On 5th July, it was announced that the European Court of Auditors is conducting an audit to find out how effectively the EU is addressing the challenges posed by e-commerce in terms of VAT and customs duties. The ECA will examine the European Commission’s regulatory and control framework for e-commerce and co-operation between Member States to ensure that VAT and customs duties on e-commerce transactions are collected in full. The ECA has published a Background Paper on the collection of VAT and customs duties on e-commerce as a source of information for those interested in the subject. The audit includes visits to the Netherlands, Austria, Germany, Ireland and Sweden. The report is expected to be published in mid-2019. The background paper says that e-commerce is prone to irregularities concerning VAT and customs duties and these directly affect the Member States’ budgets and, indirectly, that of the EU (by reducing the Member States’ customs duties and VAT-based contributions to the EU). Issues identified in the paper include – reliance on traders co-operating voluntarily; Member States have no enforcement powers outside their own jurisdiction, especially in relation to non-EU traders; B2C transactions are not covered by the VAT information exchange system (VIES); and the tax authorities of the country of registration (or the Member State of identification) have little incentive to carry out proper checks on suppliers because any VAT discovered belongs to the Member State of consumption.
https://www.eca.europa.eu/Lists/ECADocuments/INBP_VAT/INBP_VAT_EN.pdf
The background paper is at –
https://www.eca.europa.eu/en/Pages/DocItem.aspx?did=46490
