By Kelly Fiveash for The
Register.
This story has been reproduced with permission.
In a letter to the Prime Minister in-waiting the International
VAT Association (IVA) has urged Brown to reconsider the "B2B"
(business to business) proposal on Europe's escalating VAT fraud
problem.
Such a plan would extend the number of intangible services -
such as software or licences - that can be traded against borders
VAT-free.
The British government had jumped ahead of other European states
in attempting to stamp out the likes of Missing Trader
Intra-Community (MTIC) or carousel fraud which cost the taxpayer
£3bn last year.
But the IVA said that loosening VAT rules to offer a quick fix
accounting solution to what is a growing issue "will undermine
Europe's fight against VAT fraud and could further exacerbate the
significant deficits which already exist in certain member states'
VAT receipts."
It also added that such a move would be a slap in the face for
small businesses that already face high costs reclaiming VAT on
cross border European deals.
As of 1 June, computer chips and mobile phones will be subject
to a "reverse charge", effectively preventing carousel fraud on
such goods by accounting for VAT at the end of the supply
chain.
However, concerns had already been raised that fraudsters would
simply move over to goods not covered under the reverse charge
scheme. For example, MP3 players could be targeted in the same
way.
Last week a House of Lords subcommittee (economic and financial
affairs and international trade) concluded that VAT fraud was "out
of control", and suggested that the British government needed to
introduce a more measured response than simply fire-fighting the
situation.
The IVA, which also wrote to European finance members,
recommended the adoption of "a coordinated approach" to fight VAT
fraudsters and to "resist piecemeal 'solutions' that may have
merits in isolation but increase overall risks associated with the
movement of fraud into new areas across the EU".
© The Register
2007
