The European Commission has adopted a proposal for far-reaching measures to combat VAT fraud through the introduction of taxation for intra-community supplies and a generalised reverse charge.
Under the generalised reverse charge system, the VAT system which is currently applicable to intra-community supplies would also apply to domestic transactions, which means the customer, rather than the vendor, would be responsible for paying the VAT to the Treasury.
Both the introduction of VAT for intra-community supplies and the generalised reverse charge have the potential to considerably reduce the phenomenon of 'missing trader' (MTIC) fraud.
EC has insisted the possible introduction of a generalised reverse charge system could only work effectively if applied uniformly across all member states and has said it is not opposed to a pilot project by a willing member state.
Further reading:
EC releases two studies on fighting VAT fraud
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