News item | 05-07-2012
The State Secretary of Finance Frans Weekers has taken
measures in order to halt cross-border VAT carousel fraud
in the trade in electronic equipment. During the last few
months, the Fiscal Intelligence and Investigation Service
(FIOD) received warnings about an increase in carousel
fraud resulting in considerable losses for the Dutch
treasury. This concerns in particular the trade in mobile
phones, game computers, computer parts and tablet PCs.
The introduction of a VAT reverse charge mechanism for
mobile phones and computer chips intends to put a stop to
potential incidences of fraud amounting to tens of
millions of Euros.
In a VAT carousel fraud, a defrauding seller charges VAT
but does not pay it to the Tax and Customs Administration.
This fraudulent party (the "missing trader") is often
suddenly dissolved and the owners disappear into thin air.
As a result the outstanding taxes are difficult to recover.
Because the buyer can deduct the VAT charged as input tax,
on balance the Tax Authorities suffer loss.
In order to avoid this kind of fraud, Mr Weekers wishes to
introduce a VAT reverse charge mechanism for the trade in
said products. A reverse charge mechanism shuts the door on
carousel fraud. The VAT levy is shifted from the seller to
the buyer.
If the seller shifts the VAT to the buyer, the seller only
receives the (net) compensation charged for his activities
without the VAT owed. The buyer includes this VAT in his
tax return and can deduct it in that same tax return. Thus
no VAT is paid to the seller, so that this VAT cannot be
used for fraudulent purposes (received but not paid).
Because a reverse charge mechanism deviates from the
European VAT system, the permission of the European
Commission and the full Council is required. The
Netherlands has filed a request for derogation to that end
with the European Commission. Because handling such a
request takes some time and VAT fraud is increasing
considerably in particular in the trade in mobile phones
and computer parts, Mr Weekers has decided to independently
introduce a reverse charge mechanism for these products as
from 1 June next.
State Secretary Weekers:
"In this manner the bona fide trade can proceed
without hindrance and fraud is prevented, so that there are
no negative consequences for the treasury."
So as to more effectively tackle carousel fraud, various
authorities are currently working together on a structural
basis and in a more intensive way. This is the result of an
initiative of Mr Weekers. The banking sector has meanwhile
stated also to be prepared to explore with the Ministry of
Finance and the Tax and Customs Administration how the
mutual cooperation and exchange of data can be further
optimised.
The Tax and Customs Administration, the FIOD, the Public
Prosecution Department, the Ministry of Security and
Justice, the police, financial supervision institutions,
the banking sector, tax consultants and the civil-law
notaries are involved in this joint approach.
Earlier this year, as a result of warnings of fraud from
abroad and at the request of APX Endex Mr Weekers decided
to allow a measure in the form of the bonded warehouse
scheme for the trade in electricity and gas between
entrepreneurs.
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