw  information  is  not  necessary,  as  this  information  is  available  centrally 
and may be accessed there only by Eurofisc officials of the Member States.  

The  system  is  using  the  identities  produced  by  the  identity  matching  system  to 
calculate  the  aggregates.  These  records  do  contain  also  the  basic  information 
transmitted.   

Processing and VAT audits 

The  result  of  the  above  analysis  made  at  MS  level  may  give  rise  to  specific 
administrative  investigations  and  VAT  audits.  Such  investigations  may  use  the  central 
system to access the raw information. Thus, the central system must also be equipped to 
support  the  work  of  such  investigations  through  appropriate  definition  and  design.  The 
data held centrally may undergo some processing specific to a limited set of traders, as 
they are identified from the national risk analysis operations. In addition, if national risk 
analysis has uncovered an identity of a trader, the identity matching system is updated. 

99 

 
 
100 

 
 
 
 
 
DESCRIPTION OF THE DIFFERENT STEPS 

Transmission of payment data to the tax administration. 

National collection from locally established payment service providers is considered not 
to represent a specific security challenge. These organisations are recognised formally in 
the MS of establishment and thus they have or may have standard working relations with 
the tax authority.  

Cleansing 

A fundamental aspect of cleansing is to make sure that the records received are usable. In 
the particular case, each record must be able to be associated correctly to a taxable 
person. In order to palliate this issue, we have introduced an identity matching system. 
This  system  is  supposed  to  learn  from  experience:  input  of  specific  PSPs  and  of  MSs’ 
systems  (e.g.  the  association  of  a  reference  received  by  one  specific  PSP  with  records 
received  from  other  PSPs  that  may  concern  the  same  payee  or  validated  identifications 
supplied from MSs).  

From storage and processing perspective, the cleansing and the identity matching system 
will generate additional storage requirements and processing requirements where it takes 
place.  The  cleansing  algorithms  will  most  probably  necessitate  globally  3  times  the 
storage of the basic information.  

Store and exchange or sharing of information. 

From a storage perspective, the centralised option has to be able to receive and store the 
+- 8 billion payment records annually. This represents a significant storage, in the range 
of  +-  5  terabytes  (5  thousands  of  billion  characters)  annually  globally.  The  size  of  the 
transmission files is itself an issue and necessitates appropriate internet connectivity that 
we will consider available in all locations. 

In the case of scenario 3.1, the data will need to be stored in each MS both in aggregated 
way  per  payee  and  raw  no  aggregated  data.  Data  records  will  have  to  allow  the 
identification  of  the  payees  (e.g.  different  registrations  of  the  same  payee  in  different 
payment  systems).  While  aggregated  data  will be  available  to  the  other  Member  States 
electronically, raw data may be sent spontaneously. In the case of a centralised storage, 
the  raw  data  will  be  available  centrally  for  MS  access.  This  information  centrally  is 
estimated in the range of 10 terabytes annually.  

Risk analysis 

The cross-match of payment data with other databases (as VAT, MOSS or other turnover 
databases)  will  be  carried  out  by  tax  officials  of  the  national  administrations. In  option 
3.1  this  will  be  done  at  national  level,  under  options  3.2  this  will  be  done  at  Eurofisc 
level  

Processing and VAT audits 

The  centralised  solution  could  develop  other  automated  processes  to  allow  further 
crosscheck  of  data,  for  instance  with  the  VIES161.  Such  processing  will  generate 
additional storage needs. 

161 VAT Information Exchange System foreseen by Chapter V of Council Regulation (EU) No 904/2010 

101 

 
                                                            
The output of the risk analysis' output will be a number of targets to be further controlled 
by the tax authorities.  

102 

 
 
 
10.7.  Annex 7:  Case  Study  – pricing  policy and estimation of  potential VAT 

loss   

The free nature of the Internet and the high degree of anonymity provided may make it 
easier to avoid VAT payment on B2C electronic transactions. The VAT loss is very hard 
to be determined and needs specialised audit tools, time, qualified skills, other important 
resources  and  comprehensive  data,  thousands  of  invoices  and,  above  all,  a  competent 
authority. 

However, is possible to try to estimate the potential VAT loss using different proxies and 
an analysis based on out of ordinary pricing policy of different sellers. This exercise does 
not represent a valid proof of the VAT loss or VAT fraud to be used in courts, but still 
raising lots of legitimate questions.  

The  estimation  shows  a  potential  VAT  loss  of  up  to  EUR  29  million  for  a  5-year 
period (EUR 5.7 million/year) from the one seller we analysed in detail.  

Methodological considerations 

We used a mock purchase approach to reconstruct consumer experience from the initial 
moment of searching the internet for a product to the last click before the final purchase. 
We have tried to follow the process of buying a mobile phone162 from the internet.  

Observation!  This  was  as  an  exemplification  only.  We  did  not  make  any  actual 
payment/purchase and no rules were broken during this exercise.  

We tried to detect any anomalies in the selling price of the product and to analyse these 
discrepancies  in  order  to  capture  any  reasonable  justification  or  to  determine  any 
indications  (proxies)  of  potential  VAT  fraud.  The  illustration  of  our  mock  purchase 
exercise is here: 

Seller 
selection 
(initial price 
observation) 

Payment 

 (verifying 
the price) 

VAT 
policy  
(invoicing, 
registering, 
declaring) 

Operation
s 
(business 
model and 
EU 
dimension) 

Price 
analysis  
(pricing 
policy and 
VAT rates) 

VAT loss 
(estimation 
of potential 
VAT fraud) 

The  findings  were  documented  using  free  data  sources  (websites,  forums,  discussions, 
complains etc.). We tried to keep the estimation methods very easy to understand and to 
be as conservative as possible in our exercise.  

