By Anna McLauchlin - 21st April 2004
Brussels has called on member states to crack down on tax fraud, crime that is costing some national governments up to ten per cent of VAT revenues.
The European Commission estimates that over €1.5 billion worth of untaxed goods circulate in the EU.
And in a report published on Thursday regulators asks national authorities to step up communication between capitals and get more people working on combating VAT fraud.
Officials also claim legal barriers like secrecy laws preventing such information being divulged should be scrapped.
Some member states have said it is the VAT collection system that is at fault.
As it stands, when traders buy products from another member state to sell in their own member state, they should pay their government VAT on the goods.
But many goods move around the EU without being taxed and tax authorities are not easily able to find out what products are coming on to their soil.
And some people are even setting up companies to trade goods across EU borders only to dissolve them before any tax has been paid.
But the commission said "the political will is missing" to make VAT payable in the country of origin and any other changes would be likely to solve the fraud problem.
"Fraud can be combated effectively without making drastic changes to the VAT system as long as member stats continue both to co-operate with each other and to make improvements to their individual national control arrangements", internal market commissioner Frits Bolkestein said on Thursday.
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