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Eurodad response to large-scale international fraud with value added tax (VAT)

Added 08 May 2019
Under the headline Grand Theft Europe, the newsroom Correctiv, together with media outlets across Europe, have published the results of a cross-boundary investigation about large-scale international fraud with value added tax (VAT). According to the European Commission, this type of fraud is costing European governments around €50 billion each year.

Commenting on the revelations, Tove Maria Ryding, Tax Coordinator at the European Network on Debt and Development (Eurodad), said:

“It’s sad to see yet another example of international abuse of our tax systems, which is costing governments billions of euros. This is money that should have been spent on public services such as schools and hospitals, and to state the obvious, our governments urgently need to strengthen their efforts to stop international tax dodging and fraud.

“A central element of international VAT fraud is the way in which criminals use European companies to extract money. To combat this problem, governments need to set up public registers showing who owns the companies operating in our societies. This is something EU governments have already committed to doing, but we need governments to urgently follow up and turn political promises into reality. Public ownership registers are a key tool for journalists, citizens and tax authorities to identify the real owners of companies and prevent international tax dodging and fraud.

“Governments also need to reconsider their heavy reliance on VAT as a source of revenue. VAT is normally highlighted as a tax that is easy for governments to use, but as this scandal has shown, the VAT system can be open to large-scale abuse. Furthermore, VAT has the hardest impacts on the poorest people, and therefore, there are many good reasons for governments to be careful with this type of tax. We recommend that governments strengthen international cooperation to combat all types of international tax dodging and abuse, and design their tax system to be progressive, including by ensuring effective taxation of wealth and corporate profits.”