We anonymised the real name of the seller, information that can lead to identification of 
the  buyers  and  the  data  referring  to  other  sellers.  We  kept  all  the  evidence  for  our 
findings (lists, print screens, references etc.) to be able to defend our position, if needed, 
and we validated our conclusions with EUROFISC163, the EU's network of Member State 
VAT fraud experts. 

162 Our team selected the product based on what was “hot” when we initiated the search (19.03.2018). The 
product we used (Samsung Galaxy S9 phone) was just launched on 16.03.2018  
163 EUROFISC is the European Network of National Officials specialised in combating VAT fraud. The 
EUROFISC network was established by Regulation on administrative cooperation and combating VAT 

103 

 
 
 
                                                            
 
 
1.  Seller selection (finding the product and observing different prices)   

Our  team  went  online  using  the  most  popular  search  engine  in  the  world164  to  find  the 
product. The majority of new customers start the same way their search for a product.  

Different  factors  drive  purchase  decisions.  For  our  case,  important  aspects  such  as 
product  features  and  brands  are  not  determinant  because  we  searched  for  the  same 
product in different places. Price remains the main factor for the buying decision165. 

It is easy to spot the lower price from the above and we decided to follow that specific 
seller. We will further refer to this business as “The seller” in our case study. 

2.  Payment (verifying the price)  

We tried to see if the price is final or other taxes are added at a later stage of the process. 
Impersonating the average buyer, we (1) added the item to the basket; (2) proceeded to 
payment; and (3) verified the final price. 

fraud (Council Regulation 904/2010 (OJ L268 of 12/10/2010)) and officially launched on 10 November 
2010 
164 Google has approx. 90% of the search engine market (http://gs.statcounter.com/search-engine-market-
share)  
165 
(https://home.kpmg.com/xx/en/home/insights/2017/01/the-truth-about-online-consumers.html)  

consumer 

Global 

Online 

report 

2017 

KPMG 

by 

104 

 
 
 
 
                                                                                                                                                                                 
The final price corresponds to the listed price. There are no other taxes such as VAT or 
custom duties added to the listed price on the web shop. 

3.  VAT policy (invoicing, registering, declaring) 

As this was an exercise, we did not make the real payment; therefore, we do not have the 
real invoice for this payment. However, we collected evidence (invoices) from different 
other  sources:  discussion  forums,  complaints,  internet  boards  etc.  We  wanted  to  see  if 
The Seller usually indicate any VAT on the invoices issued. 

Our findings: different Member States, different invoices and one point in common - no 
VAT on invoices and no mention of any VAT and duties on the invoices. The example 
below  shows  anonymised  invoices  from  customers  in  four  different  Member  States: 
France (purchase made on .fr website operated by the seller), Germany (purchase made 
on .de website operated by the seller), Slovenia (.purchase made on .eu website operated 
by the seller) and Spain (purchase made on .es website operated by the seller).  

France 

Germany 

Slovenia 

Spain 

105 

 
 
 
 
 
The “Terms & conditions” section on the websites of the seller mentions that the prices 
shown  are  final,  without  any  other  charges,  supposedly  including  all  taxes.  The  seller 
claims  to  have  VAT  included  in  the  price.  However,  the  seller  does  not  appear  to  be 
registered  in  EU  for  VAT  purposes  and  does  not  display  a  valid  VAT  number  on  any 
invoice. However, in the communication with its EU clients the seller admits he  knows 
about  its tax  obligations.  The  seller  claims  to  pay  the  VAT  and  customs  duties.  The  e-
mail below from the seller’s customer support (France and Belgium) perfectly illustrate 
this policy: 

4.  Operations (business model and EU dimension) 

106 

 
 
 
 
 
The seller uses multiple websites in different languages and different Member States: 

The  above  websites  try  to  create  the  appearance  of  a  local  website.  However,  the 
aforementioned web shops are just an interface for “drop shipping”166. The seller receives 
and process the orders on these websites. A Hong Kong-based Ltd. company specialised 
in “drop shipping” sends the products to the customer.  

Being able to evade the VAT and to offer very low prices is a game changer for any web 
shop: it boosts the sales and the merchant can make the same or even little more profit 
than compliant businesses in the same game with virtually no costs and little associated 
risks. In order to succeed and to worth the risk from the consumer part, the seller has to 
offer  a  very  competitive  (low)  price.  We  will  analyse  this  pricing  policy  in  the  next 
section.  

5.  Price analysis (pricing policy and VAT rates) 

The  seller  offers  very  competitive  prices  on  all  its  websites.  The  average  discount 
indicated by the company on its websites is between 19% and 24% while the VAT rates 
are  between  19%  and  23%.  Even  if  cannot  be  determined  directly,  the  possible  link 
between the very competitive (“too good to be true”) price displayed and the VAT rate 
can be easily noticed from the price analysis.  

On top of the very low price, possible uncompliant sellers may benefit from other unfair 
advantages  resulting  from  aspects  such  as  no  copyright  issues,  no  return  policy,  no 
guaranty,  no  customer  care  department,  and  no  legal  costs.  All  these  aspects  offer  a 
comfortable manoeuvre margin for the seller in terms of pricing policy.  

