RegulationCorporate GovernanceEU tackles carousel fraud on carbon trading

EU tackles carousel fraud on carbon trading

Reverse charge mechanism switches liability for VAT from seller to buyer

The European Union council has agreed upon a reverse charge mechanism aimed
at putting a halt to carousel fraud in carbon permit trading markets.

Member states will be able to introduce the mechanism on an optional and
temporary basis in order to stop VAT fraud. The draft directive, which runs
until 30 June 20015, shifts the liability for the payment of VAT on emission
allowances and services to be moved from the supplier to the customer. Normal EU
rules put the liability on the supplier.

The council said it is also working to apply a similar mechanism to mobile
phones and electronic circuit devices, an industry area often exploited by
carousel fraudsters.

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