European Union finance ministers, aiming to fulfill at least one of last month’s EU summit pledges, are building support for a U.K.-backed plan to combat fraud related to value-added taxes.
Mobile phones, tablet computers, gas and electricity are among the areas most at risk for the type of fraud targeted by the proposals, according to an EU report prepared for a June 21 ministers’ meeting in Luxembourg obtained by Bloomberg News. The plan would permit temporary “reverse charges” on some kinds of goods and services when fraud is suspected.
The goal is “to combat sudden and massive tax fraud” before it has “a considerable impact on national budgets,” said the planning report dated June 5. The compromise proposal has gained the support of the European Commission and of Ireland, which holds the EU’s rotating presidency.
EU leaders called on finance ministers to adopt the anti-VAT fraud measures “by the end of June 2013 at the latest” as part of a 10-point plan to crack down on tax avoidance. The U.K. compromise aims to overcome an impasse on who makes decisions on penalties when fraud is suspected.
The anti-fraud proposal has two elements: a “quick reaction mechanism” to address new cases, and a “reverse charges mechanism.” The U.K.-backed compromise would allow nations to move forward with penalties after a one-month review by the European Commission, under the condition that the reverse charges gain unanimous support from all EU countries within nine months.
To build support for the reverse-charge measures, the current plan adjusts proposed evaluation criteria, reporting obligations and other controls, according to the June 5 blueprint. Proposed revisions, dated May 28, specify that measures could apply to products including mobile phones, game consoles, laptop computers, microprocessors and integrated circuit devices, gas and electricity certificates, and cereals and other industrial crops.
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