Table 1: Price comparison in different Member States: 

Member 
State 

Seller’s 
Price 
(EUR)
167 

Market 
Averag
e Price 
(EUR)

Seller’s 
Discount 
(EUR) 

VAT 
rate (%) 

Seller’s 
Discount 
(%) 

Theoretica
l  price in 
EUR (real 
price + 

Potential 
price 
differenc
e (EUR) 

% Theoretical 
price 
difference  (if 
theoretical 

166  "Drop  shipping"  is  a  legal  retail  fulfilment  method  where  a  store  does  not  keep  any  stocks  but 
purchases  the  item  from  a  third  party  and  sends  it  directly  to  the  customer.  The  merchant  never  sees  or 
handles the product. This business model usually operates with very low margins in a highly competitive 
niche  market.  Being  easy  to  start  the  business  with  little  or  no  overhead  expenses,  many  merchants  are 
involved in this type of business; selling prices are very close to the ones from the competitors. The little 
investment  in  getting  started,  usually  low-quality  websites  and  poor  (if  any)  customer  service,  makes  it 
possible to operate on tiny margins. 
167 As displayed on Seller’s websites  

107 

 
 
                                                            
168 

849 
849 
842 
849 
852 
795 
849 
849 
843 
842 

AT 
BE 
DE 
ES 
FR 
IT 
NL 
PL 
UK 
EU 

690 
658 
660 
660 
655 
625 
679 
687 
639 
659 

159 
191 
182 
189 
197 
170 
170 
162 
204 
183 

20% 
21% 
19% 
21% 
20% 
20% 
21% 
23% 
20% 
21% 

19% 
22% 
22% 
22% 
23% 
21% 
20% 
19% 
24% 
22% 

VAT) 

828 
796 
785 
799 
786 
750 
822 
845 
767 
797 

21 
53 
57 
50 
66 
45 
27 
4 
76 
45 

VAT is 
included) 

2,5% 
6,2% 
6,7% 
5,9% 
7,7% 
5,7% 
3,2% 
0,5% 
9,0% 
5,3% 

On  top  of  this,  the  company  may  benefit  from  other  unfair  advantages  resulting  from 
aspects such as no return policy, no guaranty, no customer care department, and no legal 
costs. 

5.1.User experience (posts from customers on dedicated discussions forums) 

User 1: 

User 2: 

User 3: 

5.2.Additional questions (extension of the mock purchase exercise) 

After this exercise, the main issue was to check if our findings are isolated (the product 
we  search  was  on  some  kind  of  promotion  or  discounted),  if  the  exercise  is  consistent 

168 Calculated as the average of best prices displayed by top selling companies in 5 Member States (UK, 
FR, DE, IT and ES) 

108 

 
 
 
 
 
                                                            
(the  findings  can  be  extended  to  other  seller)  and  widespread  (if  this  practice  concern 
other areas or is something specific to our chosen domain). 

We tried to answer to the following questions: 

a.  Is the seller applying the same pricing policy for other products on his websites? 

and 

b.  Are other sellers applying this policy on certain products? 
c.  Is this practice affecting only electronics or other areas are also concerned?  

a.  Different products, one pricing policy 

To answer the first question, we revisited the website(s) of the seller and compared the 
prices  of  other  very  popular  products  (based  on  customer’s  preferences)  with  the 
average market price in EU169. We found a 22% lower median price on the products 
compared. The full results are: 

Selected Product 

Apple iPhone X 256GB silver 
Canon EF 100mm f2.8L Macro IS USM 
Apple MacBook Air 13.3 i5 1.8GHz 128GB 
Apple iPad 9.7" (2017) 32GB Wi-Fi  
Canon EOS 80D Body   
JBL Flip4   
Samsung Galaxy Tab S3 9.7  32 GB Wi-Fi  
Google Pixel 2 XL 128GB  
GoPro HERO6 4K  
Fitbit Charge 2 
Canon EOS 5D Mark IV Body 

Seller’s price 
(EUR) 
969 
649 
732 
261 
699 
77 
429 
789 
331 
101 
2359 

EU average 
price (EUR) 
1240 
869 
956 
332 
974 
103 
540 
990 
418 
126 
3186 

Price 
difference (%) 
22% 
25% 
23% 
21% 
28% 
25% 
21% 
20% 
21% 
20% 
26% 

b.  10 different sellers, same approach 

To  find  an  answer  to  our  second  question,  we  have  selected  the  products  with  the 
biggest  price  difference  and  tried  to  verify  the  price  with  ten  sellers  mentioned  on 
different  forums  to  have  similar  practices170.  For  the  average  user,  these  websites 
appear  to  be  located  in  different  EU  Member  States  (Luxembourg,  UK,  France, 
Belgium, and Germany) but they mainly sell from outside of the EU (mostly China, 
but  from  United  States  also).  Our  results indicate  a  23%  lower  median  price  for  the 
first  product  and  21%  lower  price  for  the  second  product.  The  prices  were  between 
19%  and  28%  lower  than  the  average  market  price  used  for  comparison.  The  table 
below shows the detailed price comparison (in EUR and %): 

Seller 

Product 1 (EUR) 

Product 1 (%) 

Product 2 (EUR) 

Product 2 (%) 

EU Average Price 

The Seller 

Alternative seller 2  

974 

699 

708 

100% 

28% 

27% 

3025 

2359 

2347 

100% 

22% 

22% 

169 We determined the EU price as an average of market prices in 5 EU Member States (BE/NL, FR, DE, 
IT, ES) taking into account the lowest selling prices displayed by biggest sellers on these markets (Fnac, 
MediaMarkt, Saturn, Amazon, eBay etc.) 
170 We anonymised the real names of the 10 sellers used for comparison  

109 

 
 
                                                            
Alternative seller 3 

Alternative seller 4 

Alternative seller 5 

Alternative seller 6 

Alternative seller 7 

Alternative seller 8 

Alternative seller 9 

Alternative seller 10 

Price difference (median) 

