VAT fraud report wins backing from Europe

Sharon Bowles MEP

The European Parliament has backed a report calling for a standardised rate
of VAT.

The report, released by Sharon Bowles MEP, outlines proposals to combat VAT
fraud and has won the support of the European Parliament by an overwhelming
majority.

Certain member states of the European Union (EU) are preventing progress in
the fight against fiscal fraud by not agreeing to a standardised 15% VAT rate
when trading across borders, Bowles suggested.
Bowles said given the sheer numbers involved in fiscal fraud, the matter was one
which had to go higher than individual member states.

‘It is now for the European Council to stop dragging its feet and show
genuine political will in achieving the elimination of such costly fraud,’ she
said.

A single rate of VAT would be controversial however, with member states keen
to hold on to control of the setting of tax rates.

VAT rates across Europe are broadly set at around 15%, with variations of
around 2.5% either side.
Fiscal fraud costs 2.5% of GDP and HM Revenue & Customs estimates that in
the 2005-06 financial year, VAT revenue losses amounted to £14.4bn.

Bowles said that fiscal fraud costs the EU as much as e250bn (£203bn) a year,
with some saying it could be double that figure.

During her campaigning in compiling the report, Bowles said the reluctance by
certain member states was evident, however, the backing by the Parliament on
Tuesday demonstrates the issue has ‘transcended political and geographical
boundaries,’ she said.

Bowles said that advances in technology could also help to combat carousel
frauds.
‘VAT is increasingly being recorded in real time. More sales are going online so
there should be an instantaneous ability to capture a high percentage of the
relevant trade and subsequent VAT paid,’ she said.

Bowles said the newer member states were more likely to be adaptive to change
and are typically sound in online infrastructure and systems.

‘We have to keep pushing for it. It’s an evolutionary thing, not a
revolutionary thing,’ she said.