United Kingdom - EU ministers delay decision on VAT fraud strategy

European Union finance ministers on Tuesday put on hold discussions about a request by Germany and Austrian to trial a radical measure to crack down on sales tax fraud because the bloc's members were too divided.

Value-added tax fraud costs EU states billions of euros each year and the two countries wanted to pilot the so-called reverse charge mechanism as soon as possible.

Under the mechanism, only the end customer would be responsible for paying sales tax.

"They discussed it but then the EU presidency decided to take it up in a few months time because of the differing positions," an EU diplomat said on the sidelines of a monthly meeting of EU finance ministers.

The issue is now expected to be discussed in May or June.

EU president Slovenia had put forward draft conclusions at Tuesday's meeting saying that conventional measures, such as beefing up cooperation among EU tax authorities, should be exhausted before seeking any radical measures.

But there was no consensus behind the conclusions on Tuesday. Unanimity is required in all EU tax decisions.

Missing trader fraud is prevalent in several EU states where fraudsters gain VAT registration to obtain goods free of VAT from another EU state. The goods are then sold inclusive of sales tax but the trader disappears without handing the VAT received to the tax authority.

Germany has said the mechanism could generate about 3.5 billion euros ($5.3 billion) a year of extra revenue in Germany alone. Austria has said it would be happy to pilot the change.

But EU Tax Commissioner Laszlo Kovacs has said if the mechanism is used, it should be introduced in all EU states to avoid distortions in the bloc's single market -- a step that several countries have signalled they are unwilling to take.

Source : Guardian - UK,  dated 04/03/2008