EU to tackle VAT fraud with Russia and Norway

In efforts to continue to contain the spread of EU VAT fraud further afield, the European Commission will commence discussions early in 2014 on fiscal co-operation with Norway and Russia.

The EC will seek to replicate some of the measures already in place between its 28 member states as they have fought continuous attacks from fraud gangs.  The favoured tactic by criminals is the use of ‘missing trader’ technique.  This involves a company importing goods into their home country VAT exempt (including intra-community acquisitions), and then selling them domestically at the full VAT rate.  The company then disappears with the output VAT on the sale.  The more complex arrangements involve circles of companies in various countries, and is termed carousel fraud.

The head of the EU’s tax service, Heinz Zourek, plans to open talks in January 2014 with Norway and Russia where a number of missing trader frauds have appeared with EU companies.  Aside from sharing ideas and experiences of how to identify and prevent missing trader fraud, talks will explore concluding an Enhanced Co-Operation agreement, which would enable the sharing of information of businesses’ tax activities where there is suspected VAT fraud.