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TAXATION : NEW MECHANISM FOR SPEEDY RESPONSE TO VAT FRAUD.

To address the problem of VAT fraud, which is occurring more and more speedily and can be organised extremely cleverly, the European Commission has proposed to put in place a quick reaction mechanism (QRM). With this system, proposed on 31 July, a member state experiencing a serious case of sudden and massive VAT fraud will be able to take certain emergency measures in a way they are not currently allowed to do under VAT legislation. For now, if a member state wishes to tackle VAT fraud using measures not foreseen under EU legislation, it has to present an official request for a derogation - a slow and cumbersome process.

Under the new proposal for a directive, member states would no longer have to wait for the official procedure to be completed. They would be authorised to apply a reverse charge procedure within the space of one month, under which the recipient of the goods or services is responsible for VAT rather than the supplier. This system, explains the Commission, will help more effectively tackle complex fraud mechanisms, such as carrousel fraud, and reduce financial losses. To cope with possible new forms of fraud, other anti-fraud measures may also be authorised in the future and applied under the QRM.

VAT fraud costs the EU and national budgets billions of euro every year. An estimated 5 billion were lost between June 2008 and December 2009 due to VAT fraud on greenhouse gas emission allowances.

The draft directive is available at ec.europa.eu/taxation_customs/taxation/vat/key_documents/legislation_proposed/index_en.htm

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Publication:European Report
Date:Aug 30, 2012
Words:261
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