789 

793 

781 

763 

687 

669 

769 

740 

752 

19% 

19% 

20% 

22% 

29% 

31% 

21% 

24% 

23% 

2326 

2545 

2427 

2400 

2223 

2195 

2459 

2431 

2380 

23% 

16% 

20% 

21% 

27% 

27% 

19% 

20% 

21% 

c.  Multiple areas may be affected by e-commerce VAT fraud competition 

For the third question, we have seen evidence of the same price policy indicating possible 
VAT  fraud  in  cross-border  sales  e-commerce  in  some  other  areas  than  the  one  we 
documented. Some of the main areas concerned are171: 

  Textiles and shoes 
  Electronics (computers, cameras, mobile phones, smartwatches, tablets, speakers etc.) 
  Watches 
  Videogames 
  Television and broadcasting 
  Beauty products (cosmetics, perfumes, etc.) 

In  relation  with  above  areas,  we  found  40  other  web  shops  and  marketplaces  with 
unusual  price  policies  during  our  analysis.  However,  due  limited  time  and  resources 
available, we were unable to analyse these sites. 

6.  VAT loss (estimation of potential VAT fraud) 

Our  selected  seller  claims  more  than  500.000  customers:  “Seller  has  been  providing 
online  shopping  services  for  more  than  5  years  and  now  we  have  a  total  of  9  online 
stores  operated  in  Australia,  the  United  Kingdom,  USA,  Germany,  France,  Spain,  and 
Italy, which we have already served more than 500,000 satisfied customers”172. We used 
a  proxy  related  to  the  customer’s  reviews  to  estimate  the  percentage  of  EU  customers. 
Therefore, we analysed the dispersion of 26.806 reviews posted on Seller’s partner online 
review community. The results show that the large majority of reviews (more than 91% 
were written by people claiming they made their purchase from one of the EU Member 
States173. 

Country of 
the web 
shop 
No of 
reviews 
(%) of 
reviews 

IT 

ES 

PL 

FR  DE  UK  BE  AT  NL 

EU  US  AU  Total 

4272  3120 

14 

5064  1925  4653  688  426  1250  3139  854  1401  26806 

15,9%  11,6%  0,1%  18,9%  7,2%  17,4%  2,6%  1,6%  4,7%  11,7%  3,2%  5,2%  100% 

171  These  areas  can  be  found  in  the  list  of  most  popular  online  purchases  published  by  EUROSTAT  
http://ec.europa.eu/eurostat/statistics-explained/index.php/E-commerce_statistics_for_individuals  
172 www.eglobalcentral.eu/about-us-eu.html  
173 Own calculations based on Trustpilot reviews (www.trustpilot.com) posted at 19.04.2018  

110 

 
 
                                                            
  Based  on  the  listing  prices  of  the  top  150  most  popular  products  (best  sellers)  we 
estimate  the  Average  Order  Value  (AOV)  at  EUR  316  for  the  analysed  seller.  We 
took  a  very  conservative  approach,  even  excluding  the  top  5%  expensive  products 
from  our  estimation  and  assuming  that  the  average  customer  bought  only  one 
product per purchase174. 

  Our VAT loss estimate on this single seller is up to EUR 28.775.438 for a 5 year 

period (up to EUR 5.755.088 per year) at EU level 

  The  seller  extended  its  operation  EU-wide  over  time;  this  business  model  clearly 
disturbs  all  EU  Member  States,  even  if  the  size  of  the  potential  damage  for 
individual Member States vary significantly.  

  The  size  of  this  potential  fraud  and  the  missing  VAT  remain  unknown  from  the 

Member States. 

174  To  estimate  the  AOV,  we  just  rearranged  the  products  based  on  their  popularity  and  we  analysed  a 
potential basket with top selling 150 most popular products (over EUR 50.000, approx. 10% of all products 
available on the web shop). Due to the large sample and because at least top five best-selling products in 
each of the main 7 categories (cameras, mobiles, tablets, audio, gadgets, gaming, speakers) could be found 
in our estimation basket we have the reasons to believe that our the value of AOV used for calculation is 
reasonable. If we also considered the exclusion of most expensive products (possible outliners) from our 
calculation, we can conclude that we displayed a conservative estimation. 

111 

 
 
 
 
                                                            
10.8. 

 Annex 8: Result of the TAXUD 2016 survey on e-commerce compliance 
strategies in the EU 

On 30 September 2016, the Commission DG TAXUD sent a survey to the fiscal attachés 
of the Member States to have an overview of  VAT anti-fraud policies with a particular 
view on third party information. The survey was a follow-up of the Commission's VAT 
Action Plan where the Commission committed to address VAT fraud in the e-commerce 
sector. 

The survey showed that in December 2016 only 50% of the respondent Member States175 
had a specific e-commerce compliance strategy. The e-commerce compliance strategy 
consists  in  participating  in  international  and  European  events  on  e-commerce,  monitor 
and  examine  new  e-commerce  trends,  develop  national  cooperation  or  task  forces 
between  tax  administration  and  mainly  customs,  but  also  with  police  and  Consumer 
Rights  Protection  Agency,  information  campaign  aimed  at  informing  online  traders  of 
their  tax  obligations  and  consumers  to  recognise  "risky"  websites,  supporting  tax 
auditors, setting up e-commerce investigation and control projects.  

The  tax  authorities  with  an  e-commerce  compliance  strategy  also  have  a  specific 
capability (unit or team/task force) composed of tax auditors, IT experts and analysts in 
charge of VAT fraud in the e-commerce sector. Some of the Member States set up such 
specialised unit as a follow-up of the recommendations of the FPG038176. 

