67 Value added taxation
| (30885)
12886/09
COM(09) 427
| Draft Council Regulation on administrative cooperation and combating fraud in the field of value added tax (Recast)
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| Legal base | Article 113 TFEU; consultation; unanimity
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| Department | HM Treasury
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| Basis of consideration | Minister's letter of 7 June 2010
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| Previous Committee Report | HC 19-xxvii (2008-09), chapter 9 (14 October 2009) and HC 5-v (2009-10), chapter 4 (6 January 2010)
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| To be discussed in Council | Not known
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
67.1 The main instrument governing the exchange of information
and assistance in VAT matters is the Administrative Cooperation
Regulation (Council Regulation (EC) No 1798/2003). This has been
amended on a number of occasions, most recently in late 2008.
The Regulation is therefore in need of consolidation.
67.2 This draft Regulation is to recast (consolidate
and amend) the existing Administrative Cooperation Regulation.
The proposal sets out the Commission's aim of providing Member
States with the means for efficient and well organised administrative
co-operation procedures on VAT issues to combat cross-border VAT
fraud more effectively and for better collection of VAT in cases
where the place of taxation is different from the place of establishment
of the supplier.
67.3 The draft Regulation would recast the present
Regulation to take into account changes that have already been
agreed in other instruments, align, reorder and harmonise existing
legal text, introduce new measures and extend the role of the
existing comitology[292]
committee (the Standing Committee on Administrative Cooperation)
to some of the new elements. The key measures include:
- common minimum standards for
Member States when registering and deregistering traders for VAT;
- giving authorised personnel in other Member States
automatic access to certain data on VAT registered businesses
held by a Member State;
- allowing authorised tax authority personnel access
to another Member State's summary intra-Community trading information
and certain other data;
- Eurofisc — the main function of which will
be to provide a fast-track network for exchanging specified data
between Member States and to provide an early warning system of
possible fraud; and
- an enhanced VAT number verification system to
help businesses verify their Community customer's details.
Other changes include:
- establishing the principle
that Member States are collectively responsible for helping each
other to secure their VAT revenues;
- a requirement that tax authorities provide each
other with feedback on the value of the information which they
exchange; and
- clarification of existing legislation to facilitate
greater use of cooperation tools and to remove inconsistencies
of interpretation.
67.4 When the previous Committee considered the proposal,
in October 2009, it heard that fighting VAT fraud remained a priority
for the Government and that it therefore welcomed the Commission's
proposal, supported many of the measures in it but had some reservations,
which it would need to address during negotiations. Our predecessors
commented that cooperation between Member States to counter VAT
fraud was clearly important and rationalising and improving legislation
facilitating that cooperation would be welcome. However, they
noted the Government's reservations about the detail of the draft
Regulation. So before considering that document further the Committee
asked to hear about developments on these points in the negotiations
and to see, if the need for one emerged, any Impact Assessment.
67.5 In January 2010 the previous Committee reported
that the Government had told it that:
- only two working group meetings
on this matter had been held under the Swedish Presidency (July-December
2009) and so there had been only limited discussion of the proposal;
- so the Government had had little opportunity
to explore the proposal with other Member States and test its
interpretations of the original text;
- nevertheless it was aware from those discussions
that there was a wide spectrum of views on the proposal;
- more specifically other Member States shared
its concerns with regard to common minimum standards and about
the role played by comitology more widely; and
- the Government anticipated that the Spanish Presidency
would see this matter as a priority and that more substantive
discussions would take place early in 2010.
Our predecessors looked forward to hearing in due
course about more substantive discussion and meanwhile kept the
document under scrutiny. [293]
The Minister's letter
67.6 The Exchequer Secretary to the Treasury (Mr
David Gauke) tells us that progress on the draft Regulation has
accelerated recently under the Spanish Presidency and that there
have been extensive changes to the proposed new provisions. He
says that the key changes relate to the areas identified to our
predecessors:
- comitology will no longer have
a role to play in the establishment of common minimum standards
for registration and de-registration and has been restricted to
the governance of the technical details of exchange for "direct
access" to data; and
- comitology has been deleted
from the Eurofisc provisions — instead the details on how
the system will operate have been set out in the draft Regulation
and an accompanying explanatory Minutes Statement.
