EU | ECOFIN’s July Meeting Results in Stalemate for Anti-Fraud Reverse Charge

The 13th July 2018 meeting of the Economic and Financial Affairs Council (ECOFIN), the first held under the stewardship of the current Austrian presidency, saw ministers pick up their discussion from May on the following inextricably linked VAT proposals:

Generalised reverse charge mechanism

The Council considered once again the European Commission’s proposal allowing Member States the provisional application of a domestic generalised reverse charge on transactions of goods and services above EUR 10,000. What this means is that the recipient is liable to account for the VAT on a transaction, instead of the supplier.  This anti-fraud mechanism, introduced on request by certain Member States particularly affected by VAT fraud, would apply subject to certain conditions and only until the earlier of either 30th September 2022, or the date the definitive VAT system comes into effect.

According to the European Commission, cross-border fraud costs the EU around EUR 50 billion in lost revenue; although critics of the proposed measure hold the view that its effect on VAT fraud would in fact be negligible. On this occasion, ministers were unable to reach agreement.

Application of non-standard rates of VAT on e-publications 

The European Commission’s longstanding attempt to push through its proposal allowing Member States the option to align the VAT rates applied to e-publications such as digital books and newspapers, with that of their printed counterparts, failed again. This is as a result of strategic voting on the part of Member States who are championing the adoption of the generalised reverse charge.

The next opportunity for ministers to reach agreement on the above proposals has been set for this October.