It should be noted that in the meanwhile Member States set up a new Eurofisc working 
field (N. 5) dealing with e-commerce. Also in this framework, different Member States 
delegations raised concerns regarding a clear legal basis to exchange VAT relevant data 
for e-commerce.  

Another important issue is access to  third party information. The survey showed that 
only  33%  of  the  respondent  Member  States  collect  data  from  digital  platforms 
established in their own jurisdiction (or with a branch) for VAT control purposes, while 
the  percentage  is  67%  regarding  collection  of  VAT  relevant  data  from  payment 
intermediaries. Only 5 tax authorities collect payment data from other national authorities 
monitoring  money  flows,  such  as  financial  investigation  units  in  charge  of  anti-money 
laundering. 

The  information  collected  from  internet  platforms  and  the  format  vary  from  Member 
State  to  Member  State  and  mainly  refer  to  the  identification  of  a  given  supplier,  the 
taxable amount and the VAT number of a given supplier. Only in one Member State, the 
information is requested using a standard form. 

However, even the Member States cooperating with internet platforms mentioned some 
criticality:  the  information  is  not  always  received  or  it  is  sent  with  a  very  long  delay 
(even  6  months)  or  for  a  very  limited  period  of  time  (shorted  than  the  one  subject  to 
control). Often the information is not provided by the platforms because in the Member 
State  requesting  the  information  there  is  only  a  brunch  of  the  platform  while  the 
information requested is owned by the main headquarters in another jurisdiction. Finally, 
the most recurrent problem is that when a tax administration asks for identification data 
of  the  suppliers  the  platform  does  not  provide  this  information  because  considered  as 
"fishing" and against data protection regulation. Finally, only in 4 Member States traders 
selling  goods  and  services  through  an  account  open  online are  obliged  by  law  to  make 

175 Twenty one Member States filled out and returned the questionnaire 
176 Fiscalis Project Group 38 on "control of electronic commerce" 

112 

 
                                                            
available  online  or  to  the  tax  authorities  a  tax  identification  number.  This  makes 
impossible to identify the taxable person behind a given web-shop. 

When the platform is established abroad, the only way to receive information is through 
administrative cooperation. However, the information is not provided behind request of 
information (because the request is considered disproportionate  – bulk request). Only 5 
Member States reported to have received some spontaneous information from another tax 
administration  under  Regulation  (EU)  904/2010  on  B2C  supplies  from  suppliers 
established in another Member State and taxable in requesting Member State. 
The  VAT  Directive177  allows  Member  States  to  hold  third  parties  jointly  and  severally 
liable  for  payment  of  VAT.  The  questionnaire  shows  that  this  opportunity  is  used  to  a 
limited  extent.    Some  countries,  however,  have  general  national  regulations  that  entail 
VAT responsibility for internet platforms under certain circumstances. It should be noted 
that the new Article 14 of the VAT Directive introduced the deemed supplier provisions 
for the platforms at EU level as from 2021.  

In 3 Member States, the tax administration has the legal authority to shut down a web-
shop because of breaches to the VAT legislation, independently or in collaboration with 
another agency (i.e. consumer protection agency), but only one Member State reported to 
have used this possibility. However, the 57% of the respondent Member States indicated 
that  in  principle  already  the  power  of  shutting  down  a  web-shop/  IP  address  /  web 
account  (as  such)  could  have  a  deterrent  effect  against  VAT  fraud.  In  fact,  only  this 
possibility  may  put  some  pressure  on  the  traders  to  respect  VAT  obligations. 
Furthermore, as coercive measure this will result in a loss of reputation for a trader, will 
temporary stop the traffic of the seller (and the VAT loss for the treasury), and in general 
can be considered as a hurdle to fraudsters. On the other hand, other Member States do 
not consider this measure as an efficient anti-fraud tool, because traders can easily open 
another web account even with another identity or outside the EU.  

Also for the payment intermediaries (such as credit cards, banks, financial institutions, 
currency  agencies,  digital  and  mobile  wallet  providers)  the  information  collected  vary 
from Member State to Member State and mainly refers to payments received by a given 
supplier from consumers in a Member State in a given period and to the identification of 
the recipients of the payments. Four Member States use a standard form to ask payment 
intermediaries for information.  

Information  exchange  is  a  crucial  tool  for  the  Tax  Administrations  but  problems  occur 
when  data  is  located  outside  the  jurisdiction.  Half  of  the  Member  States  reported 
difficulties in receiving information from other jurisdictions.  

177 Council Directive 2006/112/EC Art. 205 

113 

 
 
 
                                                            
10.9.  Annex 9: Payment Services framework in the EU 

Both payments services and payment service providers are defined and regulated in the 
European  Union  by  the  payment  services  Directive  (PSD2)178.  The  Directive  is  not 
restricted  to  euro  transactions  but  applies  to  all  payment  services  in  all  EU  currencies 
within the EU, at both cross-border and national level. Furthermore, it covers third-party 
providers of payment services, such as payment initiation services offered in the context 
of e-commerce also when only one of the PSPs (involved in the payment transaction) is 
located within the EU.  

Furthermore, the data and format standardisation of payment transactions is harmonised 
in the single euro payment area (SEPA). The SEPA territory also includes countries that 
are  not  part  of  the  euro  area  and  the  EU179.  In  particular,  the  SEPA  Regulation180 
establishes  the  rules  of  an  integrated  market  for  electronic  payments  in  euro,  with  no 
distinction between national and cross-border payments. The Regulation establishes wide 
requirements for credit transfers and direct debits in euro. In particular, it requires the use 
of certain common standards and technical requirements, such as the use of international 
Bank  Account  Numbers  (IBAN),  Business  Identifier  Codes  (BIC)  and  the  financial 
services messaging standards ISO20022 XML for all credit transfers and direct debits in 
euro in the EU.  

