Intra-Community VAT Fraud

• Conclusion
• Recommendations
• Response of the State Secretary for Finance

The European Union introduced a 'temporary' system for VAT, whereby the zero rate applies to the delivery of goods and services to another member state. The temporary VAT system appears to be vulnerable to intra-Community fraud. All member states suffer from this problem. To combat this form of fraud effectively the member states - and their audit offices - must work with each other. The audit offices of Belgium, Germany and the Netherlands carried out a joint investigation to contribute to combating intra-Community VAT fraud. Their investigation resulted in thee separate reports, one for each country, and a joint overarching report. The main points of the national report on the Netherlands are presented below.

Conclusion

The administrative system in place for national tax authorities to exchange information in the European Union is failing to combat the substantial problem of cross-border VAT fraud effectively. Investigation and prosecution services in the EU member states should cooperate more closely with each other in order to increase their effectiveness. Fast and precise information exchange would help identify fraud earlier. In view of the size and seriousness of this form of fraud, the Dutch Tax and Customs Administration could give more priority to combating it.

Recommendations

The three audit offices found that a more effective approach is possible within the existing VAT system. The detection of fraud would be improved if the European VAT Information Exchange System (VIES) were faster and put to better use. The international exchange of information between fraud units could be encouraged. The effectiveness of doing so has been proved by Eurocanet, a network that is not used by all EU member states but is used by Belgium and the Netherlands. Investigation and prosecution require close cooperation among tax authorities, investigators and prosecutors if they are to be effective.

Response of the State Secretary for Finance

In his response to the report, the State Secretary for Finance welcomes the Court of Audit's recommendations. What this will entail in concrete terms for the organisation and approach requires clarification, according to the Court of Audit in its afterword. The State Secretary wants to amend EU legislation to combat fraud more effectively.