EU VAT authorities are close to turning the tables on missing traders. For many years organized fraudsters have been stealing huge amounts of VAT on the domestic re-sale of exempt cross-border supplies. Losses have been enormous whether the transactions are in goods (notably cell phones and computer chips) or in tradable services (CO2 permits and VoIP). No market has been safe from the fraudsters.
Answers are developing, but these answers may look more like Armageddon than measured enforcement. Solutions are so draconian, and so all-encompassing that very few intra-community traders will feel safe from the gathering storm. The situation is not optimal, but it appears to be where we are headed.
This paper discusses the alignment of (1) the joined cases of Axel Kittel v. Belgium and Belgium v. Recolta Recycling SPRL; (2) the Criminal Proceedings against R; and (3) the Council Directive 2010/24/EU of 16 March 2010 concerning mutual assistance for the recovery of claims relating to taxes, duties, and other measures.
A concluding section presents a series of six hypothetical fact patterns that apply these imperatives.
In a nutshell, the argument presented through these hypotheticals is that Kittel is not for domestic-only application. Kittel responds just as effectively to multi-jurisdictional missing trader fact patterns as it does to domestic patterns. Secondly, it argues that “R” is an effective backstop to Kittel when tax authorities attack missing trader fraud across Community borders. Third, it argues that MARC provides sweeping cross-jurisdictional investigative assistance to any Member State that is pursuing recovery from a fraudster, or group of fraudsters. And finally, it argues that because Member States are under an affirmative obligation to pursue missing traders throughout the Community to protect the common system of VAT from assault by criminals, these tools are being readied for use in a wide-ranging wave of MTIC enforcement efforts throughout the Community.
MARC’s enhanced investigative and enforcement powers allow/compel an easy flow of information, notification and protective measures among the member States. Multiple recoveries are a very distinct possibility.
The EU VAT does not have a mechanism that assures one recovery, and neither the ECJ nor the judiciary of the member States seem anxious to find one. This may all be the result of the severity of the missing trader problem coming home to roost, but it is not good for legitimate business. Unfortunately we may witness a perfect storm. One cannot help but think that there is a better way forward.
Richard T. Ainsworth,
A Perfect Storm in the EU VAT: Kittel, 'R' and MARC
Available at: https://scholarship.law.bu.edu/faculty_scholarship/1452