Agreed  standards,  technical  requirements  and  a  common  legal  basis  are  the  foundation 
for  payments  within  the  SEPA  area,  irrespective  of  the  countries  involved  in  the 
transaction. All Member States have migrated credit transfers and direct debits to SEPA.  

It should be noted that the SEPA does not cover payments in other currencies. However, 
also 
the  global  provider 
such 
of secure financial messaging services181 use international standards like the ISO20222.  

as  SWIFT 

international 

systems 

other 

Credit  cards  schemes  are  not  included  in  the  SEPA  regulation.  However,  the  European 
Cards  Stakeholders  Group  (ECSG)182  develops  and  maintains  requirements  and 
guidelines for cards. The "volume" (SEPA cards standardisation volume) defines general 
rules,  functional  requirements,  data  elements,  security,  conformance  verification 
procedures, implementation guidelines for the cards schemes183.  

178  Directive  (EU)  2015/2366  of  the  European  Parliament  and  of  the  Council  of  25  November  2015  on 
payment services in the internal market, amending Directives 2002/65/EC, 2009/110/EC and 2013/36/EU 
and Regulation (EU) No 1093/2010, and repealing Directive 2007/64/EC (Text with EEA relevance) OJ L 
337, 23.12.2015, p. 35 
179 https://www.ecb.europa.eu/paym/retpaym/paymint/sepa/html/index.en.html It also applies to payments 
in  euros  in  other  European  countries:  Iceland,  Norway,  Switzerland,  Liechtenstein,  Monaco  and  San 
Marino 
180  
Regulation (EU) No 260/2012 of the European Parliament and of the Council of 14 March 2012 
establishing technical and business requirements for credit transfers and direct debits in euro and amending 
Regulation (EC) No 924/2009 OJ L 94, 30.3.2012, p. 22 
181 See: https://www.swift.com/standards/about-iso-20022  
182 The ECSG is the industry association in charge of cards standardisation in SEPA. The ECSG is formed 
by  representatives  of  five  sectors  of  the  card  payments  value  chain:  retailers/wholesale;  vendors  (card, 
payment  devices,  related  IT  systems);  processors  of  cards  transactions;  card  schemes  and  PSPs 
(represented by the European Payment Council) 
183  See:  https://www.e-csg.eu/scs-volume  the  "Volume"  has  been  published  in  March  2017  and  the  full 
implementation is foreseen by 2020 

114 

 
                                                            
Finally, virtual currencies (VCs), better known as crypto-currencies, are not regulated in 
the European legal framework and in particular in the SEPA regulation and the PSD2. As 
such VCs are not in the scope of the regulatory option. 

115 

 
 
 
10.10.  Annex 10: B2B import VAT fraud 

It  should  be  noted  that  import  VAT  fraud  is  sometimes  combined  with  B2B  schemes, 
where EU taxable persons import goods from third countries avoiding the payment of the 
VAT  on  importation  and  then  re-sell  the  same  goods  (at  a  lower  price)  in  the  internal 
market. The case was documented in the “Bilton’s Bargains  – The Billion Pound VAT 
Scam” programme, where BBC journalists documented the VAT fraud by impersonating 
a  Chinese  seller  on  eBay  and  Amazon  and  importing  goods  smuggled  into  the  EU 
without paying VAT184.  

In  particular,  goods  can  be  introduced  in  the  internal  market  avoiding  the  payment  of 
VAT  by  using  Missing  Traders  fraud.  Fraudulent  businesses  (missing  traders)  import 
goods from outside the EU pretending to transport and sell them to other businesses in a 
Member  State  different  from  the  one  of  importation.  In  this  way,  these  companies  can 
benefit from a VAT exemption upon importation185 (using particular procedures such as 
customs procedures No 42 and 63), and are supposed to declare and pay the VAT in the 
Member State of final arrival of the goods. However, in reality, the goods are placed in a 
fulfilment centre in the EU and sold on the black market. Then the fraudulent company 
just  disappears  without  remitting  the  VAT  to  the  tax  authorities186.  This  simplification 
regime was introduced in the VAT Directive in order to allow for transit of goods in the 
internal  market  without  imposing  unnecessary  VAT  burden  to  the  traders187.  This 
procedure is widely used by legitimate businesses188 but there is also evidence of abuse 
in order to introduce goods into the internal market with no VAT payment189. 

The  customs  procedures  No  42  and  63  are  two  VAT  regimes  provided  for  by  Article 
143(1) of the VAT Directive that allow for a VAT-free importation of goods by a taxable 
person  in  a  Member  State  if  it  is  followed  by  a  VAT-exempted  supply  or  transfer  to  a 
taxable person in another Member State. 

