[Global IDT Insights] European Commission Unveils Coordinated VAT Fraud Action Plan

Editorial Team – [2025] 174 taxmann.com 1044 (Article)

Global IDT Insights provides a weekly snippet of tax news specifically related to Indirect Taxes from around the globe.

1. European Commission unveils coordinated strategy to combat VAT fraud across Member States

The European Commission has introduced a short-term action plan aimed at implementing a coordinated strategy to combat VAT fraud across member states.

This plan includes three core types of measures:

• Prevention of VAT fraud,
• Detection of fraudulent activities, and
• Efficient collection and recovery of VAT.

To prevent VAT fraud, the Commission recommends improving tax systems and tax cooperation. This involves setting minimum standards for registration and deregistration of traders within the VIES system to enhance the reliability of trader data. Additionally, traders should be able to electronically verify the VAT registration details of their business partners. The plan also calls for harmonisation and simplification of invoicing rules, such as common storage durations and standardised invoice date protocols, to reduce administrative costs and facilitate regulatory control.

In terms of detecting VAT fraud, the plan seeks to strengthen the capacities of national Tax Administrations and enhance the exchange of information between Member States, especially concerning intra-Community transactions. Specific rules to control VAT exemptions on imports are proposed, alongside a legal framework that permits automated access by competent authorities to relevant data stored in other Member States’ databases.

For the collection and recovery of taxes, the plan suggests bolstering the ability of Tax Administrations to reclaim VAT losses in cross-border cases. It introduces the concept of joint and several liability for traders who fail to disclose intra-Community operations, leading to VAT losses. Furthermore, the harmonisation of enforcement and precautionary instruments across Member States is advocated to reduce administrative burdens and enhance recovery efficiency.

Additionally, the Commission proposes establishing an ad hoc group consisting of tax authorities and representatives from both large and SME sectors. This group will explore ways to leverage IT tools to enhance interactions between taxpayers and tax authorities in areas including VAT compliance, auditing, and communication.

Source – Official News

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