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VAT News vious century, i.e. Directive 7 / 08. Although that Directive has recently been codified and replaced by Directive 2008/ of 2 May 2008, this instrument has, according to the Commission, proved to be insufficient to meet the requirements of the internal market as it has evolved in the last 0 years. The mobility of persons and capital in the mid-1970s of the previous century is not comparable to the mobility today. Today, fraudsters take advantage of the territorial limitations on the powers of national tax authorities, which enable them to hide from the authorities transactions carried out in another Member State or organize insolvencies in Member States where they have tax debts. It can be derived from economic literature that tax fraud generally amounts to 2% to 2. % of GDP, i.e. between EUR 200 and 2 0 billion. VAT carousel fraud is one of the biggest problems, but smuggling and counterfeiting alcohol and tobacco products (excise duty fraud) and fraud in the field of direct taxation are equally serious. The draft Directive on mutual assistance as regards the recovery of taxes intends to reinforce and improve the recovery assistance between the Member States. According to the Commission, it should help to increase the recovery ratio, which currently amounts to only % of the total for which recovery assistance is requested. IP/09/201 of 2 February 2009 and COM(2009) 28. Council Decision – Border bridges – Czech Republic and Germany On 10 February 2009, the Council of the European Union adopted a Decision authorizing the Czech Republic and Germany to apply measures derogating from Art. of Directive 200 /112 in relation to the construction and subsequent maintenance of one border bridge, and the maintenance of 22 existing border bridges, all of which are partly on the territory of the Czech Republic and partly on the territory of the Federal Republic of Germany. The details of the bridges in question are listed in the Annex to the Decision. The authorization will automatically be extended to the construction and maintenance of any additional bridges, which are brought within the scope of the Agreement by an exchange of diplomatic notes. Under this decision, as regards the border bridges in respect of which the Czech Republic is solely responsible for maintenance, the bridges are deemed to be part of the Czech territory for the purposes of supplies of goods and services and intra-Community acquisitions of goods intended for maintenance of these bridges; as regards the border bridge in respect of which Germany is responsible for construction and maintenance and the border bridges in respect of which Germany is solely responsible for maintenance, the bridges are deemed to be part of the German territory for the purposes of supplies of goods and services and intra-Community acquisitions of goods intended for construction or maintenance of these bridges. Council Decision 2009/118/EC of 10 February 2009, OJ L41 of 12 February 2009. Anti-fraud agreement with Switzerland On 17 February 2009, the Cooperation Agreement between the European Community and Switzerland aimed at combating fraud and any other illegal activities to the detriment of their financial interests (“the Agreement“), which was signed on 2 October 2004, and the Council Decision of 18 December 2008 relating thereto, were published in the Official Journal of the European Union. The objective of the Agreement is to extend administrative and mutual legal assistance in criminal matters between the European Union and Switzerland. The Agreement covers administrative and criminal procedures aimed at prevention, detection, investigation, prosecution and repression of fraud or any other illegal activity involving, inter alia, violation of the legislation on VAT, special consumption taxes and excise duties. Council Decision 2009/127/EC of 18 December 2008, OJ L 4 of 17 February 2009, p. . Anti-fraud agreement with Liechtenstein – Ecofin At the meeting of the EU Council for Economic and Financial Affairs (Ecofin Council) on 10 February 2009, the Council took note of the fact that the Commission has submitted, on 11 December 2008, a proposal for a Council Decision on the signing, on behalf of the Community, of the Cooperation Agreement between, on the one part, the European Community and its Member States and, on the other part, the Principality of Liechtenstein, to combat fraud and any other illegal activities to the detriment of their financial interests. Following the discussion held at the meeting of the Council on 4 November 2008, the Council strongly invited the Commission to continue the negotiations with Liechtenstein, in conformity with the mandate of 200 , in order to obtain such changes in the text of the draft agreement to ensure effective administrative assistance and access to information with regard to all forms of investment, in particular foundations and trusts. As regards the provision of information in tax matters to the Member States, the Council expects Liechtenstein to encompass in the agreement with the European Community and its Member States obligations that are at least similar in scope as those which Liechtenstein recently agreed on with other countries. Finally, the Council called on the Commission to report back on any progress at one of its forthcoming meetings, at the latest in May 2009. Press release 2922nd Council meeting. VAT fraud – Fiscalis Seminar The Dutch tax and customs administration and the European Commission held a one-day Fiscalis seminar in Amsterdam on 2 January 2009 on fighting VAT fraud. The participants exchanged views and ideas on measures contained in the Commission’s Communication on a coordinated strategy to improve the fight 144 INTERNATIONAL VAT MONITOR MARCH/APRIL 2009 © IBFD