184 See: http://www.bbc.com/news/business-42143849  
185 In 2015, there were 8.5 million import transactions with a VAT exemption, with a total value of EUR 
74 billion  
186  In  the  European  Court  of  Auditor  Special  report  no  13/2011,  it  was  mentioned  that  for  2009  by 
extrapolation the level of VAT losses in relation to cpc42 only would approximately reach EUR 2.2 billion. 
Report  SWD(2017)428  final  of  30.1.2017  impact  assessment  accompanying  the  document  Amended 
proposal  for  a  Council  regulation  Amending  regulation  (EU)  No  904/2010  as  regard  measures  to 
strengthen administrative cooperation in the field of VAT, p. 23-24 
187 In principle, an import of goods should be subject to VAT and this input VAT reported and offset in the 
VAT  return  of  the  importer.  In  normal  scenario,  the  importer  will  sell  the  goods  in  the  same  country 
enabling a compensation of import VAT (input VAT) with the VAT on the sales (output VAT). However, 
in case the importer does not have VAT taxable transactions in the country of importation compensation of 
input  VAT  with  output  VAT  is  not  possible.  The  importer  will  need  to  request  a  reimbursement  of  the 
VAT to the tax authorities and is then supporting the burden of financing VAT while in the end no VAT is 
due  in  the  Member  State  of  importation.  To  compensate  for  this  situation,  a  VAT  exemption  on 
importation of goods that are transiting to other Member States has been introduced. It improves the cash 
flow situation of businesses and reduces their administrative burdens. 
188 SWD(2017)428 final of 30.1.2017 impact assessment accompanying the document Amended proposal 
for  a  Council  regulation  Amending  regulation  (EU)  No  904/2010  as  regard  measures  to  strengthen 
administrative cooperation in the field of VAT, p. 25 
189See:http://www.bbc.co.uk/news/business-34650014; 
and:http://www.theguardian.com/business/2015/nov/01/uk-losing-millions-vat-non-eu-sellers-amazon-
ebay  

116 

 
                                                            
One weakness is that the entire process can take a long time to check, despite the risk of 
fraud occurring quickly. In particular, the correct control of these procedures depends on 
the effective cooperation between tax and customs authorities.  

A specific new provision is included in the 2017 Commission proposal to amend Council 
Regulation  (EU)  No  904/2010  as  regard  measures  to  strengthen  administrative 
cooperation in the field of VAT190 in order to give tax authorities of the Member States 
of destination of the goods  access to the relevant  customs information  submitted in the 
Member States of importation. Furthermore, the customs authorities will have access to 
VIES information in order to check the conditions for the VAT exemption in line with 
Article 143(1) of the VAT Directive. 

190 COM(2017)706 final 

117 

 
 
 
 
                                                            
10.11.  Annex 11: Third countries using payment data as VAT control tool 

Some  non-EU  countries  are  using  payment  service  data  as  a  tool  for  detecting  non-
compliant  traders  in  combination  with  simplified  collection  regimes  for  cross-border 
B2C supplies of goods (similar to the EU system). 

In  Australia,191  the  Tax  Office  (ATO)  can  access  some  credit  card  transactional  data 
where  payments  are  going  overseas  and  can  also  source  some  aggregated  transactional 
data  on  credit  card  payments  to  identified  non-resident  suppliers.  It  is  also  actively 
identifying  other  third  party  transactional  data  sources  as  payment  methodologies 
evolve192. The provided information refers to the identification of the supplier and on the 
amount of the transaction. This transmission is electronic and the information stored in 
electronic databases of the TAO that allows authentication of the information and of the 
sender,  confidentiality  (the communication  can only  be read by the intended recipient), 
integrity (the transmission cannot be altered) and non-repudiation (there is a record of the 
transmission and content). 

Norway  introduced  a  simplified  registration  system  for  VAT  on  electronic  service 
(VOES)  in  2011  (similar  to  the  EU  MOSS).  Service  providers  without  a  place  of 
business  or  establishment  in  Norway  providing  electronic  services  to  clients  other  than 
businesses  and  public  authorities  in  Norway  may  opt  for  a  simplified  registration  and 
declaration of VAT (instead of registering through an intermediary). Furthermore, third 
parties  such  as  payment  intermediaries'  are  obliged  upon  request  to  give  the  tax 
authorities information that can be relevant in determining a taxpayer's tax obligations193. 
Third  party  data,  information,  must  be  available  on  demand  and  in  a  format  satisfying 
legal requirements. 

Finally, also in the United States all US payment processors are required by the Internal 
Revenue  Service  (IRS)  to  provide  information  about  certain  customers  who  receive 
payments for the sales of goods or services194.  

The 

191 As from 1 July 2018 the overseas suppliers to Australian consumers will have to register, collect and 
remit the GST for low value imported goods (goods of a value of $ 1.000 or less purchased by consumers 
in Australia from overseas suppliers with Australian sales of $75.000 or more). The registration, collection 
and remittance of GST is a responsibility of the online marketplaces if they facilitate the taxable sales. 
192 
https://www.ato.gov.au/law/view/document?docid=PAC/19530001/Sch1-396-55  
193 Lov 27. May 2016 nr. 14 om skatteforvaltning (Skatteforvaltningsloven) The Taxation Administration 
Act 
§ 10-2 https://lovdata.no/dokument/NL/lov/2016-05-27-14/KAPITTEL_10#KAPITTEL_10  
194 https://www.irs.gov/pub/irs-pdf/i1099k.pdf  

Taxation  Administration  Act 

396-55. 

Section 

(TAA 

1953) 

1953 

See: 

118 

 
 
 
                                                            
10.12.  Annex 12: Visual examples of the regulatory options 

The table below shows a simplified example of the payment data that will be transmitted 
under the regulatory options (sub-option 3.1 and sub-option 3.2) by the PSPs to the tax 
authorities where they are established  

Table 8: Simplified example of payment data transmitted to a Member State from 
the Payment Service Providers established in that Member State 

Payee (the beneficiary of 
the  payment)  identifier: 
and location 

Reporting 
period 

Origin  of 
the 
payment 

Payments 
transactions  in  the 
reporting period 

Payment 
transaction 
identifier 

of 

Description 
the 
supply  underlining  the 
payment transaction (if 
available) 

(if 

Id: Mickey Mouse 
number 
Tax 
available) 
Location: Wonderland 
Id: Mickey Mouse 
Tax number 
Location: Wonderland 
Id: Mickey Mouse 
Tax number 
Location: Wonderland 
….. 

