At its meeting on 16 June, the Economic and Financial Affairs Council (ECOFIN) discussed the compromise proposal prepared by the Maltese Council Presidency on anti-VAT fraud measures, with the aim of reaching an agreement on this proposal in respect of the directive on a generalized VAT reverse charge mechanism. The discussion was concluded without an agreement, which requires unanimity in the Council. France and Slovenia opposed the proposal.

The Eu Council has been working on a proposal for a Council directive which aims to allow the application of a generalised VAT reverse charge mechanism to domestic transactions between businesses involving services or goods with an invoice exceeding EUR 10,000 based on the application of the Czech Republic and Austria, which are prepared to start the pilot project.

The aim is to help some member states that are particularly affected by VAT fraud and do not have sufficient measures to combat it, which could be the case in instances of VAT fraud schemes such as the ‘carousel’ or ‘missing trader’ schemes.

According to the European Commissions, the VAT gap in the EU has reached nearly EUR 160 billion, of which about EUR 50 billion is attributable to cross-border fraud (in 2013).

The possibility of applying the reverse charge mechanism exists in the current system; however, its application is limited to a certain list of sectors. Its application is also limited in time. It was introduced by EC directive 2013/43/EU.

This article was originally issued in the GGI Indirect taxes newsletter.