against VAT fraud in the European Union, which was presented on 1 December 2008. The seminar brought together representatives from businesses, the national tax administrations and European institutions. It focused on both short-term and longer-term measures to combat VAT fraud. All presentations are available on TAXUD’s website. European Commission’s website. Reduced VAT rates – Ecofin At the meeting of the EU Council for Economic and Financial Affairs (Ecofin Council) on 10 February 2009, the Council discussed the issue of reduced rates of VAT in the context of the economic recovery plan approved by the European Council in December 2008. The presidency indicated that it will reflect on how to take the dossier forward in response to the European Council’s request to settle the issue by March 2009. A further discussion is expected at the Council’s meeting on 10 March 2009, in the run-up to the next European Council, on 19 and 20 March 2009. Allowing Member States to apply reduced VAT rates in certain sectors is one of the actions that form part of the economic recovery plan. The current EU rules on VAT rates are set by Directive 200 /112. They are the outcome of a variety of initiatives over the years, including the 1992 decision on the harmonization of VAT rates in the context of the EU single market, the 2000 decision to temporarily allow reduced VAT rates on labour-intensive services with a view to stimulating employment, and the 2004 derogations allowed to newly acceded Member States. In addition, the Commission promised to present a proposal in April 2009 on the application of reduced rates to specific environmental goods and services, focusing principally on energy efficiency in buildings. In 2008, the Commission proposed a Directive aimed at allowing all Member States to apply reduced rates – on a permanent basis – to labour-intensive services, including restaurant services. 1 Reduced VAT on environment-friendly products – Study On 2 January 2009, the European Commission published a study on the current and potential use of reduced VAT for environment-friendly products, and its application to energy consumption by households. The analysis is carried out in the context of EU policy approach to climate change and energy security, including interaction with other policy instruments at EU and national levels. The study focuses on what role – if any – VAT rate policy should play in underpinning these objectives. European Commission’s website. © IBFD INTERNATIONAL VAT MONITOR MARCH/APRIL 2009 Fiji VAT News Zero rating The Budget for 2009 was presented on 21 November 2008. Under the budget, the zero rating of goods for VAT purposes only applies from 1 January 2009 on the condition that evidence is provided to the Commissioner that the proceeds of the exported goods and services are transferred to Fiji. Finland Tax accounts The government has proposed a new system for reporting, paying and reclaiming taxes through “tax accounts”. If approved as proposed, the system will come into force at the beginning of the year 2010 and, at the initial stage, applies to “self-assessed” taxes, i.e. taxes that are reported and paid on the entrepreneurs’ initiative, including VAT, withholding tax, social security tax, tax at source, insurance premium tax and lottery tax. The proposal therefore also contains many amendments to, inter alia, the VAT Act. At the second stage, which is envisaged to commence in the year 2012, the tax account system will be extended to the other taxes. The main purpose of the new tax account system is to make the tax collection system more taxpayer friendly and cost efficient for both the tax authorities and entrepreneurs. The new system will provide every taxpayer with his own tax account, which they will use for filing tax returns and declarations and making payments. The account may also contain other information regarding the taxpayer’s tax position. The deadlines for reporting and paying taxes will be unified under the new system. The unified due date is proposed to be the 12th day of the month following the month to which the report relates. The ultimate goal is to enable taxpayers to file only a single monthly tax report containing information on all tax liabilities and, consequently, make only a single monthly payment covering all taxes due for that month. The tax authorities will allocate the total amount received to the taxes due, on the basis of a method laid down by the law. The tax account system will prevent unnecessary money transfers between the tax authorities and taxpayers. For example, entrepreneurs will no longer have to apply for a refund of VAT because their VAT claim will automatically be offset against their other tax liabilities or, alternatively, be refunded. Taxpayers will be liable for payment of late-payment interest and, on the other hand, receive interest for any credit balance in their tax account. Late payment of VAT will no longer give rise to imposition of a penalty. How- 1 . Proposal for a Council Directive amending Directive 200 /112/EC as regards reduced rates of value added tax, COM(2008) 428. 14
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