The EU announced two days ago that:
In the framework of its strategy to combat tax evasion and fraud ( IP/06/697 ), today the European Commission adopted a proposal for a recast of the Regulation on administrative cooperation in the field of valued added tax, extending and reinforcing the legal framework for the exchange of information and cooperation between tax authorities. One of the key elements of the proposal is the creation of a legal base to set up Eurofisc: a common operational structure allowing Member States to take rapid action in the fight against cross border VAT fraud. The Commission today also adopted a report on the functioning of the administrative cooperation.
L?°szl?? Kov?°cs, Commissioner for Taxation and Customs, said: "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. My objective is to ensure that tax authorities have all technical and legal means to take action against European Union wide VAT fraud and to ensure that each tax administration is prepared to protect other Member States' tax revenue as effectively as their own."
Eurofisc. [ will be]an operational structure where Member States will in practice, fight fraud together. It should allow a very fast exchange of targeted information between all Member States as well as the setting up of common risk and strategic analysis. This will enable Member States to react timely to stop fraud and catch fraudsters, making it more difficult for new fraud schemes to emerge and spread around the Community
The proposal changes the approach of the protection of VAT revenues. In addition to giving Member States tools to cooperate more closely and to exchange information faster, the Recast regulation sets out that Member States are jointly responsible for the protection of VAT revenues in all Member States.
This is great news. It is so obviously the right direction of travel. But if “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” is true of VAT why is it not true for direct taxes such as income tax and corporation tax? And why isn’t the OECD taking this approach across the world instead of promoting Tax Information Exchange Agreements?
The EU is, as has often been the case, three steps ahead of the OECD here. I just hope the OECD catches up very, very soon. They need to.