67.7 The Minister comments that:
- as a result of the changes
to the proposal, the Government is satisfied that it respects
both the principles of subsidiarity and proportionality;
- it believes that the proposal will provide anti-fraud
benefits for the UK and other Member States as a whole, while
ensuring that no additional burdens on business are generated;
- the basic elements of the proposal remain unchanged
from the original;
- common minimum standards should help to ensure
that entry to the VAT system will be better policed and Member
State's VAT registers more up to date;
- access changes to specified information will
speed up the checking of basic information and thus help authorised
officials in their investigations, whilst the establishment of
Eurofisc will facilitate the exchange of targeted information
thus acting as an early warning system for frauds;
- introduction of feedback arrangements will help
Member States to ensure that the information exchanged is useful
and in turn provide material to refine the system;
- the enhanced VAT number checking system will
assist business engaged in intra-community trade; and
- given the absence of any impact on business and
only a limited resource requirement for HMRC, the Government confirms
that an impact assessment will not be necessary for the proposal.
67.8 The Minister tells us that the Presidency is
keen to close down discussions on the draft Regulation and tabled
it for political agreement at the ECOFIN Council of on 8 June
2010, with all other Member States willing to agree. He says that:
- the decision to put this proposal
forward for political agreement put the Government in a very difficult
position;
- if it were to block agreement on the grounds
that parliamentary scrutiny was not yet concluded, it would in
effect be blocking agreement to an important anti-fraud proposal
that it supports and for which the Presidency and other Member
States have made significant concessions helpful to the UK in
order to get the Government's agreement;
- as all other Member States want to see the proposal
agreed, blocking agreement would risk sending out unhelpful and
misleading signals that the Government is reluctant to fight fraud
or help other Member States do so; and
- this would be particularly sensitive in the current
economic climate where all Member States have been affected by
VAT fraud and all are looking to protect tax receipts in order
to repair their fiscal positions.
67.9 The Minister continues that:
- the Government reluctantly
decided, therefore, that if it were the sole Member State blocking
agreement at the ECOFIN Council, it would not be in the UK's best
interest to block agreement to the proposal;
- mindful, however, of the fact that neither we
nor the Lords' European Union Committee would have had an opportunity
to consider the significant developments that have been made on
the proposal, the Government planned to abstain from the vote;
- the Government was aware that since this is a
tax proposal and decided under unanimity this would still result
in the proposal being agreed prior to the conclusion of the parliamentary
scrutiny process;
- it felt, nevertheless, it important to reflect
its scrutiny position and to make it clear that in the circumstances
it could not vote for the proposal;
- the Government's decision to not block agreement
was particularly guided by its belief that all of the concerns
expressed previously by our predecessors and in the Lords had
been satisfactorily addressed in the current proposal; and additionally
- to block the proposal would risk the possibility
of the package being reopened at a later stage which could only
result in a revised proposal that would be less acceptable to
the Government.
67.10 The Minister says finally that he thought it
appropriate to write before the ECOFIN meeting to warn us of the
likely agreement of this proposal and that, in the circumstance,
the Government hoped we can appreciate the impetus behind its
decision.
Conclusion
67.11 We note the improvements in the text of
the draft Regulation that have been negotiated, which meet the
concerns drawn to the attention of our predecessors, and now clear
the document.
67.12 As for the breach of the scrutiny reserve
resolution we note and accept the Minister's explanation. Moreover
we appreciate the Government's effort to mitigate the extent of
the breach by its decision on abstention, particularly for the
message it sends to the EU institutions and other Member States
about parliamentary scrutiny.
292 Comitology is the system of committees which oversees
the exercise by the Commission of powers delegated to it by the
Council and the European Parliament. Comitology committees are
made up of representatives of the Member States and chaired by
the Commission. There are three types of procedure (advisory,
management and regulatory), an important difference between
which is the degree of involvement and power of Member States'
representatives. So-called "Regulatory with Scrutiny",
introduced in July 2006, gives a scrutiny role to the European
Parliament in most applications of comitology. Back
293
See headnote. Back
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