The UK government must back EU action to combat cross-border VAT fraud, and abide by any new measures post-Brexit, Labour MEPs have warned.
The European Parliament voted today vote for a report calling on national governments to update the European Union’s common VAT system by bringing in new laws to clamp down on fraud. Fraud involving VAT on goods exported to other member states costs EU taxpayers an estimated €50 billion (£42.5bn) a year, while, the 'VAT gap' between expected revenue and revenue actually collected is estimated at €170bn (£144bn).
VAT has to be paid in the country where the customer lives so if you sell goods to someone in another member state you don't have to pay VAT on them in your own country. It is possible to take advantage of this exemption by creating a fictitious company that buys VAT-free goods from another member state and then sells them with VAT in its own country before disappearing to avoid passing on the VAT to the tax authorities.
Neena Gill MEP, Labour Party, West Midlands said:
“Today in the European Parliament we have agreed measures to tackle VAT fraud and implement them. The reform of the EU’s VAT rules are long overdue and could end up saving Europe’s taxpayers up to £150 billion. ”
Ms Gill added:
“Labour MEPs are also calling for the UK and other EU governments to agree to a tax exemption on key items like sanitary products and renewable energy. Essential items like sanitary products for many women are vital to everyday life and they should not be subject to VAT.”