The EU Proposes Enhanced Cooperation to Combat VAT Fraud

The EU Commission has proposed a legislative amendment aimed at strengthening the collaborative framework between the European Public Prosecutor's Office (EPPO), the European Anti-Fraud Office (OLAF), and Member States. The initiative seeks to combat fraud affecting the Union's financial interests by establishing a robust legal basis for the exchange of information and providing centralized access to VAT data.

This proposal serves as a complementary measure to the upcoming VAT in the Digital Age (ViDA) reforms, ensuring that enforcement capabilities evolve alongside the new digital reporting landscape.

Addressing the Scale of Cross-Border Fraud

The Commission's proposal responds to the persistent challenge of VAT fraud, particularly Missing Trader Intra-Community (MTIC) schemes and the abuse of customs procedures (such as Procedure 42). These complex, cross-border mechanisms exploit jurisdictional gaps to drain significant resources from national and EU budgets.

Estimates for 2023 indicate that MTIC fraud results in annual VAT losses ranging between €12.5 billion and €32.8 billion.

In 2023, the Eurofisc network detected fraudulent transactions totaling €12.7 billion, representing approximately €2.5 billion in VAT loss. While significant, this figure underscores a detection gap when compared to the estimated total losses.

The New Collaborative Framework

Currently, cooperation between EPPO, OLAF, and national tax authorities relies on fragmented, bilateral agreements with varying conditions for data access. This approach is increasingly viewed as insufficient for addressing sophisticated fraud networks that operate across multiple borders.

The proposed amendment seeks to modernize this infrastructure by:

• Granting EPPO and OLAF direct and specific access to relevant VAT information, eliminating the delays inherent in the current request-based system.
• Establishing a direct line of communication between EU anti-fraud bodies and Eurofisc, the network of national VAT anti-fraud officials.
• Moving from bilateral cooperation to a unified, EU-wide approach that allows for faster intervention and more comprehensive investigations.

The proposal will now be submitted to the European Parliament and the Council of the European Union for review and adoption.

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