Q1 20XX  Member 
State A 

EUR  25 
xx/xx/xx 

in  date 

Xxxxxx  Mobile phone 

Q1 20XX   Member 
State A 

EUR  30 
xx/xx/xx 

in  date 

Yyyyyyy  Music 

Q1 20XX  Member 
State B 

EUR  15 
xx/xx/xx 

in  date 

Zzzzzzzz   Book 

…… 

…… 

….. 

…… 

…….. 

After the transmission of data from the PSPs, the tax authorities must exchange the data. 

The  figure  below  shows  how  payment  data  can  be  exchanged  under  the  distributed 
system (sub-option3.1) 

Figure 21: Distributed application exchange of info 

Eurofisc 
official 

Eurofis 
cofficial 

PSPs 

MS A 

database 

database 

MS D 

PSPs 

Eurofisc
official 

Eurofisc 
official 

PSPs 

MS B 

database 

database 

MS C 

PSPs 

The payment service providers (PSPs) transmit payment data to the tax administration of the Member State 
(MS) of establishment. The MS of establishment stores the data in a national database that is connected to 
the other national databases of tax authorities through a distributed application. Only the Eurofisc officials 
(Eur. Off.) will have access to payment data referring to their own MS. 

119 

 
 
 
 
 
 
The figure below shows how payment data can be shared through the centralised 
database (sub-option 3.2) 

Figure 22: Central repository of data 

PSPs 

MS A 

Eur 
off. 

Eur 
off. 

PSPs 

MS B 

database 

database 

Central repository 

database 

MS D 

PSPs 

Eur 
off. 

database 

Eur 
off. 

MS C 

PSPs 

The payment service providers (PSPs) transmit payment data to the tax administration of the Member State 
(MS) of establishment. The MS of establishment stores the data in a national database and then upload the 
data  in  a  central  repository.  Only  the  Eurofisc  officials  (Eur.  Off.)  will  have  access  to  payment  data 
referring to their own MS 

In the targeted consultation PSPs and tax authorities were also asked whether alternative 
technical solutions could reduce costs or make the transmission and exchange of payment 
data easier.  

One solution was to give the payment service providers established in the EU the option 
to  choose  one  single  Member  State  (even  different  than  the  Member  State  of 
establishment) to transmit all the VAT relevant data on inbound and outbound payments. 
This solution was basically conceived to permit payment service providers with different 
branches  in  different  Member  State  to  transmit  the  payment  data  to  one  single  tax 
authority.  Another  solution  was  to  give  the  possibility  to  payment  service  providers  to 
upload payment data directly in the central repository and skip the first step (transmission 
of data to the tax authority in the Member State of establishment). The stakeholders were 
unanimous  in  discarding  these  solutions.  The  main  problems  refer  to  data  protection 
issues and legal uncertainty. Therefore, these variants have not been taken into account 

120 

 
 
 
 
10.13.  Annex 13: Comparison amongst different initiatives in terms of fighting 

e-commerce VAT fraud 

The table below summarises the impact on VAT fraud of different initiatives as described 
more in detail in section 6.2.1 of the report.  

Table 9: Comparison amongst different initiatives in terms of fighting e-commerce 
VAT fraud  

e-commerce 
VAT fraud 
patterns 

No 
registration  

VAT 

VAT 

No 
declaration 
and payment 

Under-
declaration 
Of  imports  of 
goods 

Mis-
description 
of the import 
of goods 

Exchange 
payment data 

of 

Fully addressed   Fully 

Fully addressed  Fully 

addressed 

addressed 

Not applicable  Not 

applicable 

Partially 
addressed 
see  previous 
box 

sales 

Abolition 
distance 
threshold 
And  extension 
of  the  MOSS 
(intra-EU) 

Partially 
addressed: 
the 
distance 
seller  can  still 
the 
in 
remain 
market 
black 
and 
supplying 
abroad  without 
any registration 

Not applicable  Not 

Initiatives 
addressing e-
commerce 
VAT fraud 

Abolition small 
consignments 
exemption  
(imports 
from 
outside the EU) 

applicable 

Partially 
addressed: 
still 
is 
it 
possible 
to 
declare  less  in 
order 
to  pay 
less VAT  
Partially 
addressed: 
under-
the 
is 
declaration 
still  possible  to 
pay less VAT 

 Partially 
addressed: 
 imports  can 
be 
still 
declared  as 
gifts  or  c2c 
or samples 
Partially 
addressed: 
still  imports 
be 
can 
declared  as 
gifts or c2c 

Again  IOSS 
will  be  an 
optional 
system 

IOSS 
(import 
of  goods  from 
outside the EU) 

Deemed 
supplier  

Registration 
under the 
IOSS  will  be 
optional 
(voluntary 
compliance 
measure) 
Partially 
addressed:  only 
certain platforms 
are  covered  and 
only  goods  sold 
the 
through 
platforms 

 Partially 
addressed: 
see  previous 
box 

Partially 
addressed:  only 
goods under the 
customs 
thresholds  sold 
the 
through 
platforms 

Partially 
addressed: 
see  previous 
box 

Partially 
addressed:  see 
previous boxes 

in 
wrong 
for 
sales 
of 

VAT 
declaration 
the 
place 
distance 
(intra-EU) 
goods 
Fully addressed 

Partially 
addressed: 
the supplier can 
still  potentially 
declare  in  the 
place 
wrong 
the 
exploiting 
new 
EUR 
10.000 
threshold 
Not applicable 

Not applicable 

121