COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE 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

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   EUROPEAN COMMISSION  Brussels, 12.12.2018  SWD(2018) 487 final  COMMISSION STAFF WORKING DOCUMENT  EXECUTIVE SUMMARY OF THE 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) 488 final}  
 
 
Impact assessment on the proposal for a mandatory transmission and exchange of VAT-relevant payment data 

Executive Summary Sheet 

A. Need for action 

Why? What is the problem being addressed?  
The problem is e-commerce VAT fraud. The VAT loss on cross-border business-to-consumer (B2C) supplies of 
goods  EU  wide  is  estimated  at  around  EUR  5  billion  annually.  There  are  no  EU-wide  estimations  of  the  VAT 
fraud linked to cross-border B2C supplies of services, but only sectorial documented evidence on broadcasting 
and online games. Without an EU intervention, such losses are likely to increase with the growth of e-commerce. 
E-commerce  VAT  fraud  is  a  real  challenge  for  Member  States'  tax  administrations  because  they  have  little 
information  to  identify  the  online  businesses,  especially  when  they  are  established  in  another  country;  the 
necessary information to assess VAT liabilities is held by third parties (such as payment service providers) that 
are  often  established  in  another  jurisdiction;  the  tax  administrations  do  not  have  the  administrative  capacity  to 
deal  with  and  exchange  between  each  other  the  massive  volume  of  information  needed  to  control  and  fight 
against  the  e-commerce  VAT  fraud.  E-commerce  VAT  fraud  affects  the  Member  States'  and  EU  budgets, 
legitimate EU businesses that suffer the unfair competition, and EU citizens in terms of reduced resources to be 
invested in public services. 

What is this initiative expected to achieve?  
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 and to level the playing field for the legitimate businesses in the EU that suffer 
from unfair competition by fraudsters. The specific objective is to reduce e-commerce VAT fraud by providing tax 
authorities with efficient and effective instruments for detecting non-compliant businesses. 

What is the value added of action at the EU level?  
Member States alone do not have the means to combat e-commerce VAT fraud that, by definition, has a cross-
border  dimension.  VAT  administrative  cooperation  rules  in  the  EU  are  laid  down  in  Council  Regulation  (EU) 
904/2010  on  administrative  cooperation  and  fight  against  VAT  fraud  and,  thus,  further  initiative  in  this  field 
should be framed within that same Regulation. 

B. Solutions 

What  legislative  and  non-legislative  policy  options  have  been  considered?  Is  there  a  preferred 
choice or not? Why?  
In the baseline scenario (option 1) the EU Member States follow different approaches to fight against VAT fraud 
in the e-commerce and only some of them collect data from online intermediaries. 
Under  the non-regulatory  option (Option 2) the  European Commission  will help tax authorities to  develop their 
administrative  capacity  to  fight  VAT  fraud  in  e-commerce  and  will  publish  guidelines  in  order  to  enhance  the 
cooperation between tax authorities and payment intermediaries. 
The regulatory option (option 3) implies amending the EU legal framework for the payment service providers to 
transmit  the  relevant  payment  data  to  the  tax  authorities;  for  the  tax  authorities  to  1)  collect  the  payment  data 
and carry out a risk analysis to detect remote suppliers not complying with VAT obligations, and 2) to exchange 
or share these data with other Member States’ tax authorities. Under the regulatory option, different alternative 
technical  solutions  are  envisaged  to  make  tax  authorities  exchange  or  share  the  relevant  payment  data.  One 
solution  implies  an  automated  access  to  the  databases  of  the  other  Member  States,  while  the  three  other 
solutions imply a central repository of payment data at EU level accessible to anti-fraud officials of the Member 
States. The preferred option is the regulatory solution referring to a central EU repository. 

Who supports which option?  
18 tax authorities (out of 23 respondents) support the regulatory option and in particular the central repository. 
The payment service providers (3 out of 3) support the regulatory option.  
38 respondents to the open public consultation (out of 52) support the regulatory option. 

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C. Impacts of the preferred option 

What are the benefits of the preferred option (if any, otherwise main ones)?  
The Member States' and EU budgets will benefit from the fight against e-commerce VAT fraud in terms of higher 
VAT revenues. The higher VAT revenues also represent a benefit for the EU Citizens, because additional public 
income can be invested in public services. European legitimate business will benefit from a more level playing 
field.  Unfortunately,  the  consultation  with  the  major  stakeholders  did  not  provide  the  necessary  quantitative 
evidence. 

What are the costs of the preferred option (if any, otherwise main ones)?  
The payment service providers will have to face administrative burdens and costs to report payment data to tax 
authorities. Each tax administrations will bear a one-off cost of EUR 7.5 million and recurrent costs in terms of 
EUR  2.9  million  a  year.  The  European  Commission  will  bear  a  one-off  cost  of  EUR  11.8  million  and  recurrent 
costs of EUR 4.5 million a year.  

How will businesses, SMEs and micro-enterprises be affected?  

The  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, SME's 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 

Will there be significant impacts on national budgets and administrations?  
The payment data will allow tax authorities to collect additional VAT from the fight against the e-commerce VAT 
fraud. This positive impact on national budgets is expected in the short term. 

Will there be other significant impacts?  
Personal  data  will  be  processed  to  a  certain  extent  by  national  authorities  in  order  to  fight  e-commerce  VAT 
fraud, in line with the General Data Protection Regulation.  

D. Follow up 

When will the policy be reviewed?  
The Commission will monitor the application of the new system for the exchange of payment data through the 
annual  report  of  Eurofisc  and  the  annual  statistics  for  the  exchange  of  information  submitted  by  the  Member 
States.  Finally,  after  5  years  from  the  entry  into  force  the  Commission  will  report  to  the  European  Parliament 
and the Council on the application of the system.  

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