Brussels suggests EU-wide tax databases

EU Observer (Link) - Lucia Kubosova (August 19, 2009)

In a bid to use the momentum of the economic crisis which has strained EU public budgets, the European Commission has proposed a potentially controversial system to boost fight against tax fraud by allowing national authorities to directly access taxpayer data in other countries.

"In the current economic situation it is more important than ever to fight tax fraud efficiently and a fully functioning administrative cooperation between tax administrations is key in that respect," the EU's taxation commissioner Laszlo Kovacs said in a statement on Tuesday (18 August).

Introducing the proposed structure, the Hungarian commissioner said he wanted to provide national tax officers with "all technical and legal means to take action" and protect other states' tax revenue "as effectively as their own."

The key element of the blueprint is the creation of "Eurofisc" - a scheme for rapid exchange of targeted information to which the authorities from all 27 EU member states would have direct access, in order to "stop fraud and catch fraudsters," Mr Kovacs said.

The idea is to prevent "carousel" fraud over value added tax (VAT), which occurs when someone gets VAT-free goods in one country and sells them on VAT-included terms in another state, but disappears before paying the tax.

To boost the practical effect of the system, the EU executive also suggested concrete rules on which kind of information should be gathered in national tax databases and how it should be registered - to make it easy to compare and use by officers in other states.

According to some estimates, Europe's governments lose up to 10 percent in VAT receipts each year, amounting to some �200 billion to �250 billion. In 2006, Germany reported its overall losses in VAT receipts as �17 billion per year, according to Deutsche Presse-Agentur.

But the commission's blueprint could still face tough opposition from national capitals. The move requires unanimous support and EU governments tend to carefully guard their tax competences, including access to their national data in this area.