Czech Republic Says EU Action Needed On VAT Gap
The Czech Finance Minister and First Deputy Prime Minister, Andrej Babis, has urged the European Commission to consider VAT reform in response to poor collection rates.
A report recently published by the Commission showed that EU countries lost EUR168bn in theoretical revenues in 2013, due to tax concessions, avoidance, and evasion. Babis has written to European Tax Commissioner, Pierre Moscovici, saying that the Commission needs to be far more proactive in tackling this issue. The report calls for policy action from individual member states, but as VAT is largely controlled by EU regulation, a centralized effort is needed, he said.
Babis favors extending the use of the reverse charge mechanism, which shifts the liability to account for VAT from the supplier to the recipient, to reduce the opportunity for fraudsters to steal VAT collected from trading. Babis has complained that the Commission has consistently rejected attempts by member states to expand the use of the mechanism, on the grounds of protecting the functioning of the single market.
He wrote: “The European Commission’s position appears to be unsustainable in the long-run because you cannot, on the one hand, require the member states to improve the collection of VAT, which is their responsibility, and the other insist on the rejection of measures that are available. The Czech Republic will continue in an effort to improve the situation concerning tax fraud in VAT in the EU, because we believe that this is one of the most serious economic and political problems of the region.”