Last week a proposal for a Quick Reaction Mechanism (QRM) was adopted by the European Commission. The QRM allows Member States to respond more swiftly and efficiently to VAT fraud.
The Quick Reaction Mechanism was foreseen in the new VAT Strategy (see IP/11/508), as well as the Communication on fighting tax fraud and evasion (see IP/12/697), as a means of strengthening the fight against tax fraud in the EU and safeguarding public revenues.
5 Quick Reaction Mechanism features
Under the QRM:
- a Member State faced with a serious case of sudden and massive VAT fraud would be able to implement certain emergency measures, in a way which they are currently not allowed to under VAT legislation.
- a Member State is granted a temporary derogation within a month which is valid for up to one year. This would allow the Member State in question to begin counteracting the fraud nearly immediately, while more permanent measures are being established (and if necessary while the standard derogation procedure is being launched).
- Member States is then allowed to apply a “reverse charge mechanism”, making the recipient rather than the supplier of the goods or services liable for VAT.
- Member States can significantly improve their chances of effectively tackling complex fraud schemes, such as carrousel fraud, and of reducing otherwise irreparable financial losses.
- other anti-fraud measures could be authorised and established in order to deal with possible new forms of fraud in the future.
Battling VAT Fraud
VAT fraud is claimed to cost the EU and national budgets several billion euro every year. For example, between June 2008 and December 2009, an estimated €5 billion was lost as a result of VAT fraud in greenhouse gas emission allowances. This example shows that vast sums are lost within a very short timeframe, due to the speed at which fraud schemes evolve nowadays.
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